Bank of America on Wednesday moved to a more cautious stance on Fox, lowering its rating to Underperform and cutting the stock's price target to $45 from $80. The move reflects the firm's view that Fox is particularly exposed to the upcoming National Football League media-rights negotiations, where rising fees for live sports are forcing a re-evaluation of broadcaster economics.
Analyst rationale
Jessica Reif Ehrlich, the BofA analyst who issued the note, called Fox "the most exposed stock in our coverage to the upcoming NFL renewal," pointing to the broadcaster's concentrated reliance on sports and news programming. BofA quantified a downside scenario, saying that with a "1.5x AAV step up (all else equal), there is ~22% downside risk to our FY27E EBITDA."
The bank also trimmed the multiple it applies to Fox, lowering its valuation assumption to roughly 6x from 10x to reflect elevated uncertainty around future contract pricing and competitive dynamics. According to BofA, some of the market's concerns are already reflected in the share price - the stock has slid around 27% since early January - but the firm expects shares to remain under pressure until the contours of a new NFL agreement are known.
Competitive and market dynamics
BofA noted that the NFL appears to be pursuing early renegotiations as demand for live sports inventory has surged and fees across major sports have trended higher. The bank warned that traditional broadcasters face structural disadvantages in bidding, with the pool of potential buyers expanding as large technology platforms seek premium live inventory.
Even under a favorable outcome for broadcasters, Ehrlich cautioned that the coming renewals would likely "dilute earnings power" across the sector. For Fox specifically, BofA estimated that the implied incremental cost from renewed NFL pricing would amount to roughly 22% of FY27 EBITDA, making it the most vulnerable to the league's repricing effort among the names the bank covers.
Market implications
Until there is greater clarity on the size and structure of new media-rights deals, BofA expects investor concern to persist. The reduction in Fox's valuation multiple and the downgrade signal the bank's view that both earnings and valuation are at risk until contract outcomes are resolved.
Key points
- BofA downgraded Fox to Underperform from Buy and cut its price target to $45 from $80.
- Under a 1.5x AAV step-up scenario, BofA estimates about a 22% downside to FY27E EBITDA for Fox.
- The bank lowered Fox's valuation multiple to roughly 6x from 10x and sees the stock as most exposed among its coverage to NFL renegotiations.
Sectors impacted
- Broadcasting and media
- Live sports rights market
- Technology platforms competing for premium live inventory
Risks and uncertainties
- Outcome of NFL media-rights negotiations - deal terms remain unresolved and could materially affect broadcaster costs.
- Expansion of the bidder pool - entry of deep-pocketed tech platforms could drive up prices for live sports inventory and further pressure traditional broadcasters.
- Valuation and earnings dilution - downward revisions to multiples and potential incremental costs could weaken sector earnings power until contracts are settled.
Note: Analysis reflects the details and estimates provided in the Bank of America research note and related commentary cited by the firm.