On Tuesday, Evercore ISI updated its financial outlook for FOX Corp. (NASDAQ:FOXA), raising its price target from $38.00 to $42.00, while maintaining an In Line rating for the stock. The firm's analyst highlighted FOX Corp.'s strong start to its FY25, noting substantial performance in revenue, EBITDA, and free cash flow (FCF). The positive trend is attributed to factors such as political advertising spending, including on its Tubi platform, as well as solid viewership numbers for its sports and news segments.
FOX Corp. has recently shown resilience in the face of the challenges that typically impact linear media companies. The company's performance was bolstered by increased affiliate and advertising revenue growth, excluding the impact of the Super Bowl. However, expectations suggest that this growth could slow down in the second half of FY25 and possibly extend into the first half of FY26. This anticipated deceleration is part of a recurring discussion about whether FOX Corp. has reached its peak earnings potential.
The financial firm also pointed out that FOX Corp.'s long-term prospects are somewhat uncertain and hinge on strategic decisions by management. These include potential mergers and acquisitions, such as exercising an option to acquire a 18.6% stake in FanDuel or a recombination with News Corp. (NASDAQ:NWSA) Such moves could significantly affect the company's future.
The revised price target of $42 implies a 6.5 times multiple on the calendar year 2025 enterprise value/EBITDA and a free cash flow yield of 12.4%. The analyst's commentary suggests that while there are uncertainties in the long-term view, the near-term prospects for FOX Corp. appear stable, supported by current trends in political advertising and viewership.
In other recent news, FOX Corp. has reported a series of significant developments. The company's fiscal first-quarter performance exceeded both Guggenheim's and consensus estimates, driven by a broad-based beat across its segments, notably in Cable Networks, leading Guggenheim to maintain a Buy rating on FOX Corp. and increase the price target to $50.00. The company's revenue growth accelerated to 11%, benefiting from record political advertising revenue and a 47% increase in 'Other' revenue growth. FOX Corp.'s ad-supported streaming service, Tubi, also saw a revenue growth of 19%.
In addition, CFRA analyst Kenneth Leon upgraded Fox Corp (NASDAQ:FOXA). from 'Sell' to 'Hold' and raised the price target to $46, following a strong performance in the September quarter. The earnings per share (EPS) estimates for fiscal years 2025 and 2026 were revised upwards, reflecting the company's robust performance. Fox Corp. reported an EPS of $1.78 for the September quarter, exceeding the consensus estimate of $1.13. This beat was driven by a 5.6% revenue increase, spurred by the election news cycle and live sports events.
The company exceeded Wall Street's revenue forecasts for the first quarter, largely attributed to a surge in political advertising. Fox reported an 11% rise in advertising revenue, reaching $1.33 billion. The company's total quarterly revenue was $3.56 billion, surpassing the expected $3.37 billion. Fox's Cable Network (LON:NETW) Programming division reported revenue of $1.60 billion, exceeding analysts' projection.
InvestingPro Insights
FOX Corp.'s (NASDAQ:FOXA) recent performance aligns with several key metrics and insights from InvestingPro. The company's P/E ratio of 10.46 and adjusted P/E ratio of 12.19 for the last twelve months as of Q4 2024 suggest that the stock is trading at a relatively low valuation compared to its earnings. This is further supported by an InvestingPro Tip indicating that FOX is "Trading at a low P/E ratio relative to near-term earnings growth."
The company's financial health appears robust, with an InvestingPro Tip noting that "Liquid assets exceed short term obligations." This financial stability is crucial as FOX navigates the evolving media landscape and considers strategic moves like potential acquisitions or mergers.
FOX's stock performance has been strong recently, with a 19.05% price total return over the last three months and a 34.8% return over the past six months. This aligns with the InvestingPro Tip that the stock has seen a "Strong return over the last three months" and is "Trading near 52-week high."
For investors seeking more comprehensive analysis, InvestingPro offers 12 additional tips for FOX Corp., providing a deeper understanding of the company's financial position and market performance.
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