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Fox Shares Hit New Highs - Maybe too High

By Charley Blaine

Investing.com - Twenty-First Century Fox (NASDAQ:FOXA) shares are doing well -- maybe too well.

The company is selling off its entertainment assets to Walt Disney (NYSE:DIS) in a $71 billion deal expected to close this summer.

Basically it's keeping its Fox News and Fox Sports broadcasting businesses. And there's a huge question about whether the sports business in particular is vulnerable to new ways of reaching customers.

The stock (whether Fox or Fox A shares) hit new 52-week highs Wednesday. The non-voting A shares (NASDAQ:FOXA) were at $50.72, just off their high of $52.75. The voting shares (NASDAQ:FOX), which trade at a slight discount, hit a $50.34 peak. The A shares are up 4.5% this quarter. The Fox shares are up 6.1%, slightly lagging the market.

In fact, the shares, up nearly 37% over the last year, are looking frothy. Several technical indicators suggest the shares are overbought and vulnerable to any kind of market turmoil.

The Fox News business is very profitable with its stable of conservative commentators and provocative programming. The sports business, including Major League Baseball, the National Football League and its FSI sports network, is big and growing, but growing expensively.

The company, dominated by Rupert Murdoch and his sons, has been paying up to get programming, particularly with Major League Baseball (a $5 billion investment over seven years). It bought the rights to the Thursday night NFL games. That was $3 billion over five years, compared with $900 million over two years paid by CBS and NBC under an earlier two-year deal.

The company also benefited from the 2017 tax bill.

But the broadcasting business is changing. Streaming is potentially real competition and it's not clear how any broadcaster will compete, given their huge investments in infrastructure to support broadcasting and cable.

Still, investors seem to be buying into the scenario that, if you own the rights, someone will buy the advertising and all will continue to be well.

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