Fox News Downgraded by Major Wall Street Bank Over Viewership Issues

Ex-Fox News host Tucker Carlson speaks during 2022 FOX Nation Patriot Awards at Hard Rock Live at Seminole Hard Rock Hotel & Casino Hollywood in Hollywood, Fla., on Nov. 17, 2022. (Jason Koerner/Getty Images)

A top financial services company downgraded Fox Corporation’s stock on Monday, noting issues with the network’s viewership, earnings, and content.

An analyst with Wells Fargo downgraded shares of Fox Corp. from “equal weight” to “underweight,” lowering the price target from $35 per share to $31 per share, according to multiple reports on Monday.

“Fox News is the FOXA cash cow at [around] 80 percent of our FY24E EBITDA,” Steven Cahall, with Wells Fargo, wrote, referring to the acronym for earnings before interest, taxes, depreciation, and amortization. “Viewership is down -19% Jan-June‘23 vs Jan-June’21 due to cord cutting and/or programming.”

Mr. Cahall added that “more worryingly, Fox News was 52 percent of cable news primetime viewership for 2020-22, 51 percent in Jan‘23, and that has slid to a low of 38 percent in June’23 post-TC,” reported Investing.com. “[Fox News’] share of conservative news viewers has fallen from 94 percent to 84 percent.”

Fox News is worth about $11 billion, or about five times its earnings before interest, depreciation, and amortization (EBITDA), he wrote. That’s down from a previous estimate of six times, he said, noting that there are worries of a “structural decline” in overall cable news viewership across the board due to cord-cutting and demographics.

Other issues cited by Mr. Cahall included talent departure and increasing competition. “We are also not convinced that cable news works well in streaming, so our 8 percent view on annual cord-cutting presents ongoing earnings risks,” he said, Seeking Alpha reported.

There are also broader industry challenges ahead for Fox Corporation, the analyst said.

The Twenty-First Century Fox Inc headquarters in the Manhattan borough in New York on April 19, 2023. (Timothy Clary/AFP via Getty Images)

“Fox gets about 50 percent of fiscal year 2023 and 2024 estimated revenue from U.S. affiliate fees—among the highest in our media coverage universe,” Mr. Cahall pointed out. “We estimate 7-8 percent cord-cutting, with a downside bias.”

And he warned: “Fox Cable could soon go ex-growth on EBITDA like we’ve seen for peer linear nets. TV has better topline growth, but less ability to reduce costs due to sports rights.”

A few days after Mr. Carlson’s exit, Morgan Stanley on May 4 dropped its target price on Fox Corporation from $39.00 to $37.00 at the time.

It comes more than two months after the departure of popular host Tucker Carlson, which was confirmed by Fox News in a news release in late April. No reasons have been publicly given for his exit from the company.

Fox News has filled Mr. Carlson’s former timeslot at 8 p.m. ET with a program dubbed, “Fox News Tonight,” which has used a rotating cast of Fox News hosts. The program has drawn far fewer viewers than what Mr. Carlson had brought in, according to Nielsen ratings.

Late last month, Fox News said it would launch a new primetime lineup on July 17 that will include Jesse Watters during the 8 p.m. ET timeslot. Other changes include moving Laura Ingraham’s show to 7 p.m. and Greg Gutfeld to the 10 p.m. slot, while Sean Hannity will keep his 9 p.m. program.

“FOX News Channel has been America’s destination for news and analysis for more than 21 years and we are thrilled to debut a new lineup. The unique perspectives of Laura Ingraham, Jesse Watters, Sean Hannity, and Greg Gutfeld will ensure our viewers have access to unrivaled coverage from our best-in-class team for years to come,” Fox News Channel CEO Suzanne Scott announced.

Mr. Cahall’s note signaled that “while the new primetime lineup could drive a rebound, we think Fox News is a Show Me viewership story,” according to reports.

After the Wells Fargo downgrade, Fox shares were slightly lower during Monday trading.

(L-R) Jeanine Pirro, Harold Ford Jr., Jesse Watters, Dana Perino, and Greg Gutfeld speak onstage during 2022 FOX Nation Patriot Awards at Hard Rock Live at Seminole Hard Rock Hotel & Casino Hollywood in Hollywood, Fla., on Nov. 17, 2022. (Jason Koerner/Getty Images)

For May, coming right after Mr. Carlson’s departure, Fox News lost around a third of its primetime audience, according to Nielsen ratings. The network was still the No. 1 cable news network for the second quarter of 2023.

Also, Fox Corporation announced it had agreed to pay $12 million to settle a lawsuit by former producer Abby Grossberg, who had claimed the network promoted a hostile work environment.

Carlson Responds

Late last week, Mr. Carlson responded to a question about why the company announced it was parting ways with him.

“I don’t know why I was fired. I really don’t. I’m not angry about it. I wish Fox well,” he told podcast host Russell Brand this week in an interview that aired July 7 on YouTube.

Mr. Brand had asked Mr. Carlson about the reason behind his firing and if it had to do with Mr. Carlson’s programs that featured never-seen-before footage from the Jan. 6 Capitol breach.

“Honestly I don’t know,” Mr. Carlson also said. “They didn’t agree with me of course, I don’t think,” he said, adding that he can “only speculate” about the reasons.

The former top-rated Fox host also indicated he isn’t being paid by Twitter or its owner Elon Musk, saying that he doesn’t ever want to have a boss again. “What social media offers in the short term is an audience and a reason to write,” Mr. Carlson stated.

The Epoch Times contacted a spokesperson for Fox News for comment on Monday.