Fox Corporation (FOXA) received a significant boost from Wells Fargo, which has double-upgraded the stock from Underweight to Overweight in a note Friday.
This rating lift comes as analysts at Wells Fargo have grown increasingly optimistic about Fox's potential in the burgeoning sports streaming market, particularly with its Venu platform.
Wells Fargo's deep dive into the Venu platform led them to conclude that sports streaming presents "more opportunities than risks," positioning Fox as the primary beneficiary.
Analysts now expect Venu to contribute high single-digit to low double-digit percentage accretion to their new EBITDA estimates for Fox.
They also anticipate that Venu could eventually integrate with ESPN's flagship direct-to-consumer service, further enhancing Fox's prospects.
In addition to the promising outlook for sports streaming, Wells Fargo has revised its EBITDA estimates for Fox upwards. For FY25, the estimate has been increased by 10% to $3.3 billion, which is 7% above the consensus.
Analysts are also bullish on the impact of the Super Bowl, predicting it could deliver around $75 million in EBITDA for the company. This optimism extends to FY26, with a 12% increase in the EBITDA estimate to $3 billion, 5% above the Street's expectations.
Given these factors, Wells Fargo has raised its price target for Fox from $29 to $46, citing a more favorable EBITDA outlook and a premium valuation relative to peers like Paramount Global and Warner Bros. Discovery.
Despite the positive outlook, Wells Fargo did acknowledge the potential risks, such as the possibility of Venu being more cannibalistic than incremental and the uncertain impact of legal risks on the stock. However, the overall tone of the upgrade reflects a strong belief in Fox's ability to capitalize on the evolving sports streaming landscape.