Digital Information And Real Estate Will Shape A Strong Future

Key Takeaways

• Expanding digital services, strategic B2B partnerships, and high-value content licensing are driving stable, recurring revenue and margin improvement.
  
• Portfolio streamlining and strong cost control are boosting operational efficiency, enabling greater free cash flow and enhanced capital returns.
  
• Structural declines in print and legacy media, audience erosion for digital properties, increased AI-related risks, macroeconomic exposure, and reduced diversification threaten long-term revenue and stability.

Catalysts

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

• News Corp's growing portfolio of digital and professional information services (e.g., Dow Jones Risk & Compliance and new B2B data analytics acquisitions) positions it to capture expanding demand for high-quality, business-critical information-future-proofing revenue growth and earnings stability through higher recurring digital subscription and data licensing income.
  
• Strategic expansion in digital real estate (REA, realtor.com) is enabling margin expansion and robust revenue growth-even in a weak macro housing environment-by focusing on high-margin adjacency businesses (rentals, new homes, seller leads), which will further accelerate when market conditions normalize, driving headline growth and margin uplift.
  
• Sustained growth in digital-only subscriptions across flagship media brands (e.g., The Wall Street Journal, The Times) supported by new B2B partnerships (LSEG) and improving pricing power, enhances recurring revenue streams and reduces churn, positively impacting both top-line growth and net margins.
  
• Content licensing and anticipated AI/data partnership deals are creating new diversified revenue streams, leveraging News Corp's high-value intellectual property in an environment where digital and AI content consumption is rapidly expanding-supporting incremental revenue and long-term earnings growth.
  
• Ongoing portfolio rationalization (e.g., Foxtel divestiture) and disciplined cost management are driving improved operational efficiency and expanding net margins, allowing for higher free cash flow and increased capital returns (accelerated $1.3 billion buyback), directly benefiting future EPS growth.

News Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming News's revenue will decrease by 3.2% annually over the next 3 years.
• Analysts assume that profit margins will increase from 4.5% today to 7.5% in 3 years time.
• Analysts expect earnings to reach $697.6 million (and earnings per share of $1.23) by about August 2028, up from $467.0 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $841.8 million in earnings, and the most bearish expecting $578.4 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 35.6x 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 faces an ongoing structural decline in advertising and circulation for its print and legacy media assets (Book Publishing and News Media segments), with quarterly results already showing negative revenue growth and management citing difficult comparisons and soft market conditions, which may offset gains elsewhere and weigh on overall revenue and margin expansion in the longer term.
  
• Audience engagement trends for key digital properties, such as Realtor.com, show declines in lead volumes and unique users (-13% and -3% respectively this quarter), suggesting risk that organic growth could be stalling and exposing the company's digital businesses to intensifying competition and potential audience/share erosion-directly impacting digital revenue trajectories.
  
• The proliferation of AI-generated content and ongoing disputes over intellectual property licensing present long-term risks to News's content monetization model; should AI platforms divert content consumption away from News's paid offerings or if licensing and litigation outcomes are unfavorable, both top-line revenue and net margins could be pressured.
  
• Despite strong current growth, News remains heavily exposed to cyclical macroeconomic segments (like real estate and advertising), with management acknowledging that continued outperformance at Digital Real Estate hinges on a housing market rebound; prolonged high interest rates or housing market stagnation globally could materially delay or undermine projected revenue and earnings growth.
  
• Strategic portfolio simplification (such as the sale of Foxtel) has concentrated the business around fewer, albeit higher-margin, pillars, reducing diversification and potentially increasing long-term earnings volatility and downside risk should one core segment, such as Dow Jones or Digital Real Estate, experience unexpected disruption or downturn.

Valuation

• The analysts have a consensus price target of $36.278 for News based on their expectations of its future earnings growth, profit margins and other risk factors. 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 analyst's consensus, you'd need to believe that by 2028, revenues will be $9.3 billion, earnings will come to $697.6 million, and it would be trading on a PE ratio of 35.6x, assuming you use a discount rate of 7.1%.
  
• Given the current share price of $29.29, the analyst price target of $36.28 is 19.3% 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.