News Corp’s TV Ad Sales Look Promising

It seems to be a good season for broadcasters and cable networks with ad pricing picking up for the new TV season, as indicated by the hefty amount that News Corp (NASDAQ:NWS) has received. The company’s Fox Network, which offers cable channels such as Fox News, Fox Sports, etc., as well as a broadcasting network which is one of the biggest in the U.S., received a payment of $1.95 billion in advertising fee from advertisers for the new TV season that starts in September 2012. ^[1] This amounts to ad pricing growth of close to 8% to 9% compared to last year.

News Corp’s cable and broadcasting networks earn a significant amount of revenues from advertising. Overall, ad dollars for these networks constitute close to 20% to our estimated value of $60 billion for News Corp. This implies that close to $12 billion value is tied to ad sales from News Corp’s cable and broadcasting networks, thus giving it significant exposure. With that in mind, the ad pricing growth will be a notably positive catalyst for the company’s stock.

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Our price estimate for News Corp stands at about $23, implying a premium of about more than 15% to the market price.

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1. News Corp.’s Fox Said to Gain $1.95 Billion in Ad Orders, Bloomberg, June 14 2012 [↩]