Fox's Roku Deal 'Fundamentally Changes' the Game, Analyst Upgrades Stock to Buy

Fox Corp. (NASDAQ:FOXA) (NASDAQ:FOX) stock is trading higher on Friday after Bank of America upgraded the media company, citing the growth potential of its planned acquisition of Roku, Inc. (NASDAQ:ROKU). Bank of America analyst Jessica Reif Ehrlich upgraded Fox from Underperform to Buy and raised the price forecast from $54 to $85, citing opportunities to accelerate streaming growth, boost advertising revenue and cut costs. Roku Deal Changes Growth Outlook for Fox Ehrlich said the pending Roku acquisition “fundamentally changes” Fox’s long-term prospects by giving the company a stronger foothold in streaming. The deal, expected to close in early 2027, would combine Fox’s premium sports and news programming with Roku’s streaming distribution platform and advertising technology. The analyst expects the combined company to generate high-single-digit revenue growth, compared with low- to mid-single-digit growth for Fox on a standalone basis. Moreover, the combination could help Fox capitalize on the shift in advertising spending from traditional television to streaming. See More: Top Value Stocks Analysts See Nearly $700 Million Earnings Boost Bank of America estimates the deal could generate approximately $530 million in additional annual revenue and $400 million in cost savings by 2028. Together, these opportunities could add nearly $700 million to annual EBITDA, a measure of operating profitability. The firm sees further upside, with its bullish scenario projecting more than $1 billion in additional revenue. Ehrlich also considers the $400 million cost savings target achievable, as it represents about 10% of the companies’ combined selling, general and administrative expenses and corporate costs. The savings could come from combining advertising sales operations, technology platforms and corporate functions. NFL Risks Ease As Streaming Opportunity Expands Previously, Bank of America was concerned that higher NFL broadcasting rights costs and declining traditional television audiences would pressure Fox’s earnings. However, the analyst now expects potential NFL contract renegotiations to move closer to the league’s 2029 opt-out window. Meanwhile, Roku’s distribution network could strengthen Fox’s negotiating position and help offset higher sports programming costs. The firm projects combined revenue of approximately $25.26 billion and EBITDA of $5.69 billion in 2028. Bank of America’s $85 price forecast values the combined company at roughly 10 times projected 2028 EBITDA. Despite the upgrade, higher sports rights costs and the execution of the Roku integration remain important risks to the investment outlook. Fox Price Action FOX Price Action: Fox shares were up 1.24% at $57.85 at the time of publication on Friday, according to Benzinga Pro data. Photo via Shutterstock Read Also: Netflix Needs Another 'Squid Game' Moment As Growth Pressure Mounts