News Corp’s Stock Down 15% Over Last Year, What’s Next?

[Note: News Corp Fiscal Year Ends in June]

After a 15% decline over the last year, at the current price of around $19 per share, we believe News Corp stock (NASDAQ: NWSA), a global, diversified media and information services company, is fairly priced. NWSA stock fell from around $23 to $19 over the last year, in line with the broader indices, with the S&P also falling about 15% over the same period. The stock declines during this period can be attributed to fears of a slowing economy driven by inflation. The company also missed estimates on both the top and bottom lines in the recent fiscal Q1 (ended Sept 2022). News Corp’s revenues declined marginally year-over-year (y-o-y) to $2.5 billion while its profitability declined 79% y-o-y to 7 cents in Q1. The results were driven by lower physical book sales from Amazon’s reset of its inventory levels and rightsizing of its warehouse footprint and the negative impact of foreign currency fluctuations.

NWSA expects higher costs due to the supply chain and inflationary pressures going forward. Advertising conditions and mix and visibility remain limited across the businesses. It also expects ongoing foreign exchange headwinds, given the current spot rate for the Australian dollar and pounds sterling compared to the prior year. Looking at each of the segments, Australian residential new buy listings for October declined 18% as it lapped tougher prior-year comparisons at Digital Real Estate Services. At Move, the company continues to expect lead and transaction volumes to be challenged in the short term. In book publishing, supply chain and inflationary pressures are expected to persist and headwinds from Amazon could continue into the second quarter as well.

We forecast News Corp’s Revenues to be $10.2 billion for the fiscal year 2023, down 2% y-o-y. Looking at the bottom line, we now forecast earnings per share to come in at 66 cents. Given the changes to our revenues and EPS forecast, we have revised News Corp’s Valuation to $20 per share, based on a $0.66 expected EPS and a 29.8x P/E multiple for the fiscal year 2023 – only 4% higher than the current market price. That said, the company’s stock appears appropriately priced at the current price.

In other news, the Murdochs, which still own about a 39% voting stake in News Corp and a 42% voting stake in Fox, are looking to reunite these two companies via a merger. For the same, independent committees have been set up which will indicate whether they will give the green light to the deal or not this month. This merger, if happens, will combine News Corp’s U.S., U.K., and Australian newspaper operations, digital real estate assets, and book publisher Harper Collins with Fox’s U.S.-based Fox News and Fox Sports brands.

It is helpful to see how its peers stack up. Check out how News Corp’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

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[1] Month-to-date and year-to-date as of 1/13/2023
[2] Cumulative total returns since the end of 2016