Skydance (SKYD) is better positioned to compete in global streaming following the Paramount-Warner merger, but "high leverage" and heavy exposure to declining linear television remain key risks, UBS Securities said in a report emailed Wednesday.

The firm said the combination gives Skydance a "deep content library," stronger intellectual property, broader "production capabilities" and a larger sports portfolio, while its management is targeting more than $6 billion in cost savings, the report said.

UBS estimated linear TV will still account for more than 40% of combined revenue and about two-thirds of earnings before interest, taxes, depreciation, and amortization, while net leverage is currently about 6.5 times, according to the report.

Shareholder value will depend on whether streaming profit growth can outpace declines in the legacy TV business, while near-term shares could remain "volatile" because of pending warrant issuance and a low public float, UBS said.

UBS has a sell rating on Skydance with a price target of $8.

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