News Corp: Is the Stock Undervalued at $28?

After a 14% rise since the beginning of 2024, News Corp’s stock (NWSA), a global media and information services company, could see further long-term gains.

NWSA stock grew from around $24 to $28 (Jan 21), underperforming broader indices, with the S&P 500 rising about 27% over the same period. In comparison, its peer New York Times (NYT) saw a 9% increase during the same timeframe.

In Q1 2025, News Corp’s total revenues grew 3% year-over-year to $2.6 billion, driven by higher Australian residential revenues at REA Group, digital book sales, and growth in Dow Jones.

However, the News Media segment saw a decline in revenues, partly offset by positive currency impacts. Net income per share increased to $0.21, up from $0.05 in the prior year, with adjusted EPS rising 31% year-over-year.

News Corp’s segments show a generally optimistic outlook, but with some challenges. The Subscription Video Services segment saw higher costs related to Hubbl’s launch and sports programming expenses, leading to a decline in profitability. The News Media segment continues to face challenges transitioning from print to digital, particularly in News Corp Australia.

The stock has been volatile over the last four years, with returns of 25% in 2021, -18% in 2022, 36% in 2023, and 13% in 2024. Despite this, News Corp’s valuation appears attractive, with the stock trading at $28, below the revised price target of $31 based on an expected EPS of $0.90 and a 34.5x P/E multiple for fiscal year 2025.

A key development is News Corp’s agreement to sell its Australian cable TV unit Foxtel to DAZN for AUD 3.4 billion (USD 2.1 billion), signaling a strategic exit from a business that struggled to compete with streaming platforms. Despite this, the company’s core divisions are poised for growth:

• Dow Jones is expected to drive B2B growth through upselling and new products in Risk & Compliance and Energy.
• Digital Real Estate is benefiting from a 14% rise in Australian residential listings.
• Book publishing profits are expected to continue improving.
• Subscription video services will focus on scaling streaming products and retaining high-value customers.
• News Media will benefit from cost reductions, operational efficiencies, and a new U.K. printing joint venture, despite a challenging ad market.

Looking ahead, News Corp’s revenues are forecasted to reach $10.4 billion for fiscal year 2025, up 4% year-over-year, with earnings per share expected to be $0.90. Based on this forecast, the stock appears undervalued, with a potential upside of 11% from the current price.