Fox Corp. Has Now Entered Value Stock Territory

Fox Corp. (FOX) has not been having the best time lately with all of its public relations disasters. The stock's performance in recent times has been unsatisfactory due to persistent legal risks and ongoing legal battles. Despite the company's low price-earnings ratio of 11, many investors remain hesitant on the stock due to these risks.


Although the company has significant financial resources, Fox's legal battles will undoubtedly negatively impact its performance in the short term. However, I believe the selloff is still overblown. Just because Fox knowingly lies about some things on the news doesn't mean people will suddenly stop wanting to watch its programs. Fox's news and sports programming are still among the most popular on cable TV, and the company's Tubi streaming platform is growing rapidly. Tubi's revenue has quadrupled since Fox acquired it in 2020, and its current viewership of over 60 million could potentially double Fox's current annual revenue within the next five years according to the company's estimates. As such, I believe Fox is worth considering for value investors with a long-term view.

Fox is in the legal hot seat

Fox settled with Dominion Voting Systems for $787.5 million in one of the largest defamation suit payouts in U.S. history on Sept. 28, 2023. The Dominion settlement was significant, amounting to more than 50% of the trailing 12-month net income of $1.507 billion. While the settlement amount is easily covered by Fox's $4.058 billion in cash reserves, the company faces the risk of further lawsuits in the future. Such lawsuits could create a black cloud hanging over the company, despite its top-rated cable status and loyal following.

The Dominion settlement was undoubtedly better for Fox shareholders than the $1.6 billion Dominion sought. However, the settlement came late, with the jury already seated. Fox was facing the possibility of having its top anchors testify in court about election fraud. A pre-trial settlement was likely the best way out for Fox, rather than risking damage to the company's reputation.

Fox is also facing a $2.7 billion defamation lawsuit from Smartmatic, a voting technology company, and other defendants. The Dominion settlement sets a precedent, making Fox more likely to have to write another significant check.

There are also potential class action suits against Fox by shareholders seeking to make management liable for these costs that would have been avoidable if Fox didn't knowingly report false information.

What are the advertisers thinking?

Fox's ongoing legal battles may cause advertisers to rethink their partnerships with the company. Advertisers generally avoid controversy and try to appeal to a broad spectrum of consumers. Although Fox's sports and news programming are some of cable TV's biggest draws, it is important to evaluate the potential impact of these legal issues carefully.

High-profile exits such as Tucker Carlson's departure from Fox News may also impact the company's brand and overall perception in the market, albeit not necessarily immediately or significantly. The financial impact may depend on Carlson's replacement and their success.

Tubi is a key reason to remain optimistic

Fox's unique entry into the streaming space with Tubi is growing at an impressive rate and could double its annual revenue within the next five years, according to the company's estimates. The ad-supported streaming platform, which Fox acquired in 2020, has quadrupled its own revenue since then, and it has only begun to scratch the surface of its potential.

While Fox's cable TV programming, particularly sports and news, has always been a reliable revenue producer, Tubi has proven a worthy addition to the company's portfolio. With over 60 million regular viewers, Tubi is among the top free ad-supported television platforms and contributed to 1% of the total time spent on streaming content in February.

Integrating Tubi's tech with VideoAmp's Premium Video Planning Tool, LiveRamp TV Activation's platform and Comscore's measurement tool has bolstered the platform's appeal to advertisers, allowing them to plan their spending and forecast the results of ad campaigns better.

Although the profitability of Tubi remains uncertain, Fox's traditional television business has proven to be a reliable revenue and profit producer. The company's savvy approach to picking or producing content that attracts advertisers, coupled with the growth potential of Tubi, makes it an overlooked gem in the media industry.

Fox still has good ratings

Although Fox's network broadcast generally ranks fourth among the nation's four major names, most of the most-watched cable news shows in the U.S. are Fox programs. Thus, Fox's programming stands out as some of the most widely viewed on television, thanks to the success of its network-broadcast shows such as The Simpsons, The Masked Singer and 9-1-1, along with its other offerings.

Fox's success extends to sports broadcasting as well. The company aired this year's Super Bowl, which drew the largest audience for the big game since 2017, the last time Fox produced it. In addition, Fox led viewership for the recent regular season of college basketball and performed well with baseball.

Although Fox pays a considerable amount for the broadcasting rights of these prestigious events, such as the 2022 World Series, the investment is justified due to the company's reputation as one of the most reliable revenue and profit producers in the TV industry. Despite the fluctuating advertising market, Fox's financial results are resilient. With its ability to offer top-rated TV content that consistently generates viewership and ad revenue, Fox is a formidable force in the industry.


Despite Fox's ongoing legal battles and the potential impact on its performance in the short term, the company's balanced portfolio of traditional TV and on-demand platforms, including its streaming platform Tubi, make it an overlooked gem in the media industry in my opinion.

With its proven ability to attract advertisers through its reliable ratings and popular programming, combined with the growth potential of Tubi, Fox has great long-term potential that I belive is well worth the risk given the low valuation.

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