Fox ( FOX ) just made the biggest move of its post-Disney era, agreeing to buy Roku for about $22 billion.
But the stock fell sharply the day the deal came through and continued to slide into the next session, sending Fox shares to a 52-week low.
Now one of Wall Street’s most followed analysts has weighed in, and his verdict gives cautious shareholders something to watch.
What Bank of America said about Fox stock after the Roku deal
Bank of America Securities analyst Jessica Reif Ehrlich maintained her sell rating on Fox and nudged her price target to $54, TipRanks reported.
Ehrlich’s principle tells investors what to watch. It sits just above where Fox’s most-traded Class A shares closed and above the top-selling Class B stock, making this a decision in the absence of near-term catalysts, not an invitation to further declines.
TipRanks recommends Ehrlich, which includes names of social media services, including Netflix and Spotify, with rate of return close to 9% in limited stocks, so media investors tend to track his notes closely.
Why Fox shares fell after Roku’s $22 billion acquisition
Fox agreed to pay $160 per share for Roku, splitting the payment between $96 in cash and 0.9693 of its Class A shares, according to a Fox Corporation announcement.
To finance part of the money, Fox took out a $12 billion loan, CNBC reported. A buyer who takes on that much debt to get a goal that’s almost as big as he is tends to hurt the market, and it does.
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Fox Class A shares fell about 17% on the day of the announcement and went up in the next session.
Existing Fox owners will own 73% of the combined company, with Roku investors taking the rest, according to Fox’s SEC filing.
The logic of Roku and the catalyst gap Bank of America sees
Roku reaches more than 100 million broadcast homes and has provided Fox with a connected TV platform and first-party viewership data, according to The Hollywood Reporter.
That helps Fox rely less on shrinking cable bundles and more on broadcast and digital advertising, the fastest growing slice of media revenue.
Ehrlich marked the catch, however. The deal won’t close until the first half of 2027, the roughly $400 million in promised cost savings take years to materialize, and future expensive NFL rights renewals could squeeze profits down the road.
In plain terms, the reward won’t be seen until 2027 and beyond, while the risk comes soon.
How does Fox stock compare to the market right now?
Sales look bad next to a rising market.
