The News Corp (ASX: NWS) share price is in the red this morning. At the time of writing, the media giant's share price has sunk 4.49% to $52.815 a piece.
The drop wipes out the gains made yesterday after the company announced its FY 2025 results. Following the results, its share price closed 5.1% higher for the day.
FY 2025 results recap
The company posted total revenues of US$8.45 billion, up 2% year-on-year. Growth was driven by strong performances in Digital Real Estate Services, Dow Jones, and Book Publishing, partially offset by weaker contributions from the News Media segment. Foreign currency movements provided a modest US$8 million boost to the top line.
Net income from continuing operations surged 71% to US$648 million, and total segment EBITDA climbed 14% to US$1.42 billion. Adjusted total segment EBITDA increased 15% year on year.
News Corp's earnings per share also moved higher; adjusted diluted earnings per share came in 20% higher at US$0.89, allowing the board to declare a cash dividend of US$0.10 per share.
Following the results, Macquarie Group Ltd (ASX: MQG) sent a note to investors revealing what it thinks of the stock.
Macquarie's stance on News Corp shares
The broker downgraded its rating of News Corp shares to neutral and lowered its target price to $57.80. Despite the downgrade, at the time of writing, this still represents a potential 9.4% upside for investors over the next 12 months.
"News Corp's valuation looks fair given the re-rate of the News Corp owned business, which is trading on 5.9x 12-months forward EV/EBITDA when adjusting the REA stake at spot, and is its highest levels since early-2018 excl COVID. Downgrade to Neutral rating (from Outperform)," Macquarie said in its investor note.
The share valuation downgrade is based on "1) valuing the News Corp owned businesses on 5.9x 12-months forward EV/EBITDA (vs spot at 5.9x, and a 4.6x average trading multiple during the past two years), 2) REA at spot share price (A$254.50/sh) / FX (0.65 AUD / USD), and 3) applying a 25% public market discount."
The broker also reduced its earnings expectations: "We cut EPS 2%/3%/5% across FY26/27/28e considering the FY25 result and noting a change of analyst and revised modelling."
The broker notes that impacts from the US housing market on Move and impacts from the global publishing market on Book Publishing could affect its earnings and valuation investment thesis. It also points to impacts from the global advertising market on News Media, the pace of decline in print media, M&A, buyback programs, and the pace of repurchases.
