On Tuesday, Loop Capital set a new stock price target for News Corp. (NASDAQ:NWSA) shares, increasing it to $39.00 from the previous $38.00, while maintaining a Buy rating on the stock. The firm highlighted News Corp.'s potential growth from its digital real estate ventures, particularly noting that REA is considering an offer for Rightmove (OTC:RTMVY), which could be accretive to the company's value.
The analyst also mentioned Starboard Value's suggestion to collapse News Corp.'s dual-class share structure. However, with the Murdoch family holding over 40% of voting shares, the Board's preference for maintaining the current structure seems likely to prevail, presenting a significant hurdle to any restructuring efforts.
Despite the recent decline in REA's share value, Loop Capital expressed confidence in News Corp.'s valuation, suggesting that the market is undervaluing the company by treating it as a traditional media entity. Instead, the analyst pointed out that News Corp.'s business mix is quite distinct, with management efforts focused on showcasing the underlying asset value.
The firm's optimism extends to News Corp.'s segments beyond digital real estate, including Dow Jones, especially its B2B segment, and book publishing. These sectors are believed to represent over 90% of the company's estimated value and are expected to continue gaining appreciation.
Loop Capital also sees potential for News Corp. to license its content to generative AI companies, which could open up new revenue streams. This potential, combined with the company's diverse and valuable business segments, underpins the decision to reiterate a Buy rating and raise the price target to $39.00.
In other recent news, News Corporation continues to execute its $1 billion stock repurchase program, buying back its Class A and Class B common stock. This move is part of a broader strategy to enhance shareholder value.
Meanwhile, the company's subsidiary, REA Group Ltd, is contemplating the acquisition of Rightmove plc, the UK's largest property website, aligning with the company's expansion strategy in digital real estate services.
On the financial front, News Corp reported a 6% revenue increase to approximately $2.6 billion in the fourth quarter of fiscal year 2024. Profitability rose by 11% to $380 million, driven largely by diverse sectors including book publishing, digital real estate services, and Dow Jones segments.
In response to these developments, Morgan Stanley updated its financial model for News Corp, leading to an increase in the stock price target from $31.00 to $35.00. However, the firm's earnings per share (EPS) estimates have been slightly reduced due to assumptions of higher minority interest and tax rates.
Despite a 5% decrease in revenues and a 38% drop in EBITDA in the News Media segment, News Corp is planning for fiscal 2025, focusing on streaming, B2B growth, and data offerings. These are the recent developments for News Corp.
InvestingPro Insights
As Loop Capital emphasizes the growth potential of News Corp. (NASDAQ:NWSA) from its digital real estate and diverse business segments, real-time data from InvestingPro provides a deeper financial perspective on the company. News Corp. boasts a market capitalization of $15.35 billion, reflecting its significant presence in the market.
With a price-to-earnings (P/E) ratio of 59.55, which adjusts to 43.51 for the last twelve months as of Q4 2024, the company's valuation appears steep compared to industry averages. However, a PEG ratio of 0.74 suggests that investors may expect earnings growth to outpace the P/E ratio in the future, indicating potential value.
The company's revenue for the last twelve months as of Q4 2024 stands at $10.09 billion, with a growth of 2.09%. The gross profit margin is notably strong at 50.41%, showcasing the company's ability to maintain profitability. An InvestingPro Tip highlights News Corp.'s ability to manage its operating income efficiently, with an operating income margin of 7.79% for the same period.
Furthermore, News Corp.'s stock performance has shown resilience with a 1-year price total return of 27.39%, reflecting investor confidence and market performance above expectations. Another InvestingPro Tip points to the fair value discrepancy, with analyst targets suggesting a fair value of $33.50, while InvestingPro's own fair value estimate stands at $21.65, indicating a divergence in valuation perspectives that investors may want to consider.
For those looking to delve deeper into News Corp.'s financials and future prospects, InvestingPro offers an additional array of tips, with more than 20 detailed insights available to help investors make informed decisions.
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