NEW YORK (
21st Century Fox
(FOXA - Get Report)
, the television and film arm of the newly split News Corp., gained in its first trading day as a separately-owned company, as Credit Suisse said the company's expanded sports programming will accelerate sales.
Credit Suisse, in a report by analysts led by Michael Senno, placed a $34 price target on Fox shares, which were gaining 1.6% to $29.43 on Monday.
(NWSA - Get Report)
, the news and publishing company which counts the Wall Street Journal among its holdings, was falling 1.9% to $14.96. News Corp. has lost 5.3% since the shares began trading separately on June 20.
Fox is expected to outperform its peers, said Credit Suisse as Fox Sports 1 and FXX take advantage of expanded international networks and the acquisition of programming. These investments will weaken earnings before some costs growth by about 10% this year but "we expect these investments to yield solid long term returns, driving mid-teens total EBITDA growth in FY15-16E," the analysts wrote in a report published Monday. The New York-based company is forecast to offset current revenue weakness with its World Series and Super Bowl events.
Sports offerings are expected to bring in 21% growth, to $984 million, as the company increases digital distribution and syndication. Fox sees lower costs and growth at their European sports broadcasting networks; Sky Italia and SkyD. The cost reductions for Sky Italia are not expected to take full effect until 2015. "Fox stands to benefit from the increasing value of content and growth in pay TV penetration in emerging markets given its strong sports rights portfolio and leading market position in key international markets," Credit Suisse said in a report.
While sports are predicted to drive Fox's future, expectations for the company's film division have decreased. Filmed entertainment earned $1.1 billion in earnings before costs during 2012, leading analysts to estimate 9.5% growth to $1.24 billion for 2013, which has been lowered to 2.8% or $1.16 billion, due to poor box office performance.
Credit Suisse expects Fox to have lower ad exposure as it grows its retrans revenue and digital broadcasting subscriptions. "We prefer stocks with lower ad revenue and higher revenue visibility in light of macroeconomic uncertainty," wrote the analysts.