21st Century Fox Stock Rises 2 Percent in Market Debut

6:40 AM PST 07/01/2013 by Georg Szalai
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News Corp and 21st Century Fox chairman Rupert Murdoch

UPDATED: The stocks of the newly separated entertainment and publishing companies began trading Monday -- and headed in opposite directions -- following the split of Rupert Murdoch's media empire.

The stocks of the newly separated 21st Century Fox, mostly an entertainment company, and new News Corp, mostly a print publishing company, began trading Monday, with one closing up and the other closing down.

Following the completion of the split of Rupert Murdoch's media empire late Friday, the entertainment company's stock, traded on Nasdaq under symbol FOXA, was up more than 2 percent, to $29.40. In so-called when-issued trading ahead of the company split, the stock had closed on Friday at $28.99.

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Meanwhile, the stock of News Corp, traded on Nasdaq under the symbol NWSA, was down 3 percent to $14.79. Its stock had closed at $15.25 on Friday on a when-issued basis.

Volume on FOXA shares was 11.6 million and volume on NWSA shares was 22.8 million.

Wall Street analysts early on Monday had mostly issued bullish reports on 21st Century Fox.

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Wells Fargo analyst Marci Ryvicker highlighted an "outperform" rating and $34 to $36 stock price target range. "We Still Like What We See," the title of her report said.

"We continue to view Fox as a compelling opportunity," she wrote, highlighting "upside potential" for the Fox Sports 1 network, which will launch next month. She also touted "the potential for a higher leverage target, which could mean more buybacks, and multiple expansion now that the slow-growth assets are no longer consolidated."

Evercore Partners analyst Alan Gould initiated coverage on the stock of 21st Century Fox with an "overweight" rating and a $34 price target. "Fox is the quickest growing of the entertainment conglomerates with an estimated 21 percent earnings per share growth rate," he wrote. "The stock trades at a lower price/earnings multiple than its growth rate, but at the high end of the entertainment companies, similar to Disney."

Credit Suisse analyst Michael Senno on Monday also launched his coverage of the entertainment stock with an "outperform" rating and $34 price target.

He cited "our estimates for peer-leading [operating cash flow] growth driven by U.S. and international cable networks" and "retrans revenue with upside potential at film and [satellite TV businesses]."

Said Senno, "While fiscal year 2014 investments at Fox Sports 1, FXX, launch of international sports nets and acquisition of new sports rights dampen total [operating cash flow] growth, we expect these investments to yield solid long-term returns."

Longer term, the firm's film business "should benefit from increased digital distribution and syndication and [satellite TV], from lower costs at Sky Italia, and growth at SkyD," he said.

Lazard Capital Markets analyst Barton Crockett on Monday introduced a "buy" rating for 21st Century Fox and a $34 price target.

"With the completion of the new News Corp and 21st Century Fox split, we're initiating coverage of entertainment-focused 21st Century Fox group, maintaining the positive bias we held under the predecessor News Corp. entity," he wrote. "Growth in operating profits to come from Fox's TV networks businesses isn't fully discounted today."

Davenport & Co. analyst Michael Morris had argued last week that 21st Century Fox's shares are "attractively priced" and established a $33 price target. "While general enthusiasm for Fox continues to run high ... we believe investors still underappreciate the company’s unique and strongly positioned growth drivers," he said.

E-mail: Georg.Szalai@THR.com
Twitter: @georgszalai

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