Fox Corporation (NASDAQ: FOX) could die without its biggest “star;” ex-President Donald J. Trump (R-Florida).
Trump left the White House, and is off Twitter and Facebook, leaving the Fox Corporation’s flagship channel Fox News with nothing to cover. In addition, data shows Trump’s absence is killing Fox News.
Variety Intelligence estimates viewership for three of Fox News’ marquee shows fell between 30 November 2020 and 5 March 2021. First, Hannity lost 11.9% of its viewers in that period. Meanwhile, The Ingraham Angle lost 9.2% of its viewers and Tucker Carlson Tonight lost 4.8% of its viewership.
Moreover, A USA Today/Suffolk Poll estimates the percentage of Trump voters who claim Fox News is their “most trusted news source” fell from 58% in October 2016 to 34% in February 2021. Similarly, around 17% of Trump voters claim they now trust the bargain basement rival Newsmax more than Fox News. Another 9% of Trump voters place their trust in One America News Network (OANN).
Will Fox Corporation Die?
I think the Fox News viewership loss could be fatal because of the strategy at Fox Corporation (FOX).
Unlike its rivals; such as Disney (DIS), AT&T (T), and Comcast (CMCSA), Fox left entertainment. Notably, Fox sold its movie studio 21st Century Fox and film and TV library to the Walt Disney Corporation (NYSE: DIS). Plus Fox sold the 30% of the Hulu streaming service it owned to Disney.
Consequently, the Fox Corporation’s assets consist of Fox News, Fox Television Stations, the Fox Broadcasting Company TV network, Fox Business, Tubi, and some operations of Fox Sports. Thus, Fox is doubling down on traditional ad-based media while its competitors abandon that business.
In contrast, Disney is betting on Disney+, AT&T is promoting HBO Max, Comcast offers Peacock, and even ViacomCBS (NASDAQ: VIAC) offers Paramount Plus. All of those services rely upon subscriptions for revenue, while Fox’s Tubi is free and ad-based.
Can Fox Compete with Disney?
Disney (DIS) claims that Disney+ had 94.9 million subscribers on 2 January 2021, The Verge reports. The Disney+ subscriber base grew from 86 million on 2 December 2020. Disney management had hoped Disney+ could gain 90 million subscribers by 2022.
Comparatively, Tubi claims its video platform had 33 million monthly active users in August 2020. Tubi also claims its viewership grew by 65% in 2020.
Tubi’s growth is impressive, but I have to wonder how it can compete without a source of new entertainment programming. Notably, Fox sold such franchises as the X-Men, Planet of the Apes, the X-Files, and Buffy the Vampire Slayer to Disney with 20th Century Fox.
One threat to Fox is that competitors such as Disney or AT&T, which owns Warner Brothers and DC Comics, could cut Tubi off from programming. I have to wonder how Tubi can survive with nothing but reruns of Chef Ramsey? Will Fox end up paying Disney for characters or shows it used to own?
Is Fox Corporation Making Money?
The Fox Corporation (FOXA) reported a quarterly operating income of $229 million and a quarterly gross profit of $741 million on 31 December 2020.
In 2020, Fox’s quarterly gross profit grew from $687 million on 31 December 2019. Meanwhile, Fox’s quarterly operating income grew from $199 million on 31 December 2019.
However, Fox can generate enormous amounts of money. For example, it reported quarterly gross profits of $1.549 billion on 30 September 2020, $1.231 billion on 30 June 2020, and $1.379 billion on 31 March 2020. Plus, there was a quarterly operating income of $1.093 billion on 30 September 2020.
Similarly, in 2020, Fox’s quarterly revenues grew from $3.778 billion on 31 December 2019 to $4.087 billion on 31 December 2020. However, Stockrow estimates Fox’s revenues grew by 8.18% in the quarter ending on 31 December 2020.
Fox Burns Cash
Notably, the Fox Corporation (FOX) is burning cash. Fox reported a negative quarterly operating cash flow of -$30 million and a negative quarterly ending cash flow of -$559 million on 31 December 2020.
Interestingly, the quarterly ending cash flow rose from -$1.349 billion on 31 December 2019 and the quarterly operating cash flow rose from -$458 million on the same day. Yet Fox can generate enormous amounts of cash. It reported a quarterly ending cash flow of $5.061 billion on 30 September 2020.
The quarterly ending cash flow rose from $1.449 billion on 30 June 2020 and $1.205 billion on 31 March 2020. Plus, the quarterly operating cash flow hit $1.02 billion on 30 June 2020 and $1.1601 billion on 31 March 2020.
The amount of cash at Fox did rise in 2020. Fox’s cash and short-term investments rose from $1.991 billion on 31 December 2019 to $4.502 billion on 31 December 2020.
Fox took on some debt in 2020, it reported a quarterly financing cash flow of $1.132 billion on 30 June 2020. In 2020, Fox’s total debt rose from $6.753 billion on 31 December 2019 to $7.949 billion on 31 December 2020.
What Value Does Fox Corporation have?
The Fox Corporation (NASDAQ: FOXA) added some value in 2020. Its total assets grew from $20.45 billion on 31 December 2019 to $22.754 billion on 31 December 2020.
Mr. Market paid more for Fox Corporation Class B (FOX) over the past year. Mr. Market paid $21.41 for FOX on 18 March 2020 and $40.35 for Fox on 19 March 2021.
Fox will pay a 23¢ semiannual dividend on 7 April 2021. Overall Fox offered a 46¢ annualized dividend and a 1.15% dividend yield on 17 March 2021.
I think Fox was a good cheap dividend stock at $21.41 in 2020. However, I consider Fox an overvalued stock at $40.35. I think Mr. overvalues Fox because its businesses, broadcast and cable TV are dying.
I advise investors to avoid Fox because this company bet heavily on traditional advertising based entertainment. My prediction is Fox’s viewership, advertising, and revenues will shrink. When that shrinkage occurs, Fox’s stock and business will collapse.
My belief is that Fox Corp faces doom because its business will wither and die. Instead of Fox, I advise investors to look to companies with subscription based streaming video services such as Disney, AT&T, and ViacomCBS.