Fox upgraded to overweight as Roku deal, ad strength lift outlook

Investing.com -- Fox Corp. was upgraded to Overweight from Neutral by J.P. Morgan and Wells Fargo, which also raised their price targets, citing stronger earnings prospects, robust advertising trends and the pending acquisition of Roku.

J.P. Morgan raised its price target to $82 from $70, while Wells Fargo lifted its target to $80 from $65. J.P. Morgan raised its fiscal 2027 and 2028 adjusted EBITDA estimates by 7% and 9%, respectively, following the company's fourth-quarter results. The brokerage cited strong FIFA World Cup economics, an upbeat political advertising outlook, continued advertising momentum and better distribution revenue.

The outlook was supported by strong performance in Fox's television business and Tubi. J.P. Morgan said fourth-quarter television revenue rose 45% year over year to $2.48 billion, while segment EBITDA jumped 129% to $705 million. Tubi revenue increased 35%, helped by a 17% rise in viewing time, with the platform ending fiscal 2026 with 110 million monthly active users.

J.P. Morgan expects another boost from the 2026 FIFA World Cup and a record political advertising cycle. It raised its fiscal 2027 television EBITDA estimate by 30% to $1.49 billion and said Fox's decision not to renegotiate its existing NFL media rights deal early removes a major near-term overhang.

Wells Fargo also raised its fiscal 2027 EBITDA estimate to $4.12 billion from $3.85 billion and expects World Cup revenue of about $800 million, compared with its previous estimate of more than $600 million. It raised its fiscal 2027 television segment EBITDA estimate to $1.6 billion from $1.3 billion, citing stronger political advertising, World Cup revenue and digital investments.

The planned Roku acquisition is another key part of the bullish outlook. J.P. Morgan said combining Tubi with Roku's streaming platform would create the largest free ad-supported streaming television operator and improve Fox's growth profile. The brokerage also sees significant potential for Fox to leverage its advertising expertise across Roku's more than 100 million streaming households.

Wells Fargo estimates the deal could generate about $300 million in advertising revenue synergies within roughly two years, driven by higher pricing and fill rates on Roku Channel inventory, homescreen advertising and improved monetization of third-party streaming inventory.

J.P. Morgan said Fox's pro forma valuation remains below the level implied by its $82 price target, leaving room for a rerating as investors increasingly view the combined company as a scaled connected-TV platform with first-party data and greater advertising opportunities.

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