News Corp stock is overvalued to $ 18?

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News Corp share (NASDAQ: NWSA) has gained nearly 34% since early November and is currently around $ 18. Company shares are up on optimism in vaccine trials and the results of the US presidential election. However, we believe the company’s shares are overvalued and could likely see some short-term declines. It goes without saying that the coronavirus pandemic has had an impact on the company’s performance, with both top and bottom results falling sharply compared to the period last year. The company had to reduce its marketing expenses, which strongly affected its advertising revenues. As a result, News Corp’s total revenue has declined 13% year-over-year (year-over-year) in 2020 so far (this includes cumulative results of FY Q3 2020, FY Q4 2020 and FY Q1 2021). It’s also worth noting that News Corp’s stock has been down 7% since the start of October.

Shares of the media company have significantly underperformed broader markets between fiscal 2018 (fiscal year ending June) and now. The company’s stock is about 14% higher than it was at the end of fiscal 2018, compared to 31% growth in the S&P. Our dashboard, What factors led to a 14% change in News Corp shares between 2018 and today? provides the key figures for our thinking, and we explain more below.

News Corp shares were down 23%, from around $ 16 in 2018 to around $ 12 in 2020. During that time, News Corp’s revenue has been broadly flat. A crucial factor that led to this decline in the company’s share price was that the markets revalued the company to a lower P / S multiple of 1x in 2018 to 0.77x in 2020. While the P / The company’s S is above around 1.15x now, it could potentially see a downside closer to its historical levels.

What is the impact of the coronavirus on News Corp’s shares?

News Corp saw its advertising market collapse due to the coronavirus pandemic as several independent regional newspapers saw their advertising revenues dry up overnight. In addition, the media company has also suffered the cancellation and delay of sporting events for which it already had broadcast rights, largely affecting its subscription revenue due to Covid-19.

Nonetheless, News Corp’s management has taken the necessary steps to reduce variable costs and implement cost containment strategies across its business, focusing primarily on the news media segment. News Corp has also launched a shared services program to help minimize costs and have a positive impact on bottom lines. The company expects to recognize annualized cost savings of at least $ 100 million from this program starting in fiscal 2022.

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