10 Worst Communication Services Stocks to Buy According to Short Sellers

5) Fox Corporation (NASDAQ:FOXA)

Short % of Float (15 August 2024): 15.39%

Number of Hedge Fund Holders: 37

Fox Corporation (NASDAQ:FOXA) operates as an entertainment company. It produces and licenses news, sports, and entertainment content for distribution via cable television systems, direct broadcast satellite operators, and telecommunications companies.

Over the past 6 months, the shares of Fox Corporation (NASDAQ:FOXA) have seen a run-up of more than ~30%. Short sellers believe that the political ad spending enthusiasm had already been reflected in the company’s stock. Moreover, short sellers believe that the company’s dependence on the traditional pay-TV bundle for nearly all its top line can create a problem over the long term. Therefore, there is some uncertainty regarding its long-term strategy, with the media ecosystem increasingly transitioning to digital.

Next, short sellers believe that there are some concerns related to valuations too. The stock of Fox Corporation (NASDAQ:FOXA) currently trades at ~10.9x its forward earnings, which seems to be stretched, considering that the sectoral average hovers at ~8.8x.

However, Wall Street analysts remain optimistic about Fox Corporation (NASDAQ:FOXA). They believe that its brand strength, primarily in news and sports broadcasting, should act as a formidable asset. Its portfolio, such as Fox News and the FOX broadcast network, can command significant audience loyalty and interest among advertisers. Its owned and operated local television stations should continue to strengthen its market presence, offering direct connections to advertisers.

Next, Fox Corporation (NASDAQ:FOXA)’s content strategy, focusing on live sports and news, sets it apart from its competitors which are more focused on scripted content. Its rights to broadcast major sports events, such as NFL games and college sports via Big Ten Network, should provide it with a competitive edge.  Moreover, the company continues to expand via inorganic growth opportunities. Its recent acquisition of Credible Labs, which is a consumer fintech firm, hints at the company’s willingness to diversify and innovate beyond the core media business.

Analysts at Wells Fargo & Company raised the shares of Fox Corporation (NASDAQ:FOXA) from an “Underweight” rating to an “Overweight” rating. They upped their price objective from $29.00 to $46.00 on 16^th August 2024. The stock is held by 37 hedge funds (out of 912 hedge funds tracked by Insider Monkey) with stakes worth $653.7 million as of the second quarter. In the preceding quarter, 31 hedge funds held stakes in the company.