On Tuesday, CFRA issued a downgrade for FOX Corp. (NASDAQ:FOXA) from Hold to Sell, maintaining a price target of $38.00. The firm pointed to expectations of FOXA being a relative underperformer following the current U.S. election cycle, anticipating lower revenue and earnings growth for Fiscal Year 2026.
Despite a 17% increase in FOXA's share price since August, reaching a 52-week high, this rise was attributed to common share repurchases rather than operational performance.
CFRA's analysis is based on a forward Total Enterprise Value (TEV) to Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) multiple of 6.8 times the firm's Fiscal Year 2025 (ending in June) EBITDA estimate of $6.51 billion. This multiple aligns with the three-year historical average. The firm's earnings per share (EPS) estimates for FOXA are $3.80 for Fiscal Year 2025 and $3.70 for Fiscal Year 2026, with projected revenues of $15.1 billion and $14.6 billion, respectively.
CFRA believes that the low multiple valuation is justified for FOX Corp., as the company lacks a significant growth driver. Nevertheless, FOX Corp. owns leading networks such as Fox Sports and Fox News, which continue to be influential in the media landscape. Governance risks were also noted, relating to the controlling interests from the Murdoch Trust, particularly as motions have been filed in a Nevada court concerning Rupert Murdoch's irrevocable trust.
The firm acknowledged the efforts of Lachlan Murdoch, FOXA's Executive Chairman and CEO, in steering the company away from unprofitable video streaming ventures. Despite these efforts, the forecasted limited growth in revenues and earnings has led to the current sell rating. The downgrade reflects CFRA's outlook on FOX Corp.'s potential performance in the coming fiscal years.
In other recent news, FOX Corporation has seen significant developments in earnings estimates, mergers, and analyst ratings. Guggenheim maintained its Buy rating on FOX Corporation, citing an anticipated demand for live news and sports content. The firm increased its price target for FOX to $45, reflecting a positive outlook on the company's advertising and viewer numbers. The full-year 2025E EBITDA projection was slightly increased to $3.12 billion, up from the previous estimate of $3.09 billion.
Goldman Sachs reaffirmed its Conviction Buy rating on FOX Corporation with a steady price target of $46.00, expecting the company to achieve a first-quarter earnings of approximately $874 million for fiscal year 2025. The firm forecasts modest increases in both fees and advertising revenues within FOX Corp's Cable Networks division.
Rupert Murdoch, the media mogul, recently concluded a pivotal hearing in Nevada, seeking amendments to the family trust to ensure the control of his media companies, including FOX Corp, remains with his eldest son, Lachlan Murdoch, after his passing.
In contrast, Seaport Global Securities downgraded its rating of Fox Corp from Buy to Neutral, reflecting the current valuation of Fox Corp shares. Despite the potential benefit from political advertising spending, Seaport's rating change suggests limited upside potential in the near term. These are among the recent developments in FOX Corporation.
InvestingPro Insights
While CFRA has downgraded FOX Corp. (NASDAQ:FOXA) to a sell rating, some recent metrics from InvestingPro paint a more nuanced picture of the company's financial health. FOXA's management has demonstrated confidence through aggressive share buybacks, and the company has a history of raising its dividend for four consecutive years, with a current yield of 1.31%. The stock is also trading at a low P/E ratio of 12.39, which is relatively attractive compared to its near-term earnings growth.
Moreover, FOXA's stock has experienced a strong return over the last three months, with a price total return of 20.09%, and it is trading near its 52-week high, at 99.6% of this threshold. The company's liquid assets exceed its short-term obligations, and it operates with a moderate level of debt, which provides a degree of financial stability.
For investors looking for additional insights, there are over 10 InvestingPro Tips available, which include analysis on the company's profitability, stock volatility, and debt levels. These tips can be found on the InvestingPro platform, which offers a comprehensive view of FOXA's financial metrics and expert analysis.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.