Is Fox Corporation making money?

Is Fox Corporation making money?

Republicans could finance their favorite media company, Fox Corporation (NASDAQ: FXA).

President Donald J. Trump’s (R-Florida) reelection campaign spent 52% of its cable TV ad budget on Fox News between April and July 2020, Advertising Analytics estimates. Fox Corporation (FXA) owns Fox News.

The Trump campaign spent $9.4 million on Fox News national ads in July and August, Politco claims. In fact, Politico claims Trump sent more on Fox News ads than on local TV ads in important battleground states.

Is Trump Financing Fox News?

Over 10% of the Trump campaign’s summer TV ad spend went to Fox News, Politco estimates. However, 73% of Fox News viewers surveyed in a May 2019 NBC/Wall Street Journal poll already support Trump.

Thus, Fox News ad buys could be a waste of money for Trump because the network’s fans already support the president. Consequently, I wonder if there is another reason for Trump’s Fox News ads buys.

Trump and Republicans could try to keep their most potent propaganda outlet afloat with ad cash. For instance, the market research firm Kagan estimates Fox News’ advertising revenues could fall by 7.6% in 2020.

Fox News’ Advertising Revenues Shrink

Kagan estimates Fox News took in $1.25 billion in advertising revenue in 2019, but that number could fall to $1.16 billion in 2020, Variety claims. However, Fox Corporation CEO Lachlan Murdoch claims Fox News’ ad revenues grew by 15% in 2nd Quarter 2020, Variety reports.

Notably, Fox News’ most popular program Tucker Carlson Tonight has lost sponsors, Variety claims. Major corporations that refuse to advertise on Carlson’s show include Disney (DIS), Papa John’s, Poshmark, and T-Mobile.

Carlson is a Trump confidante and an outspoken critic of corporate America. Variety claims Carlson’s show generated between $1.4 million and $2 million in advertising revenue a week in April and May 2020.

Why didn’t Disney Want Fox News?

Notably, the Fox Corporation was not among the 21st Century Fox assets, The Walt Disney Company (NYSE: DIS) bought in 2019. Fox Corporation’s assets include Fox News, Fox Television Stations, the Fox Broadcasting Company TV network, Fox Business, Tubi, and some operations of Fox Sports.

Cynics, including me, will ask why Disney (DIS) did not want Fox News and the other assets. Was Disney afraid of Fox’s right-wing politics and association with Trump, or its lack of money-making capabilities? Moreover, I think Disney wanted 21st Century Fox’s intellectual properties and its stake in the Hulu streaming service not the news business.

Fox Broadcasting’s ratings are falling. Only one of the 15 scripted shows on Fox Broadcasting (911) saw its ratings increase between 2019 and 2020, TV Series Finale estimates. Moreover, six Fox scripted shows experienced double-digit ratings drops. One of those shows, Empire, saw its ratings fall by 41.32% between 2019 and 2020.

Fox’s Minuscule Ratings

Plus Fox Broadcasting’s audience is small; its best rated show The Masked Singer (spring series), attracted 8.644 million viewers in the 2019 to 2020 TV season. Meanwhile, Fox News averaged 3.5 million viewers to become America’s most watched network in summer 2020, Forbes claims.

Fox Corporation’s audiences are small because the US population was 331.473 million people on 28 September 2020, Worldometers estimates. Hence, Fox News viewership is a little under 1% of the US population.

Thus, I have to wonder how buying ads on Fox News helps Trump. To elaborate, if only 1% of Americans watch Fox News only 1% of voters watch Fox News. Moreover, polls show most Fox viewers already back Trump.

I conclude Disney rejected Fox News and Fox Broadcasting because broadcast and cable TV are dying. Instead, Disney wisely concentrates on its Disney+, Hulu, and ESPN+ video streaming services.

In fact, Disney CEO Bob Chapek claims Disney+ had over 60.5 million subscribers on 3 August 2020, TechCrunch reports. Thus, I estimate Fox News’ audience is around 5% of Disney+’s audience. Plus, I estimate Fox Broadcastings’ highest rated show’s, The Masked Singer’s spring edition, audience was 14% of Disney+’s viewership.

 Is Fox Corporation (FXA) Making Money?

I think Fox Corporation (FXA) is an entertainment dinosaur with shrinking ratings, but does it make money? Remember, the people who watch Fox News and Fox Broadcasting still buy stuff and watch ads.

Fox Corp makes some money; it reported a quarterly net income of $145 million on 30 June 2020. However, Fox’s quarterly net income fell from $465 million on 30 June 2019.

Additionally, Fox Corp’s quarterly revenues fell from $2.513 billion on 30 June 2019 to $2.418 billion on 30 June 2020. Conversely, Fox Corp’s quarterly revenues rose from $1.155 billion on 30 June 2019 to $1.231 billion on 30 June 2020. Moreover, Fox Corp’s quarterly operating income rose from $640 million on 30 June 2019 to $643 million on 30 June 2020.

Finally, Stockrow estimates Fox Corporation’s (NASDAQ: FOXA) revenue growth fell by 3.78% in the quarter ending on 30 June 2020. Fox Corporation’s revenues grew by 2.03% in the quarter ending on 30 June 2019.

Fox Corporation makes small amounts of money, but it offers little growth. Thus, I think Fox Corp has a low margin of safety.

How Much Money does Fox Corp Generate?

Fox Corporation (FXA) reported a quarterly operating cash flow of $1.02 billion on 30 June 2020. The operating cash flow fell from $1.601 billion on 31 March 2020, but grew from $900 million on 30 June 2019.

Plus, the Fox Corporation reported a quarterly ending cash flow of $1.449 billion on 30 June 2020. That quarterly ending cash flow grew from $1.205 billion on 31 March 2020 and $416 million on 30 June 2019.

Unfortunately, I think much of the Fox Corporation’s cash comes from borrowing. To explain, Fox News reported a quarterly financing cash flow of $1.132 billion on 30 June 2020.

Perhaps Democrats need to ask where that $1.132 billion came from. Did wealthy Republican donors extend Fox Corporation loans to keep Fox News on the air through the 2020 Presidential election to help Trump and other candidates? If so, I think the possibility of politically motivated finance makes Fox Corp a lousy investment.

Is Fox Corp a Good Stock?

Fox Corp (NASDAQ: FOXA) lost share value in 2020.  Fox’s share price fell from $37.07 on 2 January 2020 to $27.83 on 30 September 2020.

However, Fox Corp will pay a 23₵ semi-annual dividend on 1 October 2020. The Fox Corporation offered a 46₵ annual dividend and a 1.71% dividend yield on 30 September 2020.

I think FOXA is a risky stock in a dying industry that ordinary people need to avoid. In the final analysis, I believe a company that could need a bailout from political donors is a terrible investment. Ordinary people need to avoid the Fox Corporation (FOXA) because I think company will soon lose its capacity to make money.  

Originally published at https://marketmadhouse.com on September 30, 2020.