Sell-side enthusiasm about the new Fox Corporation FOXA continued Thursday, with Credit Suisse taking a bullish stance on the new TV network company that was spun off from the old 21st Century Fox, saying it could deliver the fastest earnings growth in the sector.
The Analyst
Credit Suisse analyst Douglas Mitchelson initiated coverage of Fox Corp. with an Outperform rating and $46 price target.
The Thesis
Despite being a “new” company, Fox Corp. really isn’t, of course. Its television networks, including The Fox Network, Fox News, Fox Sports and the Big Ten Network, are well-established.
Even with an expected slow 2019 for cable network affiliate revenue growth, Credit Suisse thinks Fox will have the fastest revenue and EBITDA growth in the media industry over the next few years, Mitchelson said in the Thursday initiation note.
The reasons for this include Fox having pricing power over distributors, with about 50 percent of renewals coming up in the coming years, the analyst said. Fox also should benefit from spending on TV in the 2020 election cycle, he said.
“Of note, Fox’s focus on news and sports moderates secular challenges, Fox has long-term sports contracts and is well-positioned for its NFL renewal, and is the least complex media company."
Fox Network has two NFL packages and Major League Baseball, including the playoffs and World Series, Mitchelson said.
"Fox News has led all competitors for over 15 years, and the current environment seems to have only enhanced its importance among viewers, as evidenced by share gains," he said.
Fox Corp., which includes the main TV assets of the former 21st Century Fox company, began trading this week after being spun off from the larger company. The remainder of its assets were sold to Walt Disney Co DIS.
Thursday’s initiation by Credit Suisse was the second bullish rating this week for Fox. Bank of America Merrill Lynch started Fox Corp. with a Buy rating on Wednesday.
Price Action
Fox shares were up 2.05 percent at $38.37 at the time of publication Thursday.
Related Links:
Bank Of America Starts 'New Fox' With Buy Rating, Cites Proven Brand Track Record
New Fox Starts Trading, Adds Paul Ryan To Board; Disney Deal Effective Wednesday
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