Fox Corp Is A Television And Media Empire On The Cheap

Fox Corp (FOXA) is highlighted as a strong investment opportunity, demonstrating robust financial performance with revenue and NOPAT growing 6% and 5% CAGR respectively since fiscal 2020, and an ROIC of 19% in FY25, outperforming peers. The company maintains market leadership in live sports and news, critical for advertisers, while strategically expanding its digital footprint through Tubi and the new FOX One DTC service. Despite a strong balance sheet, significant shareholder returns via dividends and buybacks, and 10 consecutive earnings beats, the current stock price of $59/share implies an overly pessimistic 20% permanent NOPAT decline. This valuation suggests a potential 39%+ upside based on more realistic, conservative growth scenarios, indicating the market undervalues FOXA's sustained profitability and strategic positioning.

Analysis

Fox Corp. (FOXA) presents a compelling long thesis grounded in its market-leading position in live sports and news, which provides a durable moat for advertising revenue despite secular declines in traditional television. The company demonstrates robust financial health, with revenue and Net Operating Profit After-Tax (NOPAT) growing at 6% and 5% compounded annually since fiscal 2020, respectively, culminating in a superior 19% Return on Invested Capital (ROIC) in fiscal 2025. This profitability outpaces peers such as WBD and DIS. Strategically, FOXA is addressing cord-cutting headwinds through its digital expansion, notably with Tubi, now the most-watched free ad-supported streaming service in the U.S., and the launch of the FOX One direct-to-consumer platform. The company's valuation appears disconnected from these fundamentals; at a price-to-economic book value of 0.8, the market is pricing in a permanent 20% NOPAT decline, a stark contrast to historical performance and 10 consecutive quarters of earnings beats. This pessimistic outlook is further challenged by a strong balance sheet, with net debt reduced from $3.5 billion to $1.4 billion since 2020, and a significant commitment to shareholder returns, evidenced by a new $5 billion share repurchase authorization on top of the $8.4 billion returned since fiscal 2020.

Key Decisions for Investors

• Investors should consider the apparent valuation disconnect, as the current price implies a sharp, permanent profit decline that seems at odds with Fox's consistent growth, market dominance in live content, and ten consecutive earnings beats.
• The aggressive capital return policy, featuring a new $5 billion buyback authorization and a potential 4.7% combined dividend and buyback yield, represents a significant source of potential shareholder returns and signals strong management confidence.
• Monitor the user growth and monetization of digital assets, particularly Tubi and the new FOX One service, as their performance is critical to offsetting secular pressures in linear TV and justifying a valuation re-rating.
• Key catalysts to watch include the continued execution of the share repurchase program and the successful broadcast and monetization of high-value sports rights, such as the 2026 FIFA World Cup, which could drive near-term share price appreciation.