Title: Predicting News Corp's Stock Trajectory
After a 14% increase since the start of 2024, we believe that News Corp stock (NASDAQ: NWSA), a global, diversified media and information services company, could see more growth in the long term. The stock climbed from around $24 to $28 (Jan 21.) during this period, underperforming the S&P by about 9%, with the index rising around 27% over the same time frame. On the other hand, News Corp's peer, New York Times stock (NYSE: NYT), gained about 9% during the same period. But, can it keep going?
In the first quarter of 2025, News Corp's total revenues grew by 3% year-over-year (y-o-y) to $2.6 billion. This growth was mainly driven by higher Australian residential revenues at REA Group, increased digital book sales, improved returns in the Book Publishing segment, and continued growth in the professional information business at the Dow Jones segment. Foreign currency fluctuations also added a 1% boost. However, lower revenues in the News Media segment partially offset these gains. News Corp's net income per share was $0.21 compared to $0.05 in the previous year. Additionally, its adjusted EPS rose 31% y-o-y to $0.21.
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News Corp's segment-wise review presents a mixed picture. While some segments, like Dow Jones and Digital Real Estate, are showing promising growth, others, like Subscription Video Services and the News Media segment, are facing challenges. The Subscription Video Services segment saw its EBITDA decline despite a 3% revenue increase. This was due to higher costs related to Hubbl's launch and escalating sports programming rights expenses. The News Media segment, too, is grappling with ongoing print challenges and the transition to digital platforms, particularly in the News Corp Australia division.
Despite the volatility, News Corp stock returns were 25% in 2021, -18% in 2022, 36% in 2023, and 13% in 2024. On the other hand, the Trefis High Quality Portfolio has been less volatile, delivering consistent returns while outperforming the S&P 500.
News Corp has recently agreed to sell its Australian cable TV unit, Foxtel, to DAZN for AUD 3.4 billion (USD 2.1 billion), including debt. This move signals a strategic exit from a business that has struggled to compete with streaming platforms. Foxtel's profitability has declined significantly since its launch in 1995 as subscribers switched to cheaper streaming services like Netflix. Despite efforts to adapt through streaming services like Kayo and ESPN, Foxtel faced unsustainable costs, including soaring sports broadcasting rights fees and dwindling revenue.
Looking forward, News Corp's key divisions are expected to see growth. Dow Jones is set to drive B2B growth through upselling and new products, while Digital Real Estate is expected to see continued growth in Australian residential listings. Book publishing profits are also expected to continue improving, albeit at a more moderate pace. The subscription video services strategy will focus on scaling streaming products while retaining high-value customers, and News Media will benefit from lower costs, operational efficiencies, and a new U.K. printing joint venture.
According to our forecast, News Corp's Revenues for the fiscal year 2025 will be $10.4 billion, up 4% y-o-y. We now forecast News Corp's Earnings Per Share to be 90 cents. Given these changes, we have revised News Corp's Valuation to $31 per share, based on a $0.90 expected EPS and a 34.5x P/E multiple for the fiscal year 2025. At its current price, the company's stock appears to be undervalued.
[1] Source: Trefis Enrichment Data
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The 'NWSA revenue' of News Corp experienced a 3% growth in the first quarter of 2025, contributing to its total revenues of $2.6 billion. This growth was aided by several factors such as higher Australian residential revenues at REA Group, increased digital book sales, improved returns in the Book Publishing segment, and continued growth in the professional information business at the Dow Jones segment.
In light of its strong financial performance and potential for future growth, the 'Newscorp stock' (NASDAQ: NWSA) could continue to attract investors looking for long-term gains in the media and information services sector.
