Fox stock rating cut to Hold by CFRA on valuation concerns

Investing.com - CFRA downgraded Fox Corp . (NASDAQ:FOXA) from Buy to Hold on Wednesday, maintaining a price target of $59.00, citing limited upside potential despite the company’s "exceptional media assets." The stock, currently trading near its 52-week high of $58.74, has delivered an impressive 68% return over the past year.

The research firm pointed to valuation constraints, with its target based on a forward TEV/EBITDA of 8.4x, near peers but above Fox’s five-year average of 7.0x. According to InvestingPro data, Fox maintains strong financial health with a score of 3.19/5 and operates with moderate debt levels. CFRA noted Fox’s low beta of 0.53 and ongoing share buybacks as positive factors.

Fox’s Television segment showed weaker Q3 FY25 EBITDA at $60 million versus $145 million a year ago, with CFRA expecting reduced advertising revenue to continue without next year’s Super Bowl. The firm anticipates a "lull" in advertising revenue during Q4 FY25 and Q1 FY26 until NFL season begins in autumn.

CFRA maintained its FY25 EPS estimate at $4.55 while raising its FY26 projection by $0.20 to $4.20. The firm forecasts adjusted EBITDA of $3.5 billion in FY25 and $3.2 billion in FY26.

Tubi, Fox’s digital streaming platform, achieved 35% revenue growth in Q3, representing a bright spot for the company. CFRA identified potential risks including economic weakness, lower TV ratings, and possible "runaway costs" for future renewal of major league sporting rights.

In other recent news, FOX Corporation reported robust financial results for the third quarter of fiscal 2025. The company achieved a year-over-year revenue increase of 27%, reaching $4.37 billion, which exceeded analyst estimates from UBS and the broader consensus. Adjusted earnings per share (EPS) came in at $1.10, surpassing expectations and slightly improving from the previous year’s $1.09. FOX’s adjusted EBITDA was reported at $856 million, despite a slight decrease from the previous year, it still outperformed analyst projections.

Several analyst firms have responded positively to FOX’s performance. UBS maintained a Buy rating with a $61 price target, citing the company’s strong financial results across all segments. Loop Capital Markets increased its price target to $64 and reiterated a Buy rating, highlighting FOX’s continued success in affiliate revenue growth and its strategic focus on news and sports content. Meanwhile, CFRA raised its price target to $59, also maintaining a Buy rating, reflecting optimism about FOX’s future earnings potential.

Additionally, FOX has been praised for its effective financial strategies, including a healthy balance sheet and an active share buyback program. The company’s ability to navigate industry challenges, such as subscriber declines, has been attributed to its strategic investments in digital platforms like Tubi, which contributed significantly to advertising revenue growth. FOX’s launch of Fox One, a new streaming service aimed at cord-cutters, is also expected to further bolster its digital presence.

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