Can News Corp Continue This Bull Run?

With shares of News Corp. (NASDAQ:NWSA) trading around $30, is NWSA an OUTPERFORM, WAIT AND SEE or STAY AWAY? Lets analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

News Corp. operates as a diversified media company worldwide.The company operates in six segments: Cable Network Programming; Filmed Entertainment; Television; Direct Broadcast Satellite Television; Publishing, and Other. As consumers seek entertainment and information through different outlets, News. Corp stands ready to provide it by any source possible. Through its segments, News Corp. is able to reach a wide audience that offers endless opportunities to them and businesses around the world. With a growing audience through its expanding reach, News Corp. stands to be well-positioned to see increasing profits into the future.

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T = Technicals on the Stock Chart are Strong

News Corp. stock has seen a consistent uptrend over several years. The stock is trading near all-time high territory and shows no signs of slowing. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, News Corp. is trading above its rising key averages which signal neutral to bullish price action in the near-term.

NWSA

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of News Corp. options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

News Corp. Options

24.15%

96%

92%

What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

May Options

Flat

Average

June Options

Flat

Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion…

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on News Corp.’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for News Corp. look like and more importantly, how did the markets like these numbers?

2012 Q4

2012 Q3

2012 Q2

2012 Q1

Earnings Growth (Y-O-Y)

140.48%

235.71%

-334.62%

58.33%

Revenue Growth (Y-O-Y)

5.01%

2.22%

-6.61%

1.77%

Earnings Reaction

-2.33%

1.6%

-0.21%

4.85%

News Corp. has seen increasing earnings and revenue figures over the last four quarters. From these figures, the markets have been mixed about News Corp.’s recent earnings announcements.

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P = Average Relative Performance Versus Peers and Sector

How has News Corp. stock done relative to its peers, Comcast (NASDAQ:CMCSA), Walt Disney (NYSE:DIS), Time Warner (NYSE:TWX), and sector?

News Corp.

Comcast

Walt Disney

Time Warner

Sector

Year-to-Date Return

20.34%

7.76%

20.89%

23.10%

16.36%

News Corp. has been an average relative performer, year-to-date.

Conclusion

News Corp. provides information and entertainment through a wide range of sources to a growing audience around the world. The stock has been great to investors as it is trading near all-time high prices. Earnings and revenue figures have supported a rise in the stock but investors have expected a little more. Relative to its peers and sector, News Corp. has been an average performer. Look for News Corp. to OUTPERFORM.

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