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Investing.com - Wolfe Research upgraded Fox Corp . (NASDAQ:FOXA) from Underperform to Peer Perform on Wednesday, citing reduced recession risks and strong sports advertising demand. The stock, currently trading near its 52-week high, has delivered an impressive 58.35% return over the past year, according to InvestingPro data.
The upgrade reflects a significant shift in economic outlook, with market-implied recession odds falling to 10%, according to Wolfe Research. The firm had previously emphasized concerns about Fox’s high exposure to television advertising, with approximately 40% of sales coming from this segment. However, Fox’s strong financial health score of 3.1 (rated "GREAT" by InvestingPro) and robust current ratio of 2.45 suggest the company is well-positioned to handle market fluctuations.
Wolfe Research noted particularly strong performance in sports advertising, reporting that upfront sports ad pricing has increased 10% year-over-year. The firm estimates that up to 25% of Fox’s advertising revenue comes from NFL programming, which provides the company with "massive, stable audiences" and pricing power for both advertising and affiliate fees.
The research firm also pointed to developments within the Murdoch family and in Washington, DC that potentially increase the likelihood of asset sales at premiums to Fox’s current valuation. Wolfe Research calculates Fox’s current price-to-free cash flow ratio at approximately 10x (average FY’26/FY’27, adjusted for FanDuel, Flutter, and tax shield).
No price target was issued with the upgrade, in accordance with Wolfe Research policy. Fox currently trades at a P/E ratio of 12.44x with revenue growth of 15.7% over the last twelve months. InvestingPro analysis suggests the stock is slightly undervalued at current levels, with additional insights available in the comprehensive Pro Research Report, part of InvestingPro’s coverage of over 1,400 US stocks.
In other recent news, FOX Corporation reported a substantial year-over-year revenue increase of 27%, achieving $4.37 billion in the third fiscal quarter, surpassing estimates from UBS and the consensus on the Street. The company’s EBITDA for the quarter was $856 million, exceeding expectations despite a slight decrease from the previous year. FOX’s adjusted earnings per share came in at $1.10, beating both UBS’s estimate and the Street’s forecast. Tubi, FOX’s streaming platform, contributed significantly to advertising revenue, showing a 35% revenue growth in Q3. Meanwhile, CFRA downgraded FOX’s stock rating from Buy to Hold, citing valuation concerns, but maintained a price target of $59.00. Loop Capital, however, raised its price target to $64, maintaining a Buy rating due to FOX’s strong financial performance and strategic focus on news and sports content. Bernstein SocGen Group maintained a Market Perform rating with a $53 target, noting FOX’s solid growth and strategy amidst industry challenges. FOX’s share repurchase activity for the quarter totaled $250 million, aligning with expectations and reflecting confidence in the company’s financial health.
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