Rising Digital Media Consumption And Smartphones Will Secure Trusted Subscriptions

Key Takeaways

• Accelerating AI-driven products, strategic M&A, and global digital reach position News for rapid margin expansion and recurring revenue growth outpacing market expectations.
  
• Premier brands, data privacy investment, and trusted content provide long-term pricing power and durable subscription and advertising revenue amid regulatory pressures.
  
• Persistent advertising softness, legal pressure from tech platforms, and digital disruption threaten revenue stability, margin protection, and long-term growth across core business segments.

Catalysts

A media and information services company, creates and distributes authoritative and engaging content, and other products and services for consumers and businesses worldwide.

• Analyst consensus sees the Foxtel sale as only a balance sheet repair, but the subsequent aggressive $1.3 billion buyback, rapid capital return, and increased cash flexibility could create substantial, sustained accretion to EPS and compress the valuation discount much faster than expected.
  
• While analysts broadly highlight high-margin B2B and digital revenue growth at Dow Jones as a margin driver, the accelerating momentum in professional data services, unique AI-powered product launches, and continued bolt-on M&A put News on a path to rapidly expand EBITDA margins and earnings at a pace underappreciated by the market.
  
• The coming proliferation of AI content licensing deals, as major tech companies recognize the need for trusted, premium IP for training and products, represents a multi-billion dollar recurring revenue opportunity for News, with initial deals already under advanced negotiation and legal actions likely to unlock further monetization.
  
• News's unrivaled digital global reach and leadership in high-engagement verticals like digital real estate are poised for outsized revenue growth as smartphone adoption and broadband expansion turbocharge online consumption, positioning the company to outpace peers when the U.S. housing market recovers and as international markets mature.
  
• Amidst widespread misinformation and regulatory pressure for credible, responsible media, News's premier brands and deep investment in data privacy and security set it up for long-term pricing power in subscriptions, advertising, and B2B offerings, driving recurring revenue durability and improving net margins for years to come.

News Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on News compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming News's revenue will decrease by 2.2% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 4.5% today to 8.2% in 3 years time.
• The bullish analysts expect earnings to reach $784.8 million (and earnings per share of $1.4) by about August 2028, up from $467.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 39.2x on those 2028 earnings, up from 35.4x today. This future PE is greater than the current PE for the US Media industry at 18.6x.
• Analysts expect the number of shares outstanding to decline by 0.43% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.1%, as per the Simply Wall St company report.

News Future Earnings Per Share Growth

Risks

• News Media revenue continued to be challenged by persistent softness in advertising demand, with quarterly results showing a 4 percent year-over-year decline and management signaling that these trends are expected to persist, which could negatively affect total revenue and compress net margins over the long term.
  
• The company acknowledged increasing pressure from AI-driven content creation and growing negotiations and legal disputes with major technology platforms such as OpenAI and DeepSeek; while there is optimism about securing IP licensing deals, ongoing or escalating legal battles could result in elevated legal costs and potential settlements, ultimately lowering net earnings.
  
• Book Publishing saw recent softness in the overall market, with a 4 percent revenue decline for the quarter and digital revenues falling 3 percent; coupled with management commentary that July trends were also soft and that upcoming comps will be difficult, this indicates a structural risk of long-term stagnation or decline in both print and digital book revenues and segment EBITDA.
  
• Realtor.com's modest 3 percent growth in the face of a sluggish U.S. property market masked a 3 percent year-over-year decline in unique users and a 13 percent drop in lead volumes, raising questions about its ability to maintain revenue momentum and protect margins if normalization in the housing market is delayed or if tech giants continue to erode its digital advertising share.
  
• News faces secular headwinds from the continued shift in consumer attention and advertising budgets to social/digital-native and independent platforms, which, given their persistent reliance on legacy news mastheads and print advertising, threatens the company's long-term ability to grow circulation, maintain premium pricing, and avoid future revenue and EBITDA erosion.

Valuation

• The assumed bullish price target for News is $45.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of News's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $45.0, and the most bearish reporting a price target of just $26.5.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $9.6 billion, earnings will come to $784.8 million, and it would be trading on a PE ratio of 39.2x, assuming you use a discount rate of 7.1%.
  
• Given the current share price of $29.29, the bullish analyst price target of $45.0 is 34.9% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.