Fox News Downgraded by Major Wall Street Bank Over Viewership Issues

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A top financial services company downgraded Fox Corporationโ€™s stock on Monday, noting issues with the networkโ€™s viewership, earnings, and content.

An analyst with Wells Fargo downgraded shares of Fox Corp. from โ€œequal weightโ€ to โ€œunderweight,โ€ lowering the price target from $35 per share to $31 per share, according to multiple reports on Monday.

โ€œFox News is the FOXA cash cow at [around] 80 percent of our FY24E EBITDA,โ€ Steven Cahall, with Wells Fargo, wrote, referring to the acronym for earnings before interest, taxes, depreciation, and amortization. โ€œViewership is down -19% Jan-Juneโ€™23 vs Jan-Juneโ€™21 due to cord cutting and/or programming.โ€

Mr. Cahall added that โ€œmore worryingly, Fox News was 52 percent of cable news primetime viewership for 2020-22, 51 percent in Janโ€™23, and that has slid to a low of 38 percent in Juneโ€™23 post-TC,โ€ reported Investing.com. โ€œ[Fox Newsโ€™] share of conservative news viewers has fallen from 94 percent to 84 percent.โ€

Fox News is worth about $11 billion, or about five times its earnings before interest, depreciation, and amortization (EBITDA), he wrote. Thatโ€™s down from a previous estimate of six times, he said, noting that there are worries of a โ€œstructural declineโ€ in overall cable news viewership across the board due to cord-cutting and demographics.

Other issues cited by Mr. Cahall included talent departure and increasing competition. โ€œWe are also not convinced that cable news works well in streaming, so our 8 percent view on annual cord-cutting presents ongoing earnings risks,โ€ he said, Seeking Alpha reported.

There are also broader industry challenges ahead for Fox Corporation, the analyst said.

โ€œFox gets about 50 percent of fiscal year 2023 and 2024 estimated revenue from U.S. affiliate feesโ€”among the highest in our media coverage universe,โ€ Mr. Cahall pointed out. โ€œWe estimate 7-8 percent cord-cutting, with a downside bias.โ€

And he warned: โ€œFox Cable could soon go ex-growth on EBITDA like weโ€™ve seen for peer linear nets. TV has better topline growth, but less ability to reduce costs due to sports rights.โ€

Byย Jack Phillips

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