Investing.com -- Wolfe Research has upgraded Fox Corp. (NASDAQ: FOXA) to Outperform from Peer Perform in a note on Wednesday, setting a $71 price target and arguing that the company's planned merger with Roku creates a more dynamic growth story than the market is currently pricing in.

Analyst Peter Supino said the combination of Fox and Roku "strengthens both competitively and should double Fox's long-term sales growth rate," with the deal creating a significantly larger connected TV and streaming unit accounting for approximately 45% of pro forma TV engagement and roughly one-third of pro forma revenue.

Supino feels Roku's consumer data will sharpen Tubi's ad targeting while Fox's premium inventory and sales capabilities would lift Roku's monetization, playing into "advertisers' demand for better targeting and bigger audiences."

Fox shares have fallen 23% from their pre-merger level, trading at 11.8 times next-twelve-month pro forma unlevered free cash flow.

Wolfe said this "shouldn't last," noting that Fox is repurchasing its discounted stock daily. The $71 price target is based on 13 times Wolfe's estimated pro forma 2028 unlevered free cash flow of $3.6 billion.

Supino acknowledged that Fox shares fell 17% on June 15 when the $22 billion Roku deal was announced, as shareholders had anticipated repurchases, dividends and bolt-on M&A rather than a deal that doubled the enterprise value at more than three times Fox's own multiple.

However, Wolfe "expects FOXA to recover as selling abates and new shareholders appraise the outlook," adding that current prices imply low-single-digit sales growth through 2030, "far below" Wolfe's combined Fox and Roku standalone forecasts of a 5.7% revenue CAGR.