New Corp. not immune to scrutiny

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NEW YORK -- News Corp. shares have been Wall Street favorites in recent years, but in recent days a couple of analysts have cut their rating and/or price target on the media conglomerate's stock, citing growth concerns, particularly at its online assets, led by MySpace.

UBS analyst Michael Morris lowered his price target by $1 to $25, highlighting "increased uncertainty." He maintained his "buy" rating though, pointing in part to the company's strong ex-posure to international markets com-pared with its peers.

Morris emphasized that he continues to view News Corp. as "well-positioned to capture above-average growth opportunities in the global media marketplace. However, recent events have increased our uncertainty around the timing and challenges related to this growth, particularly at Fox Interactive Media and Sky Italia."

The Italian satellite TV platform recently used promotions that could drag down results near-term, Morris suggested before asking whether the promotions may be a sign of sluggish subscriber momentum.

The UBS analyst also cut his estimates for Fox Interactive Media after recent reports suggested the online unit will miss its $1 billion revenue target for the fiscal year that ends June 30.

"Forward-looking comments regarding MySpace and the company's advertising strategy are most needed," Morris said before also raising questions about News Corp.'s ability to continue its strong cable networks unit growth.

In a more bearish note, Bernstein Research analyst Michael Nathanson downgraded News Corp. shares from "outperform" to "market perform" and cut his price target from $24 to $21.

"News Corp.'s earnings have more risk in the near-term due to exposure to structurally weak and cyclically affected markets," he argued in a reference to continued expectations of a U.S. recession.

Plus, "News Corp.'s valuation is unlikely to trade at a significant premium to S&P 500 multiples," he added.

While Nathanson signaled potential earnings shortfalls on multiple fronts, Fox Interactive is also his biggest concern. "As one of our key long-term profit drivers, FIM/MySpace's inability to meet near-term consensus estimates, despite increased usage, worries us about the accuracy of long-term forecasts," he said.
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