This FOX Stock Forecast article was written by Opher Joseph – Financial Analyst, I Know First.

Summary

• The company’s revenue per share has a growth rate of 11.70% in the past 12 months and 8.50% in the past 5 years out-performing 81% of the companies in the Media-Diversified industry.
• The P/S ratio is at 1.74 and the P/E ratio at 16.62 which is fairly below the industry average.
• The Operating Margin of the company is 19.40% that higher than 87.27 of the companies in the Industry.

Overview

Fox Corporation operates as a news, sports, and entertainment company in the United States. The company operates through three segments: Cable Network Programming; Television; and Other, Corporate and Eliminations. The Cable Network Programming segment produces and licenses news, business news, and sports content for distribution primarily through cable television systems, direct broadcast satellite operators, telecommunications companies, and online multi-channel video programming distributors. It operates FOX News, a national cable news channel; FOX Business, a business news national cable channel; FS1 and FS2 multi-sport national networks; FOX Sports Racing, a video programming service that comprises motorsports programming; and FOX Soccer Plus, a video programming network for live soccer and rugby competitions; FOX Deportes, a Spanish-language sports programming service; and Big Ten Network, a national video programming service.

Expanding Streaming Horizons

The rise of internet streaming services has all but shattered the revenue model of traditional media houses. Declining traditional television viewership has lowered the demand for traditional television advertisement and, thus, has lowered the price. To hedge their bets against these trends, FOX Corp has made an acquisition of TubiTV in 2019, a popular streaming service. While that service does not collect membership fees, it was another medium in which advertisement space and affiliate marketing opportunities could generate revenue. Additionally, Fox purchased MarVista Entertainment, a production company, aiding in their efforts to continually produce their own content, lessening the money needed to acquire TV series from other productions companies, allowing them to develop more in-house.

Additionally, Fox Corporation made an acquisition in the world of sports betting, acquiring a 20% interest in major sports-book betting company FanDuel via its parent company Flutter Entertainment. This presents the company with new avenues for revenue generation through the lucrative sports betting industry. Also, FOX News Media is set to expand the distribution of streaming services across Direct TV platforms. This will help FOX in further customer outreach in its subscription service.

FOX Corporation operates in a very rigid broadcasting market which has seen a gradual decrease in the revenue shares and broadcasting viewership due to the surge of several online platforms. FOX Corporation has been fairly agile to adapt to these platforms, meanwhile exploring new business avenues like sports-betting which has ensured that it maintains its share in traditional broadcasting platforms and also is well hedged against the new trends in the industry. It has managed to grow its revenue in the past 3-year CAGR at the rate of 7.37%, while is expected to grow at similar rates for the current fiscal year. For an operator in the traditional broadcasting market, a consistent return is an admirable feat. These numbers further improve in terms of revenue per share with a growth rate of 11.70% in the past 12 months and 8.50% in the past 5 years out-performing 81% of the companies in the Media-Diversified industry.

FOX Corporation ranks favorably in terms of operational performance compared to its industry. At current market price levels, even when the stock is continuously gaining momentum, the stock seems to be undervalued. The company’s P/E and P/S ratios are 16.82 and 1.76 respectively, that less than in average numbers across its comparable peers.

Despite the promising financial ratios, FOX also has some challenges to face to deliver on its promising growth prospects. The company has introduced changes in the capital debt structure which have contributed to its lower Net-Margins and also impacted free cash-flows. The company traditionally generated industry-best cash flows with its high-profit margins which it used for Dividends and Share buy-back schemes. Currently, Fox plans to buy back $4 billion worth of shares under its current program, which is equal to around 20% of the company’s market capitalization. Roughly half of that has been spent already, which means that Fox could still buy back another 10% of its share count under the current program, which should boost its earnings per share meaningfully.

Fox Stock Forecast: Conclusion

The company’s business strategy is to maximize its shareholders’ value by providing promising returns on shares. However, given the current difficult markets and the stress on the resources of the company to generate cash-flows, the company would have to ensure revenue growth with efficiency in operations to succeed in its business propositions. Hence, I recommend waiting till the effects of uncertain markets wear out, and the company reflects signs of gaining a stronghold on its financial performance.

It is worth paying attention that the stock-picking AI of I Know First has a high signal on the one-year market trend for Fox stock forecast. The signal shows positive signs indicating good upside potential for the stock. The light green for the short-term forecasts is mildly bullish, while the darker green is a strong bullish signal for the one-year forecast. However, I have a more conservative approach considering the present economic conditions and would recommend holding the stock till it reaches higher levels of performance.

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Please note-for trading decisions use the most recent forecast.