Should You Buy Fox Stock Now? Analyst Shares 5 Reasons Why

Fox Corp FOX has significantly lagged the S&P 500 in the past three months, but one analyst has listed at least five reasons why investors should be buying the dip in Fox.

The Analyst: Bank of America analyst Jessica Reif Ehrlich has reiterated her Buy rating and $54 price target for Fox.

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The Thesis: On Wednesday, Ehrlich said she is bullish on Fox despite the company’s signals that fiscal 2022 will be an investment year focused on Tubi and Fox’s other digital assets.

Ehrlich said Fox is likely to invest between $200 million and $300 million in its direct-to-consumer (DTC) assets in fiscal 2022, which she said is prudent given the current media climate.

Bank of America is projecting 14% revenue growth in the fiscal 2021 fourth quarter but a 23% drop in OIBDA as Fox’s Tubi investments ramp up.

“However, underlying core trends remain robust, driven by a very strong advertising market following this year’s upfronts, which we believe positions the company well to re-accelerate in FY23,” Ehrlich said.

She listed the following five reasons she is bullish on Fox at its current price:

• It is the best-positioned media company to benefit from a rise in sports betting.
• It is taking a measured approach to DTC formats.
• It owns rights to must-have news and sports content.
• It has a healthy balance sheet, including net leverage below 1x.
• It will be a beneficiary from strong post-pandemic advertising trends.

Looking ahead, Ehrlich is projecting EPS growth will accelerate from 2.2% in fiscal 2022 to 24.5% in fiscal 2023 following Fox’s investment phase.

Benzinga’s Take: Traditional cable TV may be dying a slow death, but Fox doesn’t appear to be going down with the ship. However, Fox has a lot of ground to make up to compete in the DTC space with the likes of market leaders Netflix Inc. NFLX and Walt Disney Co DIS.