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Fox leads Nasdaq 100 as threat from Trump-backed rival fades

 


Photographer: Paul Morigi / Getty Images

Photographer: Paul Morigi / Getty Images

Media giant Fox Corp. became the unlikely leader of the high-tech Nasdaq 100 stock index this year thanks to something that didn’t happen: the launch of a competing news service backed by the former President Donald Trump did not materialize.

Fox shares have climbed 47% so far in 2021 as the creation of Trump media looks increasingly unlikely. The stock has largely passed the Nasdaq 100, which has now erased its year-to-date gains twice as inflation fears hammer growth stocks. This reverses the trend of late last year, when Fox fell amid speculation that the former president might support or launch a network to compete with Fox News, capturing some of its viewers and ad revenue. .

“At least for now, I think Fox News’ position looks really, really secure,” Bloomberg Intelligence analyst Geetha Ranganathan said in an interview.

Read more: Fox News Finds He’s Back In A Familiar Place: Lead-Time Prime

While Trump’s relationship with Fox News has changed over the years, the channel’s importance to its parent company has not. Fox News is the company’s largest cash cow, according to Ranganathan. She estimates that about 75% of Fox Corp. come from the channel, which is why any overhang for Fox News translates into a big overhang for the action.

However, support for actions is not universal.

Fox has 12 buy, 12 take and three sell odds, with price targets ranging from $ 25 to $ 54, according to data compiled by Bloomberg. Short interest – a measure that indicates how much is wagered on a stock – fell from a one-year high of 13% at the end of November and now stands at around 5.4% of the free float, data from the financial analysis company S3 Partner Show.

Shares of other traditional media companies are also up, and earnings in ViacomCBS Inc. and Discovery Inc. have outpaced those in Fox, more than doubling since the start of the year.

BofA Securities analyst Jessica Reif Ehrlich said in Fox’s case, investors are increasingly appreciating the company’s betting prospects as more states in the United States legalize betting sportsmen. The betting industry is gaining ground as a key growth sector for media companies.

Fox has exposure to online betting through a 2.5% stake in Dublin-based sports book operator Flutter Entertainment Plc, an 18.5% stake option in FanDuel Group and an option to own 50% of Stars Group Inc.’s US operations, Reif Ehrlich said in a recent memo. Flutter has almost total control of FanDuel and owns the Stars group.

Fox can also benefit from the switch to streaming through Tubi, a free online TV service it bought last year, Bloomberg Intelligence’s Ranganathan said. Fox hasn’t invested money in the streaming wars like its peers, but Ranganathan estimates Tubi could be valued at over $ 4 billion by 2024.

Read more: Fox’s Tubi Seeks Funding Original Shows After 2020 Growth Spurt

Hidden value

Fox CFO Steve Tomsic addressed the issue at a recent conference, saying the share price does not reflect the full hidden value of the company’s portfolio.

Fox’s mix of “must-have” content, streaming assets, sports betting interests and a strong balance sheet should allow it to catch up with peers like ViacomCBS and Discovery, said BofA’s Reif Ehrlich.

“With expectations currently tempered, we anticipate that several positive catalysts could reduce the divergence of multiples, driving stocks higher,” she wrote. “We believe FOX is poised to outperform in today’s environment.”

Before it’s here, it’s on the Bloomberg terminal.

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