Is 21st Century Fox the Next Hot Stock?

With shares of 21st Century Fox (NASDAQ:FOXA) trading around $32, 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.

21st Century Fox announced that its new network, Fox Sports 1, will launch Saturday as planned with all major distributors on board and 90 million subscribers. There had been some doubt as to whether the new network would be carried by Time Warner Cable (NYSE:TWC), Dish Network (NASDAQ:DISH), and DirecTV (NASDAQ:DTV), but after Fox agreed to reduce the retransmission fees it originally asked for, the big three pay-TV providers agreed to carry the new 24-hour sports network. 21st Century Fox recently delivered earning that missed Wall Street’s expectations, but it beat the revenue expectation.

T = Technicals on the Stock Chart Are Strong

21st Century Fox stock has been surging higher since it was spun off into its own company. The stock is currently pulling back from all-time high prices. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day, 100-day, and 200-day simple moving averages. Unfortunately, 21st Century Fox stock has not been around long enough to view these moving averages.

FOXA

Source: Thinkorswim

Taking a look at the implied volatility 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

25.56%

40%

39%

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

September Options

Flat

Average

October Options

Flat

Average

As of Friday, there is 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.

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 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 increasing earnings and revenue figures over the last four quarters. From its recent numbers, markets expected a little more from 21st Century Fox.

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), and Viacom (NASDAQ:VIAB) — and sector?

21st Century Fox

Disney

Comcast

Viacom

Sector

Year-to-Date Return

44.53%

25.11%

13.92%

49.54%

31.29%

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. The company also recently reported earnings that did not impress the market. The stock has been trending higher since being spun off but is now pulling back from highs. Over the last four quarters, earnings and revenue figures have been rising, but investors expected more from the company’s recent earnings announcement. Relative to its peers and sector, 21st Century Fox has been a year-to-date performance leader. Look for 21st Century Fox to OUTPERFORM.

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