Fox (FOX) stock price has pulled back in the past few days as US equities continue facing substantial headwinds ahead of the Federal Reserve’s first interest rate cut. The stock peaked at $38.55 earlier this month and has pulled back by 5.50% to $36.45.
Tucker Carlson ouster
One of the biggest media news of 2023 was the decision by the Fox Corporation to fire Tucker Carlson, its biggest star. This firing came a few days afer the company agreed to pay Dominion over $800 million for its election coverage.
Carlson’s firing was notable because of the numbers he brought at Fox and his connection with the Trump wing of the Republican party. Therefore, his firing led to fears that the company would lose viewers and revenue.
Indeed, Fox News lost many viewers on its television network and other media platforms like YouTube and Fox Nation, its streaming application.
However, the stock has done modestly well, beating most media-related stocks. It has jumped by over 25% since Carlson was ousted. In the same period, Paramount Corporation shares have plunged by 54% while Nextstar and Warner Bros. Discovery (WBD) have retreated by 2% and 48%. Walt Disney has fallen by over 10%.
Paramount Global owns a series of television stations, including CBS while Warner Bros owns CNN. Disney owns ABC while Nextstar is a top media company that owns NewsNation and other local television networks.
The only major media company that has beaten Fox stock was The New York Times whose stock has jumped by over 32% thanks to its subscription business.
Additionally, Fox News has continued to beat other competitors in terms of viewership. The most recent data showed that Fox News averaged about 2.09 million in the second quarter. It was also the most-watched prime-time television station.
MSNBC, which Comcast owns, averaged 1.19 million primetime viewers while CNN had just 616k. Other conservative-leaning channels like Newsmax and OANN have not gained substantially from Tucker’s exit.
Why Fox has done well post-Tucker
Fox News has done relatively well after Carlson’s exit for a few reasons. First, it is the biggest television network for conservatives in the US, meaning that many of them will tune it to it no matter what. Liberals have more options like CBS, CNN, ABC, and MSNBC.
Second, Fox News is just one part of the Fox Corporation, which also owns FOX Sports, FOX Television Stations, FOX Entertainment, and Tubi Media Group. Fox Sports is made up of networks like FS1, FS2, The Big Ten Networks, and Fox Deportes.
The most recent annual results show that Fox Corporation made over $14.9 billion in annual revenue, 7% higher than in the previous quarter. Most of this revenue – $7 billion – came from affiliate fee, or the funds it earns from cable companies.
Over $6.6 billion of the revenue was from the advertising segment while the other section of its business brought in $1.2 billion.
Fox Corporation is also a highly profitable company as its net profit came in at $1.25 billion, higher than the $1.2 billion it made in the previous financial year.
Fox stock has also done well after it published the fourth-quarter results in August. These numbers showed that its total revenue rose slightly from $3.03 billion to over $3.09 billion.
Its cable network programming rose to $1.43 billion while its television figure rose to $1.6 billion during the quarter.
Fox valuation and challenges
There are signs that Fox is relatively undervalued. The company trades at a price-to-earnings ratio of 12, lower than the sector median of 20. Its forward P/E ratio is 9.9, lower than the industry median of 13.
This valuation is likely because the company is having a slow growth and that it lacks a clear catalyst to grow its revenues going forward.
Most notably, like other media companies, it is going through major headwinds as cord-cutting continues. Cord-cutting is a situation where people are canceling their cable subscriptions and opting for streaming solutions. The advertising industry is also seeing a sharp slowdown.
Fox stock analysis
The daily chart shows that the Fox stock price formed a golden cross chart pattern in May this year as the 200-day and 50-day moving averages crossed each other. In price action analysis, this is one of the most bullish patterns, which explains why the stock has jumped by over 25% since then.
Most recently, however, the stock has pulled back slightly. As a result, the Relative Strength Index (RSI) has pointed downwards and moved below the neutral point of 50.
Therefore, I suspect that the stock will likely continue falling as sellers target the 50-day moving average at $35.58 and then resume the upward trend.
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