News Corp's $1 Billion Buyback: A Strategic Bet on Value Accretion Amid Digital Transformation

News Corp's July 15 announcement of a $1 billion share buyback plan, layered atop an existing $303 million undrawn capacity, signals a bold strategic shift. This move underscores management's confidence in the stock's undervaluation while prioritizing capital allocation to drive shareholder returns. With a strengthened balance sheet and a pivot toward recurring digital revenue streams, the buyback could narrow the gap between market valuation and intrinsic value—but execution risks remain. Here's why investors should pay close attention.

Value Accretion Through Share Buybacks: The Dual-Class Dynamics

News Corp's dual-class share structure (Class A and B) complicates the EPS impact of buybacks. However, the company's explicit targeting of both classes in its repurchase program suggests a deliberate effort to reduce the overall diluted share count. For context, weighted-average shares outstanding fell from 570.9 million in Q3 2024 to 567.2 million in Q3 2025—a 0.6% reduction—despite minimal buyback activity to date.

A fully executed $1.3 billion buyback could further compress shares, boosting EPS meaningfully. Consider this: if the company repurchases 5% of its ~570 million shares at an average price of $23 (near its 52-week low), EPS could rise by ~8-10%—a powerful catalyst for valuation re-rating. This math assumes no dilution from other capital uses, which brings us to the next point.

Strategic Capital Allocation: Prioritizing Buybacks Over Acquisitions

News Corp's Q3 results highlighted strong free cash flow ($539 million over nine months) and reduced debt ($1.94 billion, down from $2.09 billion). The Foxtel sale—completed in April 2025—freed up $592 million in repayments and secured a 6% stake in DAZN, bolstering liquidity. Management's decision to allocate this capital to buybacks instead of aggressive acquisitions reflects a focus on returning value to shareholders rather than speculative growth.

This shift is strategic. With digital revenue streams (e.g., Dow Jones' Risk & Compliance and REA Group's Australian real estate services) growing steadily—despite challenges in traditional media—the company's recurring revenue base is stabilizing. This creates a “defensible” cash flow profile, making buybacks a safer bet than chasing uncertain M&A opportunities.

Timing and Risks: Navigating the Post-Earnings Blackout

The buyback's timing is critical. Management plans to accelerate repurchases after the August earnings release, avoiding the trading blackout period. This aligns with the company's historical pattern of deploying capital when it deems shares undervalued.

However, risks persist:

1. Execution Uncertainty: The buyback is discretionary, with no obligation to spend the full $1.3 billion. Market volatility or competing opportunities (e.g., strategic investments in AI-driven content tools) could divert capital.
2. Dual-Class Liquidity: Class B shares (held mostly by insiders) may lack sufficient trading volume for large repurchases without distorting prices.
3. Tax Implications: The 1% federal excise tax on buybacks, now in effect for two years, reduces net returns—though the impact remains marginal at current scale.

Why Investors Should See This as a Catalyst

Despite the risks, the buyback announcement is a vote of confidence in News Corp's intrinsic value. Key factors supporting this thesis:

• Undervalued Metrics: At ~$23/share, the stock trades at a 30% discount to its 5-year average P/E of 15x. Buybacks could narrow this gap.
• Digital Growth Anchors: Dow Jones' 82% digital revenue contribution and REA Group's 6% revenue growth (despite housing market headwinds) signal resilience.
• Balance Sheet Flexibility: With $2.095 billion in cash and manageable debt, News Corp has ample room to navigate macroeconomic uncertainty.

Historically, earnings release dates have positively impacted NWSA's stock price, with a 71.43% win rate over 3 days and 71.43% over 30 days from 2022 to present. The stock achieved a maximum return of 1.00% on day 50 following an earnings release, reinforcing the strategic value of timing buybacks post-earnings.

Investment Recommendation

News Corp's buyback plan is a compelling opportunity for long-term investors seeking value accretion in a media landscape undergoing structural shifts. While execution risks exist, the combination of strong free cash flow, disciplined capital allocation, and undervalued shares makes NWSA a buy. Hold for the near term, with a bullish bias if repurchases begin to meaningfully reduce shares outstanding by early 2026.

Final Note: The buyback's success hinges on management's ability to time repurchases during dips—a skill they've historically demonstrated. For now, this move signals that News Corp's best days as a digital-first media conglomerate may still lie ahead.