News Corp (NWSA) Last Update 11/24/21
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% of Stock Price
Revenue
Gross Profits
Free Cash Flow
News Corp
STOCK PRICE
DIVISION
% of STOCK PRICE
Book Publishing
22.9%
$7.02
News Media
1.1%
$0.35
TOTAL
100%
$30.71
$30.71
Yours
Trefis Price
N/A
$21.45
Market
 
Top Drivers for Period
Key Drivers
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TREFIS Analysis


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RECENT NEWS AND ANALYSIS

Potential upside & downside to trefis price

News Corp Company

VALUATION HIGHLIGHTS

  1. Digital Real Estate constitutes 45% of the Trefis price estimate for News Corp's stock.
  2. Subscription Video Services constitute 29% of the Trefis price estimate for News Corp's stock.
  3. Book Publishing constitutes 23% of the Trefis price estimate for News Corp's stock.

WHAT HAS CHANGED?

  1. News Corp Tops Estimates in Fiscal Q3
NWSA reported Q3 fiscal 2021 total revenues of $2.34 billion, 3% higher year-over-year, while total segment EBITDA was $298 million, up 23% y-o-y, reflecting an 8% positive impact from foreign currency fluctuations as well as growth in the Digital Real Estate Services, Book Publishing, and Dow Jones segments. These three segments collectively grew EBITDA by 55% versus the prior year. However, it should be noted that the company saw lower revenues in the News Media segment, primarily driven by a negative impact of $199 million (or 9%) from the divestiture of News America Marketing as well as weakness in the print advertising market. Moreover, negative impacts worth $28 million triggered by the closure or digital transitioning of certain regional and community newspapers in Australia also put pressure on the top line.

At Dow Jones, revenues rose 6% year-over-year, and segment EBITDA led an impressive 61%. Overall advertising, which was slightly down in Q2, moved into positive terrain in Q3, with digital advertising 30% higher in the quarter, almost double the growth rate of the New York Times. Digital now represents 61% of all advertising compared to a ratio of 48% in the prior year.

  1. NWSA Saw Growing Digital Revenues

Digital revenue surpassed $1 billion in fiscal 2020 for the first time and represented 66% of total revenues, rising to 70% for the fourth quarter. NWSA saw strong circulation volume growth, with digital-only subscriptions increasing 23% year-over-year for the Wall Street Journal in Q4 and 51% for the Barron’s Group.

  1. Introduction of Subscription Video Services
News Corp consolidated Foxtel and Fox Sports Australia (including Sky News), reflecting in the revenue segment Subscription Video Services. This consolidation will make circulation and subscription revenues the biggest revenue stream for News Corp for the first time, guarding the company against the volatile advertising market. Previously, Fox Sports Australia results were included in the former Cable Networks Programming segment, which was renamed as Subscription Video Services.

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 billion in 2020 to around $1.2 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, the digital real estate could grow at a higher rate. There could be an upside of more than 10% to the Trefis price estimate for News Corp's stock if the segment revenues were to increase to $1.4 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 $1.1 billion during the Trefis forecast period, there could be a 10% 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, 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 the various popular brands, including The Wall Street Journal, Dow Jones, Herald Sun, The Sun, The Times, HarperCollins Publishers and Fox Sports Australia. The company recently consolidated Foxtel and Fox Sports Australia (including Sky News), reflecting in the revenue segment Subscription Video Services. This consolidation is expected to make circulation and subscription revenues the biggest revenue stream for News Corp for the first time, guarding the company against the volatile advertising market.

News Corp in 2014 acquired Move Inc. for $950 million. Move Inc. operates the Move Network of real estate websites, which capture more than 35 million monthly visitors and it is the third most trafficked website in the U.S. In 2014, the company also acquired Canada based Harlequin Publishers from Torstar Corporation for around $390 million. In July 2015, News Corp acquired Checkout 51 Mobile, a data-driven digital coupon company that provides News America Marketing with a leading receipt recognition mobile app which enables retailers to reach consumers with highly personalized marketing campaigns. It also acquired Unruly in 2015, which is a leading global video distribution platform that is focused on delivering branded video advertising across websites and mobile devices. In 2016, News Corp completed its acquisition of Wireless group, which operates talkSPORT, the leading sports radio network in the U.K., and a portfolio of radio stations in the U.K. and Ireland, for a sum of $285 million. In 2017, REA Group acquired an 80.3% interest in Smartline Home (Australia’s premier mortgage brokering franchise groups) for approximately $55 million. To add to that, REA Group also acquired Hometrack Australia for $100 million in 2018. Hometrack Australia is a provider of property data services to the financial sector and it allows REA Group to deliver more property data and insights to its customers.

SOURCES OF VALUE

The prime value contributor for News Corp which 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 ~3 million.

KEY TRENDS

Growth In Digital Content

Online media provides more abundantly available information, that too at a faster rate and cheaper prices when compared to print media. This has effectively rendered print newspapers obsolete, and as online reading is made further easy by tablets/smartphones, both physical circulation and print advertising within newspapers would 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 the 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 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.