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The analysts outlined various potential pitfalls they see for the company, including news risks, cord-cutting risks, and earnings risks.
“Fox News is the FOXA cash cow at ~80% of our FY24E EBITDA,” they said. “Viewership is down -19% Jan-June’23 vs Jan-June’21 due to cord cutting and/or programming.”
“More worryingly, Fox News was 52% of cable news primetime viewership for 2020-22, 51% in Jan’23, and that has slid to a low of 38% in June’23 post-TC. FN’s share of conservative news viewers has fallen from 94% to 84%. While the new PT lineup could drive a rebound, we think Fox News is a Show Me viewership story,” they added.
Wells Fargo stated that FOXA gets ~50% of FY23E+24E revenue from US affiliate fees, which is among the highest in its media coverage universe. They estimate 7-8% cord cutting, with a downside bias.
“ESPN DTC could add fuel to the fire. FOXA Cable could soon go ex-growth on EBITDA like we’ve seen for peer linear nets. TV has better topline growth, but less ability to reduce costs due to sports rights. If FOXA is 1% worse cord cutting p.a. vs our ests. = -7% downside to total FY24E-26E EBITDA,” the analysts said.
