Fox Corporation stock has just been downgraded by a major financial services company off of worries over risks, including diminishing earnings and declining viewership.
Analysts from Wells Fargo downgraded the shares of Fox Corporation (NASDAQ:FOXA) from equal weight to underweight on Monday, with the price target dropping from $35 to $31 per share.
The analysts said, “Fox News is the FOXA cash cow at ~80% of our FY24E EBITDA. Viewership is down -19% Jan-June’23 vs Jan-June’21 due to cord cutting and/or programming. More worryingly, Fox News was 52% of cable news primetime viewership for 2020-22, 51% in Jan’23, and that has slid to a low of 38% in June’23 post-TC. FN’s share of conservative news viewers has fallen from 94% to 84%.”
Fox News has seen its ratings decline significantly since it suspended Fox News host Tucker Carlson, the network’s number one rated host. The network has never explicitly stated why he was removed from his prime time slot. The company had just settled a lawsuit with the voting machine company Dominion Voting Systems which reportedly involved Fox paying $787 million over claims the company’s voting machines could have facilitated fraud. Carlson had reportedly been one of the on-air personalities Dominion asserted made the claims.
Fox has also suffered from declining viewership due to cord-cutting by viewers who have canceled cable or satellite subscriptions, to switch to less expensive streaming solutions.
Analysts Stephen Cahill has said he sees the enterprise value of Fox News as being roughly $11 billion. He now says it is worth five times EV/EBITDA, a decline from his previous estimate of six times, over worries of a “structural decline,” in cable news viewership due to cord cutting and changing demographics, as well as worries about increased competition from other media outlets.
In an interview, Cahill said, “We are also not convinced that cable news works well in streaming, so our 8% view on annual cord-cutting presents ongoing earnings risks.”
MarketBeat summarized the analyses of other equities research analysts, in a report which noted that so far this year, Fox Corp. has been downgraded by Bank of America, Argus, Barclays, Rosenblatt Securities, and Morgan Stanley, all of which have dropped their price targets on the stock as well, in amounts ranging from one to eight dollars per share.
