News Corp's $1 Billion Buyback: A Strategic Play on Undervaluation and Digital Growth

Amid a consolidating media landscape, News Corp (NWSA) has unveiled a $1 billion stock buyback program, signaling confidence in its financial health and undervalued equity. This move positions the company as a compelling long-term investment, leveraging its strong balance sheet, recurring digital revenue streams, and a stock price trading at a steep discount to intrinsic value. Yet, risks such as macroeconomic headwinds and execution challenges must not be overlooked.

Capital Allocation Priorities: Strong Balance Sheet as Foundation

News Corp's decision to deploy capital toward buybacks reflects its robust financial position. With a debt-to-equity ratio of 21.6%—well below industry averages—and $2.1 billion in cash, the company maintains a stable net cash position despite $2.92 billion in debt. Crucially, its payout ratio of 23.4% leaves ample room for both dividends (yielding 0.67%) and share repurchases.

This conservative leverage structure allows News Corp to execute the buyback without compromising liquidity. Analysts view the balance sheet as a competitive advantage in a sector where many peers face debt overhang.

The Undervaluation Case: Why Now is the Time to Buy Back Shares

News Corp trades at a trailing P/E of 35.9x and a forward P/E of 32.6x, below peers' valuations and significantly below intrinsic value estimates. Analysts project an average price target of $38.80, implying a 30.8% upside from the July 14 closing price of $29.73. The stock currently trades at 56.3% below some fair value assessments, suggesting a rare opportunity to acquire shares at a discount.

The buyback's timing is strategic: With shares near a 52-week low and trading at a 3-year average discount to intrinsic value, the company can amplify earnings per share (EPS) accretion while signaling confidence in its growth trajectory.

Historical data supports this strategy: A backtest of buying NWSA at support levels and holding for 60 days from 2022 to present shows an average return of 7.76% and a 55.56% win rate, indicating a favorable risk-reward profile. The highest returns were observed around the 60-day mark, though investors should note that the strategy isn't foolproof, with some periods yielding losses.

Digital Growth as the Engine: Sustainable Revenues Powering the Buyback

The buyback is underpinned by recurring digital revenue streams, which now account for over 30% of total segment revenues. Key drivers include:

1. Digital Real Estate Services:
2. 13% revenue growth in Q2 2025, driven by REA Group's 17% rise in Australian residential listings and Move's 2% growth in U.S. rentals and new homes.

3. EBITDA surged 26%, reflecting scale advantages in its listings platforms.

4. Book Publishing:

5. Digital sales (e-books and audiobooks) jumped 9%, with audiobooks alone growing 13% on partnerships like Spotify.

6. EBITDA rose 19%, despite rising production costs.

7. Dow Jones:

8. Digital subscriptions hit 5.35 million, a 13% annual increase, with Risk & Compliance and Dow Jones Energy driving 10–11% revenue growth.
9. EBITDA expanded 7%, aided by cost discipline.

These segments collectively offset declines in legacy media, such as reduced unique users at The Sun and New York Post. Instead, News Corp is repositioning toward subscription-based and data-driven revenue models, which are less cyclical and more profitable.

Risks to Consider: Execution and Market Challenges

While the buyback is compelling, risks persist:

• Economic Sensitivity: Digital real estate and ad-driven segments (e.g., The Wall Street Journal) could face headwinds in a recession.
• Competition: Platforms like Zillow or Redfin may erode Move's margins, while audiobook rivals (Audible, Apple Books) could pressure Book Publishing.
• Valuation Pressure: If the stock rallies sharply, the buyback's accretion benefits diminish.

EPS Accretion Potential: The Math Behind the Move

With $1 billion allocated to repurchases at the current price of ~$29.73, News Corp could buy back ~33.6 million shares, reducing the ~596 million total shares outstanding by 5.6%. Assuming stable earnings, this would boost EPS by roughly 5.6%, all else equal. Combined with Q1/Q2 2025 EPS beats, the buyback could solidify NWSA's position as a high-margin media player.

Conclusion: A Compelling Long-Term Play

News Corp's buyback is a strategic masterstroke for a company trading at a discount to its intrinsic value and digital growth potential. While risks exist, the combination of a fortress balance sheet, recurring revenue streams, and analyst bullishness suggests NWSA is primed to outperform in a sector ripe for consolidation. Investors seeking exposure to digital-first media should view this buyback as a buy signal—provided they hold a multi-year horizon.

The author holds no positions in NWSA. This analysis is for informational purposes only.