Fox stock slips as Wells Fargo cuts to Equal Weight on strategic uncertainty

Wells Fargo analysts downgraded Fox Corporation (NASDAQ:) shares to Equal Weight from Overweight with the price target going to $35 per share from the prior $44.

The analysts see “a lot less to get excited about” going forward, hence the downgrade call. More specifically, they say there is less balance sheet appeal.

“FOXA’s 1x net leverage was particularly appealing in a rising rate env’t. Rates appear to be peaking and while FOXA’s low leverage is still a positive attribute, the relative appeal is less compelling since everyone’s cash interest feels more predictable,” the analysts said in a client note.

Moreover, they highlighted strategic uncertainty.

“We once thought FOXA would be the sports betting play, but that now seems less likely post the FanDuel arbitration. Its sports rights likely have streaming monetization upside though when and how is TBD (potentially as part of an ESPN DTC launch). For now, that leaves FOXA as a linear stock with good cash deployment.”

For the analysts to grow more positive on FOXA stock, they would first like to see a more long-term strategic outlook from management.

Shares are down 2.2% in premarket Friday while being up 1% year-to-date.