On Tuesday, Wells Fargo maintained its underweight rating on FOX Corporation (NASDAQ:FOXA), with a steady price target of $29.00. The firm's analysis suggests that while FOX's affiliate revenue risk is not fully recognized due to the migration of sports broadcasting to streaming platforms, there is a cautious outlook on potential mergers and acquisitions.
The analyst at Wells Fargo highlighted a modest increase in fiscal fourth-quarter 2024 estimates for FOX, primarily due to the company's soccer rights, which are believed to have performed well. Based on viewership data, the Copa and Euro soccer events are estimated to contribute an additional approximately $24 million year-over-year, with further impacts expected in the first quarter of fiscal 2025.
The revision also accounts for a positive adjustment in earnings before interest, taxes, depreciation, and amortization (EBITDA) as a consequence of the sports events. Additionally, the analyst adjusted the revenue forecasts for Tubi, FOX's ad-supported streaming service, and scaled back political advertising revenue for the quarter. Consequently, television advertising growth projections shifted from a 1% decline to a 2% increase, translating to an incremental $21 million in revenue and adjusted EBITDA compared to previous estimates.
The firm noted FOX's consistent EBITDA outperformance over the last four quarters relative to Wells Fargo's models, citing figures that exceeded their predictions by $42 million, $83 million, $51 million, and $80 million, sequentially.
In other recent news, FOX Corp has been the focus of several financial firms and analysts. Citi raised the company's stock target to $40 from $38, maintaining a Buy rating. This adjustment reflects revised forecasts, including a scaled-back projection for TV advertising revenue and a reduced assumption for future interest expenses. These changes led to a slight increase in the revenue and EBITDA predictions for the years 2024 to 2026.
UBS also maintained its Buy rating on FOX Corp, with a steady price target of $44, anticipating consistent trends and expecting growth into fiscal year 2025. The firm projects a total affiliate growth of 4.6% year-over-year in the fourth fiscal quarter and an EBITDA of $702 million. By fiscal year 2025, UBS expects the EBITDA to reach $3.2 billion, surpassing the street's estimate of $3.05 billion.
Goldman Sachs initiated coverage on FOX Corp, assigning a Buy rating with a price target of $42. The firm foresees a boost from the upcoming 2024 political season, projecting an additional $280 million in political advertising spend. It also believes the market has not fully recognized the value of FOX Corp.'s unconsolidated net assets, estimated to be worth $5.5 billion.
In recent financial results, FOX Corp reported 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. In other company developments, 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.
InvestingPro Insights
While Wells Fargo maintains a cautious stance on FOX Corporation (NASDAQ:FOXA), recent metrics from InvestingPro paint a picture of a company with noteworthy financial health and investor-friendly moves. FOXA boasts a robust P/E ratio of 10.03, which is attractive when considering the near-term earnings growth, and indicates a company potentially undervalued relative to its earnings potential. Moreover, the company's management has been actively buying back shares, a sign of confidence in the company's value. Additionally, FOXA has a history of rewarding shareholders, with a dividend yield of 1.52% and a track record of raising its dividend for three consecutive years, suggesting a commitment to returning value to investors.
InvestingPro Tips highlight that FOXA operates with a moderate level of debt and has liquid assets that exceed its short-term obligations, providing a cushion for operational flexibility. Furthermore, analysts predict the company will be profitable this year, with a performance that has been profitable over the last twelve months. With a current market cap of $15.94B and a price sitting at 96.27% of its 52-week high, FOXA may be positioned for stability in the near term.
For readers looking to delve deeper into FOX Corporation's financials and future outlook, there are 9 additional InvestingPro Tips available, which can be accessed by visiting: https://www.investing.com/pro/FOXA. Don't forget to use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, offering a more comprehensive investment analysis and insights.
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