Take Profits in Twenty-First Century Fox Inc Stock While You Can

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Fox stock - Take Profits in Twenty-First Century Fox Inc Stock While You Can

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In any takeover story, you should get out when you know who is in the game and what their bids are. This point came about one month ago for holders of Twenty-First Century Fox Inc (NASDAQ:FOXA), when Comcast Corporation (NASDAQ:CMCSA) made its move on Sky PLC (OTCMKTS:SKYAY). That was the best time to drop Fox stock.

Comcast’s bid for Sky trumped that of Fox by $4.2 billion. Since it was made shares of Fox are down about $1.60 each.

They are unlikely to recover much ground, because the Comcast bid for Sky complicates, and could render pointless, the $52.4 billion bid the Walt Disney Co (NYSE:DIS) offered for most of the Fox media assets in December.

The company’s market cap entering trade April 4 was $66.6 billion, meaning if you take that deal the remaining assets – TV stations and cable channels – are worth $14.4 billion to you. Which they’re not.

Fox Stock Top Dollar?

The battle for Fox is quite a show. Bulls are hoping Comcast might go beyond its Sky bid, and top Disney’s $52.4 billion offer for the Fox assets Disney is buying. Comcast has a market cap of $155 billion, against $148 billion for Disney, and the two companies are comparable, except for Comcast’s superior distribution through its cable network.

If Comcast buys Fox and Sky, the thinking goes, Disney will have both its global and distribution opportunities closed-off. This is something of a nonsense, because Disney’s plan is to replicate the model of Netflix, Inc. (NASDAQ:NFLX), offering global streaming services.

Ending net neutrality doesn’t mean Comcast will cut off those services in favor of its own, and it could only do so in the U.S. It’s what is on the stream that sells it, not how it gets to you.

Comcast and Disney are thus in for a months-long pissing match with very little additional cash on the table. Fox will either buy the 60% of Sky it doesn’t own and sell it to Disney or take the Comcast offer for Sky and hope Disney remains interested in it. Most recently, Sky offered to have Disney buy Sky News if regulators will let its bid go through.

Once one company or the other takes the Fox studio, investors will be left with Fox News, its TV stations, and Fox Sports. The uncertainties of film will be gone, but so will the financial heft to win sports rights, and the rest of the company has fading demographics – the median age for the Fox News viewer is 68. That doesn’t look great for Fox stock.

Time Value and the Money

The good news is that the presence of two bidders for Sky, and potentially for Fox’ primary assets, should hold Fox stock up in the face of the market’s current “volatility,” or fall. It was traded in the pre-market down .69%, on a day when the Dow Jones was down almost 2%.

But with all cards now on the table, it would seem the only future direction would be down. If Comcast wins Sky, Disney might walk away from Fox. You would be left with a crippled company in the hands of an octogenarian CEO in a down market.

The old Fox still has some tricks. Fox paid to televise the NFL Draft later this month even though Disney’s ESPN had been doing this on cable for years, using a loophole in the agreement based on its broadcasting network. But the financial result of that is minuscule, merely cutting a fixed piece of pie into more pieces doesn’t make more pie.

The Bottom Line on Fox Stock

Analysts following 21st Century Fox all have price targets in range of the current price. It would seem that leaving capital on Fox stock in hopes for a third, miracle bidder is a waste of time.

Time to take profits.

Dana Blankenhorn is a financial and technology journalist. He is the author of the historical mystery romance The Reluctant Detective Travels in Time, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned no shares in companies mentioned in this story.

Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Tweet him at @danablankenhorn, connect with him on Mastodon or subscribe to his Substack.


Article printed from InvestorPlace Media, https://investorplace.com/2018/04/fox-stock-profits-can/.

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