FOX CORP Balance Sheet

Recommendation: Long Fox (FOXA) at current prices Thesis: FOXA shares have sold off aggressively YTD on fears that an early NFL rights renewal will result in materially weaker financials and/or the company ceding NFL games to streamers/competitors. We believe the impacts of an NFL renewal will be far better than the market fears, the underlying business financials are robust, there are positive revisions to estimates (political advertising, World Cup, Tubi), all creating an opportunity to buy a quality business with catalysts at a discounted price. We see 20% upside in the near-term and ~30%% upside over the next 12 months (12x a blend of our ’27 and ’28 FCF/share) Price target: Our valuation suggests a $68 price target for FOX (18% upside) using 9.0x our consolidated '27 EBITDA (that is 3% above consensus). This compares to a '27 EV/EBITDA multiple range of 7.5-10.5x over the last year. The $68 target equates to ~11x a blend of our ’27/’28 FCF/share and 13.5x our ‘27/’28 EPS (using a blend to normalize for political years), which we view as attractive for the business given its moat in news programming, multiple levers for upward revisions, and robust FCF/share growth supported by its share repurchases (we estimate 6% CAGR from ’25 –’29). Our $68 price target is also supported by a sum-of-the-parts base case which assumes: This is equivalent to 3.4x '26 sales (21% y/y growth) and compares to NFLX at 8x with 13% y/y growth, AMCX at 0.8x with -3% y/y growth, FUBO at 0.8x with ~5% y/y growth, and STRZ at 0.7x with -2% y/y growth 8x cable EBITDA 5x TV ex. Tubi EBITDA 8x 2030 Tubi EBITDA (~15% margin) discounted back. $475m for FLUT stake (live price) 0 value for FanDuel option $2.1b for NPV of tax shield from Disney transaction 0 value for its Studio lot Apple DCF Netflix DCF Microsoft DCF Facebook DCF Tesla DCF Amazon DCF Apple WACC Netflix WACC Microsoft WACC Facebook WACC Tesla WACC Amazon WACC Apple Intrinsic Value Netflix Intrinsic Value Microsoft Intrinsic Value Facebook Intrinsic Value Tesla Intrinsic Value Amazon Intrinsic Value Situation overview: As linear television has become increasingly secularly challenged (predominantly due to the rising of streaming services), Fox wisely positioned itself as a live sports and news company - the two categories that continue to command viewership and monetization. Fox News momentum Even after the recent sell-off FOXA shares are up nearly 100% over the last 2 years, primarily attributable to the success of Fox News. The cable channel has garnered meaningful growth in engagement and is beginning to rival that of the broadcast networks. Advertising volumes and CPMs, and affiliate rate increases have followed. Evidence of this is the company's 2.5% CAGR in cable distribution revenue over the last 3 years, which implies a HSD-LDD % growth in pricing per sub as industry subscribers have declined 7-8% per annum. This pricing power stems from Fox's loyal audience leading to dominance in cable ratings. We believe this continues and coupled with a deceleration in cord cutting speaks to accelerating revenue growth from here. Cable segment EBITDA (~84% of consolidated EBITDA in FY25) had an 8% CAGR over that same 3 year period. Fox strength in sports portfolio. Fox has one of the leading sports rights portfolios in the US including prominent packages for NFL, NCAA, MLB, NASCAR, and the FIFA World Cup. These games are typically shown on Fox's broadcast network but occasionally used for programming on cable channels like FS1 as well. Industry subscriber declines somewhat abating The number of subscribers in the linear video ecosystem (traditional cable/satellite packages + virtual services like YouTube TV, Fubo, etc) is a key input for Fox’s revenue trajectory. Total linear subscriber declines accelerated from -5% in 2020/2021 to 7-8% by late 2024 / early 2025. In recent quarters, however, subscriber declines are abating back to 5-6% levels as 1) cable packages are now bundling in streaming services, 2) distributors are offering "skinnier" packages with just core sports/news channels (i.e. YouTube TV's recent Sports package), and 3) cable companies are increasingly pushing video in their go-to-market after years of deemphasizing video/bundle attach rates. Fox also recently launched FoxOne, its own direct-to-consumer offering for consumers to get access to live Fox sports and Fox news without needing a linear TV / cable TV package. Although in early stages, FoxOne helps the trajectory of subscribers for Fox's channels in the coming years. We estimate growth in FoxOne is contributing ~200bps of revenue growth at Cable and Television each. Variant view: NFL situation We believe the market is wrong to sell-off Fox on perceived NFL renewal risk because the company will pass nearly all the increased costs on to distributors through retrans fees as it has in prior cycles. Fox's package of Sunday afternoon games aligns well with a broadcaster that has local market reach. Streamers have shown more interest in eventized properties with better branding like Christmas Day, Black Friday, Thursday Night Football. We believe there is more risk of streaming displacement for Sunday Night or Monday Night than there would be for Fox's Sunday afternoon slate. There is also scope for shedding other sports rights to mitigate the total cost increase. The ~20% sell-off prices in the worst-case outcome in our view that the company would somehow absorb ~$1b of extra costs net of any offsets. Television segment and sports related revisions should impact a negligible portion of overall enterprise value Although the broadcast network and sports portfolio gets a lot of attention and has driven the recent stock decline, we believe the segment drives a minimal portion of the company's overall value. The company's cable segment (primarily Fox News) is 80-90%+ of company EBITDA in a given year and has superior economics (40%+ EBITDA margins) to the television segment (~10% EBITDA margins). Investors also have much more visibility into sustainable growth at Cable given its longer-term story of better monetizing Fox News while results at Television are much more lump based on sports calendars and political advertising $s. Accordingly we believe the Cable segment accounts for ~90% of the overall enterprise value Today’s ~$30b of enterprise value represents ~9.0x the cable segment, essentially receiving the rest of the business (including Tubi) for free. Although we do not shrug off the potential for TV segment EBITDA to be revised lower by a few hundred million in the coming years (from NFL pressure), we believe there is strong valuation support at these levels. Why the opportunity exists: Background on current NFL media rights landscape Fox's differentiation vs. its media peer group has been its exposure to live news & sports, especially the NFL (incl. postseason and Super Bowls). The NFL continues to garner outsized share of viewership/engagement and therefore commands meaningful premiums for advertising and affiliate. The current NFL media rights were signed in 2021 and the deals took into effect for the '23-'24 season. Most of the contracts, including Fox's, were 11 year deals (running through the '33-34 season) but give the NFL the option to exit the deals early after the '29-'30 season. Note that change of control provisions would allow the NFL to opt out of its deal with Paramount by 2027. In the current agreement, Fox pays an average of $2.25b per year over the duration of the contract for its Sunday package as well as postseason games and the 3 Super Bowls it will carry over that time period. Although the average is $2.25b, the actual in-period recognized opex varies based on internal accounting escalators over the life on the contract and can be lumpy depending on timing of Super Bowls. The NFL has been increasingly transitioning more games to streaming platforms (think TNF on Amazon Prime, occasional exclusive games on Netflix/Peacock, and the Sunday Ticket package on YouTube TV). While incumbents will tout the unparalleled reach of broadcast networks, it is worth noting that more subscribers in the US have Netflix and Prime than have linear TV. Headlines of the early NFL renewal drove sell off The NFL has not shied away from publicly discussing their intentions to potentially open up the rights agreements early in an attempt to negotiate higher values - motivated by the NFL's materially higher viewership vs. other sports leagues (i.e. when compared to the NBA's lucrative rights deal in 2024). Although it was understood that the NFL was going to seek to negotiate early (NFL commissioner Roger Goodell was on CNBC late 2025 discussing his intentions), the market was surprised to learn that a new deal could go into effect as early as the '26-27 season (various press including NYT on 2/4). Despite a strong print from Fox on 2/4, sentiment about the NFL overshadowed and the stock sold off 25% in the month after earnings (now down 21% YTD). Fears are driven by the assumption that Fox will have to pay more for its existing games as well as the fear that a higher portion of games may be carved away from Fox and given to streamers that are willing to bid much more (Netflix, Amazon, YouTube, Apple, etc.) Our scenario modeling arrives at $1b of EBITDA impact in our base case renewal assumption (AAV step-up of 1.5x with the contract still ending in 2033) (see Scenario 1 in Exhibit 5). Historically the company has passed along sports rights inflation by raising prices on distributors (and in turn distributors raising prices on consumers). We believe the company would act similarly for any upcoming renewal (supported by management commentary at recent conferences). To us, $1b of EBITDA impact represents the worst case realized outcome. We would highlight that on Friday 3/13, CNBC reported that Paramount was close to an agreement with the NFL that would garner a 1.5-1.6x step-up and run through the '33-'34 season (in-line with our base case for Fox). This effectively means the NFL will get rid of its early opt out clause in exchange for the network paying a higher fee for the duration of the contract. The ~20% sell-off YTD (~$6.5b of market cap loss) represents the full ~$1b of impact at 6.5x and therefore we believe the magnitude of the sell-off is unjustified and the risk/reward at these levels is attractive. Sports betting weakness from prediction markets also pressuring shares Fox also owns 2.5% of Flutter Entertainment (worth ~$475m or 2% of FOXA market cap) and an option to purchase 18.6% of FanDuel. Fox has until Dec 2030 to exercise the option; the price to exercise was $4.8b as of Dec 2025 and escalates at 5% annually. In July 2025, Flutter repurchased 5% of FanDuel from Boyd Gaming for $1.55b. This implied $31b valuation would put Fox's option in the money by ~$1b. FLUT and DKNG are down nearly 80% from their highs from mid-2025 as fears around prediction markets build. The fear around prediction markets and resulting de-rating of online sports betting led to Fox's stake in FLUT losing ~$1b in value and its FanDuel option potentially losing ~$1b in value. Illustratively this ~$2b is ~$4 of headwind per share (5-7% of the FOXA share price in 2H25). Fundamentals for the year remain strong We believe Fox also has an attractive backdrop to drive street numbers higher through the year, underpinned by advertising revenue upside from the FIFA World Cup, the midterm political cycle, and continued momentum at Tubi. We are 4%/3% above the street for F26/F27 EBITDA. Valuation After the recent sell-off, FOXA is trading at 8.6x '26 EBITDA and 8.0x '27 EBITDA which we view as attractive for the company which should grow EBITDA at a LSD CAGR through the end of the decade, converts 70%+ of its EBITDA into FCF, and is buying back a meaningful portion of stock (we estimate $2.3b in FY26 which is roughly ~10% of current market cap) given its underlevered balance sheet (1.3x TTM leverage exiting the most recent reported quarter). We value FOXA at 9.0x our ’27 EBITDA and arrive at a $68 target (18% upside). This compares to its range of 7.5-10.5x over the last year (Exhibit 2). We believe the higher end of the range is reasonable given the improvement in the 1) linear subscriber ecosystem starting in late 2025, 2) higher affiliate pricing at Fox News, and 3) the improvement in EBITDA trajectory at Tubi Our price target is also supported by a sum of the parts (Exhibit 3) In our sum of the parts we also contemplate value for the aforementioned Flutter stake, the FanDuel option, the NPV of a tax shield created by its 2019 transaction with Disney, and the value of its studio lot (Disney will be vacating its tenancy of the space this year). Home Depot Relative Valuation Walmart Relative Valuation CVS Relative Valuation Goldman Sachs Relative Valuation Morgan Stanley Relative Valuation Caterpillar Relative Valuation Deere Relative Valuation Hilton Relative Valuation Yum Brands Relative Valuation Fedex Relative Valuation Risks: Negative NFL headlines Incremental negative press around streamers interest in packages or speculated rights step-ups could add downside volatility to Fox shares. Event path largely uncertain The timeline for any clearing event (rights renewal and subsequent raising of distributor rates) is largely uncertain. Rights renewals with the different partners could be staggered or could happen all at once. Visibility into when market fears would abate is low.