Why Fox Can Finally Breathe a Sigh of Relief With the Roku Deal—and Why the NFL Can’t

Fox’s deal with Roku is a huge plus for airing NFL games. Above, the match-up between the Miami Dolphins and the San Francisco 49ers aired regionally on Fox. (Ezra Shaw/Getty Images)

Fox Corp.’s $22 billion acquisition of Roku will enhance how the media titan delivers its programming directly to viewers, a huge plus for livestreaming—especially its Sunday NFL games.

The deal, approved by Fox and Roku shareholders this week and expected to close early next year, essentially takes the risk off the table that the NFL will renew its 10-year contract with Fox early. The contract runs through 2033, but has an opt-out clause that either party can exercise after the 2029 season.

An early renewal has weighed on Wall Street—billions spent on traditional TV, the NFL’s right to move high-profile games to powerful platforms like Amazon, and NFL’s massive media rights that just keep going up.

And all of these things without new ways for Fox to make money.

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Nailing down the deal, though, has analysts singing a different tune because of Roku’s streaming operating system on TVs and revenue from ads and subscription fees for other streamer such as Netflix and Comcast’s Peacock.

On Friday, Bank of America’s Jessica Reif Ehrlich double upgraded Fox to Buy from Underperform and raised her price target to $85 from $54. The change sent shares 0.2% higher to $64.11 on Friday.

“One billion reasons to love the Roku deal,” Ehrlich wrote, adding that the acquisition “changes the equation” for Fox stock.

Ehrlich said the early renewal risk and Fox’s long-term positioning in streaming were behind her Underperform rating.

“With the risk of a near term NFL renewal largely receding until the 2029 opt-out window, the Roku acquisition fundamentally changes the strategic and financial narrative,” she said.

Roku provides Fox with a credible path to transition toward a direct-to-consumer model, which has been a weakness for the company, Ehrlich said.

It also adds to Fox’s current direct-to-consumer product, FOX One.

“One of the core bear arguments on Fox has been that the company…lacked a robust direct-to-consumer strategy to fully capture the migration of audiences and advertising budgets away from traditional pay-TV,” she said. “Roku addresses this existential question,” she added.

On Wall Street, Fox has an average Buy rating with a price target of $77.75, according to FactSet. The stock has six Buy ratings, seven Hold ratings, and one Sell rating.

Fox and Barron’s parent News Corp share common ownership.

Write to Kit Norton at kit.norton@barrons.com

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