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On Wednesday, Evercore ISI increased the price target for FOX Corp. (NASDAQ:FOXA) to $38 from the previous $33, while maintaining an In Line rating. The decision follows FOX's strong fourth-quarter performance, which exceeded expectations, particularly in terms of earnings before interest, taxes, depreciation, and amortization (EBITDA).
FOX concluded its fiscal year 2024 on a high note, with margins exceeding forecasts and driving a significant EBITDA beat. The company has seen a surge in momentum, attributed to better ratings at Fox News, a positive advertising environment, and growth acceleration for its streaming service Tubi, especially in June and July. This uptick came after a notably quiet April and May.
Looking ahead to fiscal year 2025, FOX is poised to benefit from multiple factors. These include increased political advertising revenue, financial gains from broadcasting the Super Bowl, reduced digital losses, and the launch of the Venu Sports joint venture, which is expected to contribute to revenue and EBITDA through licensing deals. Despite these positive developments, the immediate net cash impact remains uncertain.
While the revenue and EBITDA forecasts for fiscal year 2025 remain largely intact, the firm's confidence in FOX's outlook has grown. This sentiment is supported by the resilience of affiliate fees, encouraging advertising trends, and efficient cost management. In addition to its operational achievements, FOX has consistently continued its share buyback program and has raised its semiannual dividend by 4%, which translates to approximately a 1.4% yield.
FOX's management has been described as cautious and prudent in their approach to capital allocation, balancing organic investments and shareholder returns. However, they have indicated a growing interest in mergers and acquisitions (M&A), which introduces a degree of uncertainty.
The narrative for FOX moving forward is expected to revolve around advertising trends, digital initiatives, and potential M&A activities. The new price target of $38 implies a 5.9x calendar year 2025 enterprise value/EBITDA and a 13.1% free cash flow yield.
In other recent news, FOX Corp has been the subject of several analyst adjustments. CFRA increased its price target for FOX Corp from $35.00 to $38.00, maintaining a Hold rating. This change was based on a forward Total Enterprise Value to Earnings Before Interest, Taxes, Depreciation, and Amortization (TEV/EBITDA) multiple of 6.8 times the firm's fiscal year 2025 EBITDA estimate of $6.51 billion.
On the other hand, Wells Fargo maintained its underweight rating with a steady price target of $29.00. This analysis suggests a cautious outlook on potential mergers and acquisitions due to the migration of sports broadcasting to streaming platforms.
In terms of financial performance, FOX Corp reported a Q4 EPS of $0.68, falling short of the consensus estimate by $0.13. The company also reported a 5% increase in affiliate fees and a 2% increase in revenue for its cable-network programming division.
The company's free advertising-supported streaming platform, Tubi, continues to grow, now boasting 81 million monthly viewers. Additionally, FOX Corp recently announced a joint venture with Disney and Warner Bros. Discovery (NASDAQ:WBD), aiming to offer major sports leagues and events to non-subscribed streaming viewers.
Lastly, a legal dispute is ongoing between media mogul Rupert Murdoch and three of his children over the future leadership of his media empire, which includes FOX Corp.
InvestingPro Insights
As FOX Corp. (NASDAQ:FOXA) wraps up a robust fiscal year 2024, investors may find additional context in the real-time data and InvestingPro Tips. The company's management has demonstrated a commitment to shareholder value through aggressive share repurchases and a consistent dividend increase over the past four years. Alongside this shareholder-friendly approach, FOXA is trading at a low P/E ratio of 11.63, suggesting it may be undervalued relative to its near-term earnings growth potential.
From a financial health perspective, FOXA's liquid assets surpass its short-term obligations, indicating a solid liquidity position. Moreover, with a moderate level of debt and a dividend yield of 1.34%, the company presents a balanced risk profile. Investors will note the stock's strong performance, with a price uptick of 32.88% over the last six months and a return of 20.08% over the last three months, trading near its 52-week high.
For those seeking more in-depth analysis, InvestingPro offers a suite of additional tips, including insights on profitability, analysts' predictions for the year, and a comprehensive fair value assessment. In total, there are 10 more InvestingPro Tips available, which can provide a more nuanced understanding of FOXA's investment potential.
It's clear that FOX Corp. is navigating the dynamic media landscape with strategic initiatives that are resonating with the market. As the company continues to evolve with new ventures and a focus on digital expansion, these InvestingPro Insights can serve as a valuable tool for investors looking to make informed decisions.
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