On Tuesday, UBS reaffirmed its Buy rating on FOX Corporation (NASDAQ:FOXA) with a steady price target of $44.00. The firm anticipates consistent underlying trends in the fourth fiscal quarter, similar to the third fiscal quarter, with expectations of continued growth into fiscal year 2025 due to cyclical tailwinds.
FOX Corporation is expected to see total affiliate growth of 4.6% year-over-year in the fourth fiscal quarter, mirroring the growth rate of the previous quarter. Advertising revenue is projected to remain relatively stable, with the growth of Tubi, although at a slower pace due to challenging comparisons and an increase in Connected TV (CTV) inventory. The solid performance in sports advertising spending and improved cable ratings are likely to balance out the weaker entertainment segment.
The company’s EBITDA for the fourth fiscal quarter is projected to be $702 million, which would contribute to a decline of approximately 12% in fiscal year 2024 EBITDA. However, this is expected to reverse with an anticipated double-digit EBITDA growth in fiscal year 2025, reaching $3.2 billion, surpassing the street's estimate of $3.05 billion. This growth is predicted to be driven by several factors, including political advertising revenue, the Super Bowl, savings from the WWE, and strong affiliate trends.
UBS's analysis suggests that FOX Corporation is positioned for a significant turnaround in fiscal year 2025, following a year of declining EBITDA. The firm's projections indicate a robust recovery supported by key events and trends in the media sector.
In other recent news, FOX Corp has been the subject of multiple analyst reports. Goldman Sachs recently initiated coverage on the media company, assigning a Buy rating and setting a price target of $42.00. The firm's analysis suggests that FOX Corp. is undervalued by the market, despite challenges from cord cutting and a decline in linear viewership. Goldman Sachs also anticipates a boost for FOX Corp. from the upcoming 2024 political season, projecting an additional $280 million in political advertising spend.
On the earnings front, FOX Corp's recent financial results highlighted a net income of $666 million and total revenue of $3.45 billion. Despite a decline in ad revenue, the company managed to surpass Wall Street's profit forecasts. Deutsche Bank, Rosenblatt, and CFRA all raised their price targets for the media giant, reflecting the company's robust EBITDA increase, controlled expenses, and slight uptick in affiliate revenue across both Cable and TV segments.
In other company news, FOX Corp announced a sports-streaming joint venture with The Walt Disney Company (NYSE:DIS) and Warner Bros Discovery (NASDAQ:WBD), aiming to provide streaming services for major sports leagues and events. This development is part of the company's strategy to navigate the evolving media landscape and capitalize on upcoming opportunities.
InvestingPro Insights
According to real-time data from InvestingPro, FOX Corporation (NASDAQ:FOXA) is trading at a low P/E ratio of 10.06, indicating a potentially undervalued stock relative to its near-term earnings growth. This aligns with UBS's positive outlook on the company's fiscal performance. FOXA's management has also been proactive in creating shareholder value, as evidenced by their aggressive share buybacks and a consistent history of raising dividends for the past three years, with the current dividend yield standing at 1.51%. Additionally, the company's liquid assets exceed its short-term obligations, suggesting financial stability.
InvestingPro Tips highlight that FOX Corporation operates with a moderate level of debt and has been trading near its 52-week high, reflecting market confidence. Moreover, analysts predict the company will maintain profitability this year, a sentiment supported by the stock's low price volatility. For readers interested in a deeper analysis, there are over 10 additional InvestingPro Tips available, which can be accessed with a special offer: use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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