VALUATION HIGHLIGHTS
- Dow Jones constitute 37% of the Trefis price estimate for News Corp's stock.
- Digital Real Estate constitutes 31% of the Trefis price estimate for News Corp's stock.
- Book Publishing constitutes 18% of the Trefis price estimate for News Corp's stock.
WHAT HAS CHANGED?
- News Corp Q2 2025 Snapshot
NWSA reported strong financial results for Q2 FY2025, with revenues increasing 5% year-over-year (y-o-y) to $2.24 billion. Net income from continuing operations surged 58% y-o-y to $306 million, while Total Segment EBITDA rose 20% y-o-y to $478 million. In the quarter, reported EPS from continuing operations was $0.40 as compared to $0.28 in the prior year. Adjusted EPS was $0.33 compared to $0.27 in the prior year.
Key highlights include record revenues at REA Group ($343 million, up 17%) and Dow Jones ($600 million), with the latter driven by improved circulation and professional information business revenues. Book Publishing revenues grew 8%, while Segment EBITDA increased 19%. Digital performance remained strong, with Dow Jones digital revenues representing 81% of total revenues. The Wall Street Journal's digital-only subscriptions grew 7% to nearly 3.8 million. The company declared a semi-annual cash dividend of $0.10 per share.
Note: News Corp's FY'24 ended on June 30, 2024. Q2 FY 25 refers to the quarter that ended on December 31, 2024
- Sale of Foxtel
News Corp has agreed to sell its Australian cable TV unit Foxtel to British-owned sports network DAZN for 3.4 billion Australian dollars ($2.1 billion) including debt, cutting the media empire’s exposure to a business upended by streaming platforms. Foxtel, launched by News Corp in 1995, has dragged profits due to declining subscribers switching to cheaper streaming services like Netflix. Despite efforts to diversify with streaming services like Kayo and ESPN, soaring sports broadcasting rights costs and shrinking revenue hurt earnings, leading Foxtel to share rights with free-to-air broadcasters to offset expenses.
DAZN is a London-headquartered global streaming platform available in North America, Europe and Asia. DAZN competes against traditional TV and satellite channels and provides access to a range of sports content, including American football, boxing, and baseball, over its streaming platform.
POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE
Below we highlight key drivers of News Corp's value that present opportunities for upside or downside to the current Trefis price estimate for News Corp.
Digital Real Estate
- Digital Real Estate Revenues: News Corp through REA offers digital advertising solutions to help real estate agents sell or rent properties and win new listings. The company generates revenues from advertising. REA owns and operates Australia's largest residential property website, realestate.com.au, and Australia's largest commercial property site, realcommercial.com.au. Moreover, the company acquired Move Inc. in the U.S. which will further drive the company's revenues. We estimate that the segment revenues will grow from $1.7 billion in FY 2024 to around $2.8 billion by the end of our forecast period. However, driven by a surge in the housing demand in Australia and benefits from the Move group of websites, digital real estate could grow at a higher rate. There could be an upside of more than 7% to the Trefis price estimate for News Corp's stock if the segment revenues were to increase to $3.5 billion by the end of our forecast period. On the other hand, if the real estate ad marketplace tends to be softer, it could lead to slower-than-expected advertising growth for News Corp. If the revenues only grow to around $2.0 billion during the Trefis forecast period, there could be an 8% downside to our price estimate.
BUSINESS SUMMARY
News Corp is a diversified media and information services company. The Company operates in four segments: News and Information Services, Subscription Video Services, Digital Real Estate Services, and Book Publishing. The company's overall business consists of a range of media, including news and information services, sports programming in Australia, digital real estate services, book publishing, and pay-TV distribution in Australia. The company distributes its content under various popular brands, including The Wall Street Journal, Dow Jones, Herald Sun, The Sun, The Times, HarperCollins Publishers, and Fox Sports Australia.
SOURCES OF VALUE
The prime value contributor for News Corp consists of Dow Jones, News Corp Australia (which includes News Limited and its subsidiaries), News UK (formerly known as News International), and the New York Post. These generate revenue primarily through print and digital advertising sales and through circulation and subscriptions to its print and digital products. News Corp's Wall Street Journal is the leading circulation daily newspaper in the U.S., with an average print and digital circulation of ~4.3 million.
KEY TRENDS
Growth In Digital Content
Online media provides more abundant available information, at a faster rate and cheaper prices when compared to print media. This has effectively rendered print newspapers obsolete, and as online reading is further made easier by tablets/smartphones, both physical circulation and print advertising within newspapers would likely see a decline going forward.
Migration To Other Media Alternatives
News Corp's businesses face competition from other sources of news, information, and entertainment content delivery, and consumers are migrating to other media alternatives. This reflects general trends in the newspaper industry, including declining newspaper buying by younger audiences and consumers' increasing reliance on the Internet for the delivery of news and information, often without charge.
Social Media To Drive Future Growth
Social networking leaders like Facebook have initiated a unique concept of "frictionless sharing" through their Open Graph tools, which enables publishers to instantly get their articles/content shared across a user's network of friends. Various media companies like Yahoo! and the Washington Post have adopted the Open Graph to increase user engagement, and we expect more websites to join the bandwagon if they are to increase both web traffic and user engagement. Additionally, the growing penetration and bandwidth capabilities of smartphones and tablets would play a major role in increasing traffic and viewership for media companies.
