U.S. Media & Entertainment: FOX/Roku: Increasing exposure to higher growth media assets

Research evidence excerpt

U.S. Media & Entertainment: FOX/Roku: Increasing exposure to higher growth media assets

Valuation Method and Risk Statement

Price targets are based on multiples. Risks for the pay TV sector include: operational and

financial leverage, potentially adverse regulatory rulings, changes in technology, increasing

competition, reliance upon increased penetration of new services for cash flow growth,

potentially dilutive acquisitions, and exposure to economic cycles.

Fox Corp:

Our price target is multiples based. Key risks for media networks include the health and

sustainability of the U.S. Pay TV ecosystem as well as U.S. advertising, particularly television

advertising, which is sensitive to overall macroeconomic conditions (GDP and consumer

spending). Changes in growth expectations for the U.S. economy and the U.S. consumer,

either positive or negative, could impact our forecasts, ratings and price targets. Further,

companies with international exposure to pay TV and advertising are also subject to these

same risks in countries where they operate, as well as facing the effects of foreign currency

translations, all of which could impact our outlook and investment thesis. As companies

transition toward direct-to-consumer business models, this poses cannibalization risk to

legacy revenue streams as well as higher risk of dilution/margin compression.

Roku Inc:

Our Roku price target is multiples based. Changes in growth expectations for the U.S.

economy or U.S. consumer, either positive or negative, could impact our forecasts, ratings,

and price targets. Further, companies with international exposure such as Roku are also

subject to these same risks in countries where they operate, as well as facing the effects of