On Monday, Seaport Global Securities adjusted its stance on shares of FOX Corp. (NASDAQ:FOXA), shifting its rating from Buy to Neutral. The revision comes after the analyst's examination of the political and television station landscape, focusing on areas where political advertising spending is likely to be significant. This includes competitive races from presidential swing states to Senate, House, and gubernatorial races.
FOX Corp., with its business model concentrated in the U.S. and a traditional media footprint, stands to benefit from political ad spending. The company's coverage extends to local TV stations reaching 39% of the country, including the Fox News Channel. The analyst acknowledged the robust cyclical cash flow potential due to this exposure.
However, the analyst pointed out that FOX Corp. shares have been trading above the previous price target of $40 for approximately a week. This sustained increase suggests that the market may have already priced in the anticipated surge in political advertising spending. Consequently, the decision was made to downgrade the stock rating, adopting a more cautious stance as the shares reflect the current market sentiment.
The change in rating is a response to the current valuation of FOX Corp. shares, which implies that the stock may have limited upside potential in the near term. This adjustment in expectation is a typical part of the analyst's role in providing guidance to investors based on the latest market conditions and company prospects.
Investors and market watchers will likely monitor FOX Corp.'s performance closely, especially as the political season heats up and advertising spending unfolds. The company's financial results in the coming quarters will provide further insight into the impact of these factors on its revenue and profitability.
In other recent news, both News Corp (NASDAQ:NWSA) and Fox Corp have been the focus of significant developments. News Corp is facing a challenge from hedge fund Starboard Value, which aims to dissolve the dual-class share structure that gives Rupert Murdoch control over the company.
Starboard, which holds a 1.9% stake in News Corp, has suggested spinning off the company's digital real estate unit to enhance shareholder value. The outcome of this proposal remains uncertain.
Meanwhile, Fox Corp has seen a series of analyst adjustments following its robust fourth-quarter performance. Citi increased its price target for the company's shares to $47, maintaining a Buy rating, and factoring in the potential value of an option to acquire a significant stake in FanDuel. Evercore ISI and CFRA also raised their price targets for Fox Corp to $38, citing strong earnings and a stable outlook.
However, the company's future plans may introduce some uncertainty. Fox Corp's management has expressed an interest in mergers and acquisitions, and the company is launching a sports streaming joint venture with Disney and Warner Bros. Discovery (NASDAQ:WBD). These recent developments highlight the dynamic nature of both News Corp's and Fox Corp's operations and strategies.
InvestingPro Insights
With FOX Corp. (NASDAQ:FOXA) at the center of Seaport Global Securities' recent rating adjustment, investors may find value in considering additional insights from InvestingPro. Notably, FOXA's management has been actively repurchasing shares, signaling confidence in the company's value. This is complemented by a consistent history of dividend increases, with the dividend having been raised for four consecutive years.
Such shareholder-friendly actions could be seen as a positive indicator of the company's financial health and management's commitment to returning value to investors.
In terms of valuation, FOXA is trading at a low P/E ratio relative to near-term earnings growth, with a current P/E ratio of 11.93 and an adjusted P/E ratio for the last twelve months as of Q4 2024 at 11.47. This could suggest that the stock is undervalued compared to its earnings potential. Moreover, the company's stock generally trades with low price volatility, which may appeal to investors seeking stability in their portfolio.
For those looking to delve deeper into FOXA's financials and future prospects, InvestingPro offers a range of additional tips. Currently, there are over 10 additional InvestingPro Tips available, which provide further analysis and insights into FOX Corp.'s performance and potential investment opportunities. Visit InvestingPro for a comprehensive view of these expert tips and metrics.
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