FOXA - Embedded Expectations Analysis - 2021 09 10
Fox Corporation (FOXA:USA) currently trades well below corporate averages relative to UAFRS-based (Uniform) earnings, with a 9.9x Uniform P/E. At these levels, the market is pricing in bearish expectations for the firm, but management is optimistic about their new content verticals for FoxNews.com, programmatic advertising CPMs, and Tubi customer exclusivity.Specifically, management generated excitement markers when saying they will continue to push into new verticals of content with FoxNews.com and anticipate doing extremely well with the cost per mille (CPMs) they get through programmatic as the year progresses. In addition, management is confident they prudently allocated capital over the past fiscal year and that the Arizona and Wisconsin markets will launch legalized sports betting in fiscal 2022. Also, management is confident Tubi viewers are to a large degree exclusive to Tubi.
Fox is a news, sports and entertainment company. The company has three segments: Cable Network Programming, which consists of the production and licensing of news and sports content distributed primarily through cable television systems, direct broadcast satellite operators and telecommunication companies and online multi-channel video programming distributors; Television, which consists of the acquisition, marketing and distribution of broadcast network programming nationally under the FOX brand and the operation of several broadcast television stations; and Other, Corporate and Eliminations, which consists of corporate overhead costs, intracompany eliminations and the FOX Studios lot.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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