On Friday, FOX Corp. (NASDAQ:FOXA) received an improved stock rating by a Citi analyst, who shifted the rating from Neutral to Buy and increased the price target to $35 from the previous $34. The upgrade comes in the wake of a joint venture agreement announced on February 6, 2024, involving Disney, Fox, and Warner, which covers approximately 50% of US sports rights.
The analyst noted that the collaboration is expected to be beneficial for Fox, leading to an upward revision of revenue and EBITDA forecasts for fiscal years 2025 and 2026. The new joint venture is anticipated to strengthen Fox's position by reducing its vulnerability to the ongoing challenges in the Pay TV sector.
The decision to upgrade the stock and adjust the price target was based on a detailed analysis indicating that the sports JV should positively impact Fox's financial performance. This agreement is seen as a strategic move that could enhance the company's valuation multiples by presenting Fox as more resilient in the face of industry headwinds.
The revised price target of $35 reflects a valuation that is approximately 10 times the analyst's estimated free cash flow per share for calendar year 2024. The Citi analyst's assessment suggests that the JV might not only support Fox's financial metrics but could also lead to a re-rating in the stock market.
Fox's collaboration with Disney and Warner in the sports broadcasting domain marks a significant step for the company, positioning it to potentially capitalize on lucrative sports broadcasting rights and mitigate some of the risks associated with the broader Pay TV landscape.
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