[Note: News Corp Fiscal Year Ends in June]
After a 25% decline over the last six months, at the current price of around $16 per share, we believe News Corp stock (NASDAQ: NWSA), a global, diversified media and information services company, could see gains. NWSA stock has declined from around $21 to $16 in the last six months, largely underperforming the broader indices, with the S&P declining about 19% over the same period. The stock decline during this period can be attributed to fears of a slowing economy, driven by inflation and China shut down. However, NWSA’s recent performance, while not all strong, has been generally positive. Only revenue associated with the Subscription Video Services portion of the business came in flat during the first three quarters of 2022, other than that most other parts of the business fared quite well.
In the first nine months of fiscal 2022, News Corp’s revenue grew 12% year-over-year to $7.7 billion, largely due to a 32% rise in the Digital Real Estate Services unit. In addition, the company’s earnings per share came in at 87 cents in the first three quarters of 2022 compared to 58 cents in last year’s same period. Also, News Corp amassed nearly $1.4 billion of total segment EBITDA, a 27% surge, in the first nine months of this fiscal year.
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We forecast News Corp’s Revenues to be $10.3 billion for the fiscal year 2022, up 10% y-o-y. Looking at the bottom line, we now forecast revenue per share (RPS) to come in at $12.92. Given the changes to our revenues and RPS forecast, we have revised News Corp’s Valuation to $22 per share, based on a $12.93 expected RPS and a 1.7x P/S multiple for the fiscal year 2022 – almost 41% higher than the current market price. That said, the company’s stock appears very cheap at the current price. NWSA’s P/S multiple has increased from 1.01x in fiscal 2018 to 2.20x in fiscal 2021. While the company’s P/S has now declined to 1.7x, there is an upside potential when the current P/S is compared to levels seen in the past years.
News Corp continues to focus on other ways to grow. Dow Jones, which owns the WSJ, has launched a site called Buy Side. Like NYT’s Wirecutter, it offers independent product recommendations in exchange for affiliate commissions from links to the site. Also, Move, an operator of Realtor.com, acquired UpNest which operates a marketplace that connects home sellers with highly qualified local agents recently. These developments followed the acquisition of Base Chemicals (in Dec 2021), a provider of market data and analytics on chemicals which cost the company $295 million. In addition, NWSA also saw a larger $1.15 billion acquisition of the Oil Price Information Service in July 2021.
While NWSA stock looks poised for more gains in the future, 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.
|S&P 500 Return||0%||-14%||84%|
|Trefis Multi-Strategy Portfolio||-9%||-27%||186%|
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