Index removal and asset sale put News Corp in focus

News (NWSA) has dropped out of the Russell 1000 Dynamic Index and agreed to sell its Moving.com and MoveAI businesses to National Holding Company, putting recent portfolio and index changes on investors’ radar.

The index removal affects how some passive funds may hold News, while the divestiture marks a shift away from certain digital services toward the company’s core media and information operations.

Recent moves around News, including the index removal and its divestiture of Moving.com and MoveAI, come as the stock’s 7 day share price return of 6.43% contrasts with a decline of 9.74% in 1 year total shareholder return. Longer term total shareholder returns over 3 and 5 years remain positive, which may suggest that recent momentum is rebuilding after a softer year.

If you are weighing how this shift in focus at News fits into your portfolio, it can help to compare it with other media and information businesses and broaden your search through 20 top founder-led companies

With News trading at $26.64, carrying an intrinsic value estimate at a 49% discount and sitting about 32% below analyst targets, you have to ask whether this reflects mispricing or whether the market already expects future growth to be realized.

Most Popular Narrative: 24.3% Undervalued

With News last closing at $26.64 against a most-followed fair value estimate of $35.18, the current price sits well below that narrative view and puts the focus squarely on the company’s earnings power and cash generation over the coming years.

Ongoing portfolio rationalization (for example, 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.

Want to understand why this narrative sees room above today’s price for News? The story hinges on a specific blend of revenue growth, margin uplift, and a future earnings multiple that has to do some heavy lifting. The exact mix of those inputs might surprise you.

Result: Fair Value of $35.18 (UNDERVALUED)

However, investors also need to weigh risks to this News narrative, including ongoing pressure on print and legacy media, as well as signs of softer engagement at key digital properties.

Another view on News Corp’s valuation

The fair value narrative for News leans heavily on future earnings and cash flows, yet the current P/E of 32.4x tells a different story. It sits above both the US Media industry at 23.3x and peers at 25.9x, and also above a fair ratio of 22.8x, which points to valuation risk if sentiment cools.

For a closer look at what this gap in P/E ratios could mean for future returns and downside risk, See what the numbers say about this price — find out in our valuation breakdown.

Next Steps

Given the mixed sentiment around News, it makes sense to review the underlying data yourself and decide how compelling the story really is. To see the specific positives that current holders are focused on, take a closer look at the 3 key rewards.

Looking for more investment ideas beyond News?

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Use the Simply Wall Street Screener to quickly scan other opportunities that may complement or contrast with News in your portfolio.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.