Fox gets upgrade at Citi on sports joint venture

Citi upgraded Fox (NASDAQ:FOX) (NASDAQ:FOXA) to Buy on Friday, citing the sports streaming platform joint venture announced earlier this month.

Shares rose 1.5% in mid-day trading.

The joint venture between Fox, Walt Disney (NYSE:DIS) and Warner Bros. Discovery (NASDAQ:WBD) is likely be a positive for the Lachlan Murdoch-led company, the analysts said. As a result, they raised their revenue and EBITDA estimates by about $50M for fiscal 2025 and around $200M for fiscal 2026, respectively.

Beyond the financial benefits, the joint venture could boost Fox's earnings multiple, as it places Fox on a firmer footing and reduces its exposure to the secular pressures affecting the Pay TV ecosystem.

Citi's updated price target of $35 from $34, is still predicated on about 10x the analysts' 2024 free cash flow per share estimate.

Shares fell sharply after the joint venture was announced, but that's likely due to the skepticism about the financial and strategic merits of the deal, along with concerns that consumers may not sign up for it, the analysts said.

However, the analysts disagree and believe the market may be underestimating the potential impact.

Fox (FOX) has a Hold rating at Seeking Alpha's Quant Rating system, which consistently beats the market. The Seeking Alpha authors' (2 authors in this case) average rating is also Hold but the average Wall Street analysts' (2 analysts) rating is Buy.