Macquarie downgrades News Corp stock rating to Neutral on fair valuation

Macquarie downgraded News Corp. (NWSA) to Neutral from Outperform, setting a price target of $32.70, citing fair valuation as the primary reason. The firm noted News Corp.'s owned business is trading at 5.9x 12-months forward EV/EBITDA (adjusted for REA stake), its highest level since early 2018, and revised its FY26 segment EBITDA forecast down to $1,519 million. While Dow Jones and Digital Real Estate segments are expected to see improvements, the outlook for Book Publishing and News Media remains 'opaque' due to market softness, even as the company continues its authorized $1 billion stock repurchase program.

Analysis

Macquarie has downgraded News Corp. (NWSA) to Neutral from Outperform, primarily driven by valuation concerns. The firm notes that News Corp's owned business, adjusted for its REA stake, is trading at a 5.9x 12-month forward EV/EBITDA multiple, its highest level since early 2018, suggesting limited near-term upside. This sentiment is reinforced by a downward revision of Macquarie's FY26 segment EBITDA forecast to $1,519 million from a previous $1,584 million. The company's operational outlook is mixed; while the Dow Jones division is expected to see margin improvement from a shift to higher-margin B2B products and the Digital Real Estate Services segment benefits from REA's market leadership, the Book Publishing and News Media segments face an 'opaque' future due to softness in their respective markets. A potential counterbalance to this cautious outlook is the company's ongoing authorization to repurchase up to $1 billion in shares, though the timing and scale of execution remain unspecified.

Key Decisions for Investors

• Given the downgrade to Neutral is based on the stock reaching fair value at a multi-year high valuation, investors may consider that significant near-term price appreciation could be limited.
• Closely monitor the divergent performance within News Corp's business segments, as the growth in Digital Real Estate and Dow Jones B2B must effectively offset the cited weakness and 'opaque' outlook in the traditional publishing and news media divisions.
• Watch for official company disclosures on the execution of its authorized $1 billion stock repurchase program, as active buybacks could provide a floor for the stock price and serve as a positive catalyst.