Fox's Growth Prospects, Competitive Valuation Stand Out Against Disney, Paramount; Analyst Sees Momentum With Tubi, Sports

BofA Securities analyst Jessica Reif Ehrlich reiterated a Buy rating on Fox Corp FOX FOXA with a price target of $40, up from $34.

Reif Ehrlich noted fiscal 2024 was set to be a challenging year given the tough comparisons to fiscal 2023, which included the Super Bowl, the World Baseball Classic, a midterm political cycle and the Men’s World Cup. 

According to the analyst, Fox is now well-positioned to accelerate earnings in fiscal 2025. 

Also Read: Fox Beats Revenue Estimates, Plans New Streaming Venture With Warner Bros. And Disney

Her bullish thesis reflected an improving advertising backdrop that should benefit from a U.S. presidential, congressional and ballot election cycle in the second half of 2024, continued momentum at Tubi, the Super Bowl in 2025, strength in Live News and Sports, including major soccer events and a healthy balance sheet with net leverage currently at 1x. 

Reif Ehrlich was encouraged by Fox’s results amid a challenging linear advertising environment, surprisingly strong retransmission fees (+9%) despite pay TV contraction, and Tubi’s performance, which has exceeded all expectations. 

Well positioned in the evolving landscape, Fox appears extremely attractive. It trades at ~6x Reif Ehrlic’s calendar 2025 EV/EBITDA, well below other peers like Walt Disney Co DIS and Paramount Global PARA PARAA, and its valuation provides downside protection. 

Moreover, the analyst noted Fox had the most minor exposure to entertainment advertising given its asset mix, which is biased toward sports and news. This, coupled with no competing SVOD services, should enable the company to best manage the secular headwinds within the linear ecosystem.

The analyst raised her fiscal 2024 EBITDA forecast to $2.8 billion (from $2.77 billion) and fiscal 2024 EPS to $3.32 (from $3.22). Additionally, she increased her fiscal 2025 EBITDA forecast to $3.2 billion (from $3.1 billion) and fiscal 2025 EPS to $3.79 (from $3.69).

FOXA Price Action: Fox Corp shares are up 0.35% at $33.28 at the last check Thursday.

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