VALUATION HIGHLIGHTS

1. Dow Jones constitute 36% of the Trefis price estimate for News Corp's stock.
2. Digital Real Estate constitutes 32% of the Trefis price estimate for News Corp's stock.
3. Subscription Video Services constitute 18% of the Trefis price estimate for News Corp's stock.

WHAT HAS CHANGED?

1. News Corp Beats Estimates in Q2

News Corp beat on both the top and bottom lines on their fiscal second-quarter report. The company's revenues grew 3% year-over-year (y-o-y) to $2.59B, driven by broad gains across almost every segment. The company more than doubled its attributable net income to $183M from a previous $94M. Total segment earnings before interest, taxes, depreciation, and amortization rose to $473M from $409M. In the quarter, reported EPS was $0.27 as compared to $0.12 in the prior year. In operating metrics for its news business, total consumer subscriptions rose 10% to 5.43M, and total digital-only subscriptions rose 15% to 4.75M. At The Wall Street Journal, total subscriptions rose 7% to 4.05M, and of that, digital-only subscriptions rose 11% to 3.53M. For Barron's Group, total subs rose 17% to 1.24M while digital-only subs rose 23% to 1.1M.

Note: News Corp's FY'23 ended on June 30, 2023. Q2 FY'24 refers to the quarter that ended on December 31, 2023

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 $1.5 billion in FY 2023 to around $2.6 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 $3.2 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 $1.8 billion during the Trefis forecast period, there could be a 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. The company also consolidated Foxtel and Fox Sports Australia (including Sky News), reflected in the revenue segment Subscription Video Services. This consolidation makes circulation and subscription revenues the biggest revenue stream for News Corp, guarding the company against the volatile advertising market. For the first time in FY 2023, the company's full-year revenues were more than 50% digital.

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 million.

KEY TRENDS

Growth In Digital Content

Online media provides more abundantly 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 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.