BUZZ - Bank of America upgrades rating due to Roku deal, Fox shares surge

October 16 - ** On Friday, Fox Corp (FOXA.O) shares rose 1.7% to close at $65.08. Earlier, Bank of America Global Research upgraded the rating of the media company from “underperform” to “buy," stating that the upcoming acquisition of Roku (ROKU.O) enhances the company’s risk-reward profile and position in the streaming market.

** The brokerage raised its price target from $54 to $85, representing 33% upside from the latest closing price. According to London Stock Exchange Group (LSEG) data, the median target price from Wall Street analysts is $76.

** Bank of America said that, since the deal is expected to be completed in early 2027, Roku will provide Fox with a scaled operating system and distribution platform. This alleviates previous concerns about Fox’s long-term transition from linear TV to a DTC model and defers the NFL broadcast rights renewal risk to the 2029 exit window.

** Bank of America expects around $530 million in revenue synergy from the deal, and noted that Fox’s $400 million annual cost synergy target is likely to be achieved through savings in ad sales, ad technology, and corporate management expenses.

** Fox News’ parent company stated in June that it would acquire (link) Roku for about $22 billion in cash and stock.

** Among the 22 brokerages covering FOXA, 13 rate the stock as “strong buy” or “buy,” while 9 rate it as “hold.”

** So far this year, the stock has fallen about 11%, underperforming the S&P 500 Communication Services .SPLRCL sector’s 4.5% gain.

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