On Thursday, Macquarie maintained a Neutral stance on FOX Corp. (NASDAQ:FOXA), with a price target set at $30.00. The evaluation follows the announcement of a streaming sports bundle partnership involving Fox, ESPN, and Warner Bros. Discovery (NASDAQ:WBD)'s Turner Networks. This collaboration is seen as a potential new sublicensing revenue stream for Fox.
The assessment of Fox's financial performance revealed mixed results. Advertising revenues fell short of expectations, while affiliate fees exceeded them, and Operating Income Before Depreciation and Amortization (OIBDA) remained strong. The company saw a 10% increase in affiliate revenue in its television segment and a slight 0.5% rise in its cable division. This growth comes after four quarters of decline and is attributed to price increases in contract renewals, which helped to mitigate an 8% decrease in linear TV subscribers.
However, advertising revenue did not perform as well, with a significant 23% decline reported in both TV and cable divisions. Despite this downturn, the company's streaming platform, Tubi, showed positive signs with a 17% increase in advertising growth and a 62% surge in user engagement. Tubi now boasts 78 million monthly active users (MAUs).
The Neutral rating by Macquarie reflects a cautious perspective on FOX Corp.'s business model. Nonetheless, the firm acknowledges the underlying asset value that exists beneath the company's operational figures. The price target was adjusted to $30, up from $29, based on an increased Sum of The Parts (SOTP) value due to the uptick in EBITDA.
InvestingPro Insights
Amid the recent developments in FOX Corp.'s (NASDAQ:FOXA) business strategy and Macquarie's neutral outlook, InvestingPro insights offer a deeper dive into the company's financial health and market position. FOX Corp. has been actively engaging in share buybacks, demonstrating management's confidence in the company's value—an InvestingPro Tip that aligns with the company's efforts to enhance shareholder returns. Additionally, the company's consistent dividend growth over the last three years, coupled with a high shareholder yield, indicates a commitment to rewarding investors, a factor that may appeal to income-focused shareholders.
From a financial perspective, FOX Corp. currently has a market capitalization of $13.73 billion and a forward P/E ratio for the last twelve months as of Q1 2024 of 8.0, which suggests a potentially attractive valuation relative to earnings. The company's revenue for the same period stands at $14.93 billion, with a growth rate of 5.71%, reflecting a stable increase in its top-line figures. Moreover, FOX Corp. maintains a solid gross profit margin of 33.72%, indicating efficient cost management relative to its revenue generation.
Investors considering FOX Corp. as a potential addition to their portfolio may find these insights particularly relevant, especially when considering the recent volatility in the stock price, as the company is trading near its 52-week low. For those looking for more comprehensive analysis and additional InvestingPro Tips, such as the company's moderate level of debt and liquidity position, InvestingPro offers extensive data and expert insights. Use coupon code SFY24 to get an additional 10% off a 2-year InvestingPro+ subscription, or SFY241 to get an additional 10% off a 1-year InvestingPro+ subscription. There are 10 additional InvestingPro Tips available for FOX Corp. to help investors make more informed decisions.
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