Wells Fargo analyst Steven Cahall downgraded Fox Corp. stock to “underweight” from “equal weight” as lower ratings at Fox News Channel and cord-cutting threaten to depress earnings.
Cahall lowered his target price for Fox stock to $31 a share from his previous $35 a share target and Friday’s close of $31.92.
According to Cahall, Fox News Channel accounts for about 80% of Fox Corp.’s earnings. The network’s viewership is down 19% for the first half of 2023 compared to the first half of 2021, he noted, because of a combination of programming and cord-cutting. FNC's share of primetime news viewership is down to 38% share of from 51% in January, before popular host Tucker Carlson was dismissed.
Fox News’s share of conservative news viewers is down to 84% from 94%.
“While the new primetime lineup could drive a rebound, we think Fox News is a Show Me viewership story,” Cahall said.
Cahall also noted that Fox gets 50% of its revenue from affiliate fees. He sees cord-cutting as reducing pay TV subscribers by 7% to 8% this year. He adds that if ESPN goes direct-to-consumer, cord-cutting could accelerate.
The company also faces more litigation after settling a defamation lawsuit from Dominion Voting Systems for $787 million.
