Company Reports

Fox reported a very good fiscal third quarter, with the firm continuing to largely withstand declining industry trends better than peers. We expect this outperformance will become even more pronounced later this calendar year—in Fox’s fiscal 2025—as Fox has relatively more exposure to political advertising spending. We’re still uneasy with Fox’s long-term dependence on the traditional pay-TV bundle. While management reaffirmed its dedication to the traditional bundle, it highlighted progress the firm is making with its free streaming service, Tubi, and the recently formed sports streaming joint venture with Disney and Warner Bros. Discovery. We’re maintaining our $43 fair value estimate, as we continue to see the firm as undervalued but with high uncertainty.

Fox’s strategy differs from its biggest traditional media peers, and its business has been far more resilient as a result. Although it has outperformed in the past few years, we think its dependence on the traditional pay-TV bundle for nearly all its revenue is problematic over the long term.

We’ve removed our narrow moat ratings for both Fox and AMC Networks. Like peers who rely as heavily on traditional pay TV, streaming has disrupted these firms’ business models. We don’t think they can be nearly as profitable in a media industry built on streaming as in the landscape they historically enjoyed. We now have no-moat ratings on Fox, AMC Networks, Paramount, and Warner Bros. Discovery. Within our US coverage, Disney, and Comcast are the only firms connected to the traditional pay-TV bundle that we still think have moats, and our moat assessment for both firms relies heavily on their nonmedia assets.

Fox’s strategy differs from its biggest traditional media peers, and its business has been far more resilient as a result. Although it has outperformed in the past few years, we think its dependence on the traditional pay-TV bundle for nearly all its revenue is problematic over the long term.

As expected, considering tough comparisons, a big drop in advertising revenue led to a steep fiscal second-quarter sales decline for Fox. However, margins were strong, and affiliate revenue from pay-TV distributors and affiliated local Fox stations continues to hold up well. Despite the just-announced streaming sports joint venture among Fox, Disney, and Warner Brothers Discovery, our long-term outlook for generally stagnant top-line results for Fox has not changed, and we are maintaining our $43 fair value estimate.

Fox continued to increase revenue in its fiscal first quarter, despite tough comparisons from the political election season in the same period last year and a continuing trend of declining cable subscriptions. Pricing strength and the success of Tubi, the firm’s free streaming service, offset the headwinds. We are maintaining our $43 fair value estimate.

After selling its film, television studios, and various other entertainment assets to Disney in 2019, Fox now consists exclusively of the Fox network, 28 local TV stations, Fox News Group, Fox Sports, Tubi, and investments in related and unrelated assets including Credible Labs, a consumer fintech firm. The slimmer firm represents a large bet on the viability of live sports and news, as we project that the cable networks, including Fox News and FS1, will generate the vast majority of operating income. We believe these bets are well placed, but Fox is now undiversified relative to other media firms.

Fox posted a strong end to fiscal 2023 as revenue met and adjusted EBITDA beat FactSet consensus projections. The broadcast segment posted impressive affiliate fee growth once again as Fox continues to succeed in swimming against the cord-cutting wave. The direct response ad market at Fox News remains plagued by elevated supply across the market, compounding the lack of political ad spending versus a year ago. We are maintaining our fair value estimate of $43.

Fox reported a strong quarter as the broadcast division benefited from the Super Bowl and the ongoing adoption growth of free ad-supporting streaming TV. The affiliate fee growth at the broadcast segment was impressive once again as the division continues to buck the recent acceleration in cord cutting. In comparison, the cable division struggled as the direct response ad market at Fox News and Nation continues to suffer from elevated supply across the market. We are maintaining our fair value estimate of $43.

Fox agreed to a settlement with Dominion Voting Systems concerning the defamation suit brought against Fox News. Dominion sued Fox News for $1.6 billion in damages over the repeated false claims made on-air that Dominion’s electronic voting machine were hacked to switch votes in the 2020 presidential election from President Donald Trump. While less than half of the claimed amount, the $787.5 million settlement payment is one of the largest payouts ever in a defamation suit. However, given the information already released, the pretrial setback, and the potential further embarrassment from chairman Rupert Murdoch, other Fox executives, and a number of high-profile hosts taking the stand, we believe that Fox views the settlement as a win and possibly just the cost of doing business. We are maintaining our $43 fair value estimate as the settlement amounts to only about $1 per share. The firm has plenty of resources to cover the payout, with over $4 billion in cash as of December 2022. We don’t expect the settlement to significantly affect the business model at Fox News.

After completing the Disney transaction in March 2019, the Murdoch clan now oversees a much smaller media firm, albeit one that still controls major media brands. Fox consists of the Fox network, 28 local TV stations, Fox News Group, Fox Sports, Tubi, and investments in related and unrelated assets including Credible Labs, a consumer fintech firm. The slimmer firm represents a large bet on the viability of live sports and news, as we project that the cable networks, including Fox News and FS1, will generate the vast majority of the operating income. We believe these bets are well placed, but Fox is now undiversified relative to other media firms, all of which own significant subscription streaming platforms.

Fox reported another solid quarter as the broadcast division posted relatively good advertising growth given the macro environment in the fiscal second quarter. The broadcast segment once again generated strong affiliate fee growth even with the recent acceleration in pay-TV cord-cutting. The potential reunion with its sister firm, News Corp, has been called off, which we view as a positive as the publishing assets at News Corp would not help Fox overcome its potential scale issues. The board authorized a $3 billion increase to the stock buyback authorization, raising the total to $7 billion, and the firm intends to enter a $1 billion accelerated share repurchase plan. While we are generally wary about the opportunity cost of stock buybacks at the expense of investing in growth, the Murdoch family has a spotty M&A track record. We are maintaining our fair value estimate of $43.

Fox reported a solid start to fiscal 2023. The cable and broadcast divisions once again reported relatively good advertising growth, considering the macro background, thanks to the ongoing growth at Tubi and the continued dominance of Fox News. Even with the recent acceleration in television cord-cutting, Fox generated strong affiliate fee growth at the broadcast segment. The Murdoch family’s bet on the value of sports and news remains on pace to be the right one, at least in the near term. We are maintaining our $43 fair value estimate.

Fox posted an in-line end to its fiscal 2022, with both revenue and EBITDA meeting FactSet consensus estimates. The cable and broadcast divisions both reported relatively strong advertising growth given the macroeconomic background, as the firm benefited from the continued growth of Tubi and the seemingly never-ending dominance of Fox News. Even with the decline in pay-TV subscribers over the last few years, Fox has added an additional $1 billion in affiliate fee revenue since its 2019 investor day, six months ahead of schedule. While there remain questions about the long-term outlook for a media firm with limited exposure to the subscription streaming market, the Murdoch family’s bet on the value of sports and news appears to be paying off. We are maintaining our fair value estimate of $43.

Fox posted a mixed fiscal third quarter. Both the cable and broadcast divisions reported relatively impressive advertising growth, benefiting from the ongoing adoption of streaming services and the continued dominance of Fox News. While profitability was pressured due in part to continued digital investment, the recent growth at both Tubi and Fox Nation makes the investment appear reasonable. Tubi had 18 of its top 20 total viewing time days in the last quarter, a strong result. We keep our fair value estimate of $43.

After completing the Disney transaction in March 2019, the Murdoch clan now oversees a much smaller media firm, albeit one that controls major media brands. Fox consists of the Fox network, 28 local TV stations, Fox News Group, and Fox Sports. The new firm represents a large bet on the viability of live sports and news, as we project that the cable networks, including Fox News and FS1, will generate the vast majority of operating income for Fox Corp. We believe these bets are well placed given our expectations for the evolution of the television industry, but Fox is now undiversified relative to other media firms.

Fox posted another strong quarter, as fiscal second-quarter revenue and EBITDA both beat FactSet consensus projections. Even with a lack of political spending, both the cable and broadcast divisions reported relatively impressive advertising growth, benefiting from strong NFL and college football seasons along with growth at the streaming services. Affiliate fee growth at both segments was above 10%, a strong showing. We are maintaining our narrow moat rating and raising our fair value estimate to $43 from $41 to account for stronger-than-projected affiliate and ad growth in fiscal 2022.

After completing the Disney transaction in March 2019, the Murdoch clan now oversees a much smaller media firm, albeit one that controls major media brands. Fox consists of the Fox network, 28 local TV stations, Fox News Group, and Fox Sports. The new firm represents a large bet on the viability of live sports and news, as we project that the cable networks, including Fox News and FS1, will generate the vast majority of operating income for Fox Corp. We believe these bets are well placed given our expectations for the evolution of the television industry, but Fox is now undiversified relative to other media firms.

After completing the Disney transaction in March 2019, the Murdoch clan now oversees a much smaller media firm, albeit one that controls major media brands. Fox consists of the Fox network, 28 local TV stations, Fox News Group, and Fox Sports. The new firm represents a large bet on the viability of live sports and news, as we project that the cable networks, including Fox News and FS1, will generate the vast majority of operating income for Fox Corp. We believe these bets are well placed given our expectations for the evolution of the television industry, but Fox is now undiversified relative to other media firms.

Fox kicked off fiscal 2022 with a strong first quarter, as revenue and EBITDA both beat FactSet consensus projections. The cable and broadcast divisions benefited from a larger sports slate and resultant advertising growth. While the off-cycle year hurt political ad spending, Fox News remains the premier news network; it was the most-watched news channel for the 79th quarter in a row and had over a 50% share of cable news viewership in the quarter. We are maintaining our narrow moat rating and expect to modestly raise our $37 fair value estimate to account for stronger ad growth at Tubi and Fox Nation.