Now that we're clear on what
management wants us to know
about the business, let's explore the factors that could drive
Twenty-First Century Fox, Inc
. stock higher.
No more distractions
Two weeks ago, we were talking about a very different company.
Back then, Fox stock was falling in response to an unsolicited
. Investors seemed convinced that Fox was overpaying for a business
that's still seeking its next big franchise. Chief Operating
Officer Chase Carey addressed that concern on Fox's most recent
earnings conference call:
First, let me be clear, we are done. We pursued this potential
combination to achieve one overarching goal, to create value for
our shareholders. It became increasingly clear that the
combination of the drop in our share price and the highly
defensive nature of Time Warner's actions was going to lead to a
transaction where too much of the value created in success went
to Time Warner's shareholders.
Three reasons Fox stock could rise
With the Time Warner deal no longer a factor, what other
catalysts can investors expect during the next 12 to 24 months?
Here are three that stand out:
1. The X-Universe is expanding again
X-Men: Days of Future Past
marks the mutant franchise's second consecutive winner after a
troubling trilogy that ended with 2006's poorly received
X-Men: The Last Stand
. Last year's
earned $414.8 million worldwide on a $120 million production
budget, easily surpassing
X-Men: First Class
. Adding in another $75.5 million from home video sales makes The
Wolverine one of the more profitable movies in Fox's
Hugh Jackman has been a consistent presence throughout the
movie franchise. Credit: Twenty-First Century Fox.
Days of Future Past
did better on a gross basis, setting a new franchise record with
$744 million in worldwide grosses. But the film's impact goes
much further than the box office. Shortly after
Days of Future Past
started its long, successful run at theaters, Fox announced plans
to release the next installment, titled
, in May 2016. Spinoffs also appear to be
in the works
2. Fox Sports will put cash in the coffers
Earlier this month, Fox celebrated the one-year anniversary of
Fox Sports 1 and Fox Sports 2, the newest additions to its cable
sports lineup. Business appears to be going well. In a press
release, the company said Fox Sports 1 was the fastest-growing
sports cable channel in prime time, with key demographics --
including the all important 18-49 demo -- up 62% year over
We could see more growth down the road. During
the most recent earnings call
, Chief Financial Officer John Nallen reminded investors that Fox
would be sacrificing some short-term profit to invest in cable
sports and entertainment programming here and abroad. How big
might the bet pay off?
a number of analysts that very question. Their estimates suggest
that just Fox Sports 1, on its own, could pull in an extra $1
billion in revenue.
3. A cheap valuation
Perhaps that explains why Fox is willing to repurchase $6 billion
of its shares in the months ahead. At the very least, it's fair
to say that CEO Rupert Murdoch sees an opportunity. Here he is
talking about the buyback on Fox's latest earnings call:
We believe buying our own stock, when it is underpriced,
represents a unique opportunity to maximize shareholder value
over the long term. And at these levels, we believe our stock
is severely undervalued.
"Severely?" That might be pushing it, but I can also see
Murdoch's point. Fox stock has sharply underperformed the market
year to date despite improving fundamentals.
Revenue growth has accelerated in each of the past three
fiscal years. Returns on capital have risen steadily during the
same period. Profits haven't come as quickly, but that's also
understandable given the company's ongoing investment in sports
Fox is in a time of transition. New X-movies are in
development, as are
, while Fox Sports 1 and Fox Sports 2 are potential catalysts. In
buying back stock now, Murdoch may very well be amplifying
returns for today's investors.
Your cable company is scared, but you can get rich
You know cable's going away. But do you know how to
profit? There's $2.2 trillion out there to be had.
Currently, cable grabs a big piece of it. That won't last. And
when cable falters, three companies are poised to benefit.
for their names. Hint: They're not Netflix, Google, and
3 Reasons Twenty-First Century Fox, Inc. Stock
originally appeared on Fool.com.
is a member of the
Motley Fool Rule Breakers
stock-picking team and the
Motley Fool Supernova
Odyssey I mission. He owned shares of
at the time of publication. Check out Tim's
or connect with him on
, or Twitter, where he goes by
. You can also get his insights
delivered directly to your RSS reader
The Motley Fool has no position in any of the stocks mentioned.
Try any of our Foolish newsletter services
free for 30 days
. We Fools may not all hold the same opinions, but we all believe
considering a diverse range of insights
makes us better investors. The Motley Fool has a
Copyright © 1995 - 2014 The Motley Fool, LLC. All rights
reserved. The Motley Fool has a