Will Twenty-First Century Fox (FOXA) Stock be Helped by 'American Idol' Cancellation?

NEW YORK (TheStreet) -- Twenty-First Century Fox (FOXA) shares are up 0.18% to $32.83 in trading on Monday after the company announced that it will be canceling its seminal talent search reality show 'American Idol' following the conclusion of its 15th season next year.

The Simon Fuller-created show debuted on Fox in the summer of 2002 and immediately became one of the most watched shows on American broadcast television. An episode of the show has been the highest ranked broadcast program in terms of viewership eight times during its run, peaking in season five when the show averaged 30.6 million viewers per episode.

However, rising production costs tied to enormous salaries paid to judges and hosts combined with falling viewership have doomed the once extremely profitable show. 

American Idol allegedly pays host Ryan Seacrest $15 million per season, while Jennifer Lopez is also reportedly paid $15 million per season to judge talent for the show. Despite rising costs, the show brought in $578 million in revenue during its previous season, according to calculations by the New York Daily News.

However, that total is well below the $836 million in ad revenue the show brought in during the 2012-2013 season. This year's season has failed to reach 10 million viewers at any point so far, guaranteeing the show's weakest performance since it debuted 13 years ago.

TheStreet has further coverage of American Idol here.

TheStreet Ratings team rates TWENTY-FIRST CENTURY FOX INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate TWENTY-FIRST CENTURY FOX INC (FOXA) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its notable return on equity, attractive valuation levels, expanding profit margins, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Media industry and the overall market, TWENTY-FIRST CENTURY FOX INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • 36.30% is the gross profit margin for TWENTY-FIRST CENTURY FOX INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 14.25% is above that of the industry average.
  • Net operating cash flow has significantly increased by 53.66% to $1,761.00 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 15.04%.
  • Even though the current debt-to-equity ratio is 1.06, it is still below the industry average, suggesting that this level of debt is acceptable within the Media industry. Despite the fact that FOXA's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.09 is high and demonstrates strong liquidity.
  • You can view the full analysis from the report here: FOXA Ratings Report
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