A Fox Analyst's 5 Investor Day Takeaways

Fox Corp Class A FOXA's third-quarter print brought no big surprises, and the investor day held Thursday was broadly in-line with expectations, according to BMO Capital Markets.

The Analyst

Daniel Salmon maintained a Market Perform rating on Fox Corp. with an unchanged $37 price target.

The Thesis

Fox's annual renewal percentages provided increased visibility into the affiliate fee outlook, Salmon said in a Tuesday note. (See his track record here.)  

For the cable networks segment, 38 percent of the subscriber base is up for renewal in 2020; 26 percent in 2021; and 6 percent in 2022, the analyst said. The company expects affiliate fee revenues to be driven by the television segment, with 50 percent of affiliate renewals occurring in 2020, 30 percent in 2021 and 1 percent in 2022, he said. 

This translates into combined affiliate renewals of 42 percent in 2020, 27 percent in 2021 and 4 percent in 2022, Salmon said. 

Second, Fox announced an annual dividend of 46 cents, far below BMO’s estimate of 64 cents. Buybacks were promised, but no details were given, the analyst said. 

Third, no details related to Fox Nation were provided, and new direct-to-consumer products are not expected anytime soon, he said. 

Fourth, Fox has inked a new gambling partnership with The Stars Group Inc. TSG to create Fox Bet. 

The analyst's fifth takeaway: while noting the benefits of Fox not being tied to a TV studio, the company did say season two of "The Masked Singer" will be produced by Fox Alternative Entertainment at a lower budget than the debut season.

Price Action

Fox Corp. shares were trading up slightly at $37.92 at the time of publication Wednesday. 

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