Does 21st Century Fox Have a Bright Future?

With shares of 21st Century Fox (NASDAQ:FOXA) trading around $34, is FOXA an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

21st Century Fox was formerly part of News Corp. The company has a portfolio of cable, broadcast, film, pay television, and satellite assets spanning six continents across the globe. It is home to a global portfolio of cable and broadcasting networks and properties, including FOX, FX, FXX, FS1, Fox News Channel, Fox Business Network, Fox Sports, Fox Sports Network, National Geographic channels, Fox Pan American Sports, MundoFox, STAR, and 28 local television stations; film studio 20th Century Fox Film; and television production studios 20th Century Fox Television and Shine Group.

Investors in 21st Century Fox, excluding chairman and CEO Rupert Murdoch and his family, have voted to separate the roles of chairman and CEO of the company by a 2-to-1 margin, as it’s believed the Murdochs have too much control over the company. According to a regulatory filing seen by Bloomberg, shareholders representing 147 million Class B shares in the company have voted for having an independent chairman at the company’s annual meeting last week.

T = Technicals on the Stock Chart Are Strong

21st Century Fox stock has been trending higher since its initial public offering, earlier this year. The stock is currently at all time highs and looks ready to continue. 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, and 200-day simple moving averages. As seen in the daily price chart below, 21st Century Fox is trading above its rising key averages, which signal neutral to bullish price action in the near-term.

FOXA

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of 21st Century Fox options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

21st Century Fox Options

23.39%

46%

44%

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

Put IV Skew

Call IV Skew

November Options

Flat

Average

December 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 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 Mixed 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 21st Century Fox’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for 21st Century Fox look like and more importantly, how did the markets like these numbers?

2013 Q2

2013 Q1

2012 Q4

2012 Q3

Earnings Growth (Y-O-Y)

-3.13%

221.10%

140.50%

235.70%

Revenue Growth (Y-O-Y)

-13.84%

13.52%

5.01%

2.22%

Earnings Reaction

-0.41%

N/A

N/A

N/A

21st Century Fox has seen mixed earnings and revenue figures over the last four quarters. From these numbers, the markets have expected a little more from 21st Century Fox’s recent earnings announcements.

P = Excellent Relative Performance Versus Peers and Sector

How has 21st Century Fox stock done relative to its peers, Disney (NYSE:DIS), Comcast (NASDAQ:CMCSA), Viacom (NASDAQ:VIAB), and sector?

21st Century Fox

Disney

Comcast

Viacom

Sector

Year-to-Date Return

55.13%

35.59%

25.64%

58.78%

42.57%

21st Century Fox has been a relative performance leader, year-to-date.

Conclusion

21st Century Fox is a cable, broadcast, film, and pay television provider around the world. In recent news, the company’s newest channel, Fox Sports 1, comes to life Saturday. Investors in the company have voted to separate the roles of Chairman and CEO as they believe that the Murdoch family has too much influence. The stock has been trending higher since its IPO and is now at all time highs. Over the last four quarters, earnings, and revenues have been mixed which has left investors to expect more from the company. Relative to its peers and sector, 21st Century Fox has been a year-to-date performance leader. Look for 21st Century Fox to continue to OUTPERFORM.

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