With shares of News Corp. (NASDAQ:NWSA) trading around $32, is NWSA an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
T = Trends for a Stock’s Movement
News Corp. is a diversified global media company that operates in six segments: Cable Network Programming; Filmed Entertainment; Television; Direct Broadcast Satellite Television; Publishing; and Other. The company is involved in programming distribution through cable television systems and direct broadcast satellite operators; live-action and animated motion pictures distribution and licensing; operation of broadcast television stations and the broadcasting of network programming and in direct broadcast satellite business through its subsidiary, SKY Italia. News Corp. distributed information and entertainment through just about every medium possibe which reinforces a powerful presence. As companies and consumers continue to search for entertainment and information at increasing rates, look for companies like News Corp. to see rising profits.
T = Technicals on the Stock Chart are Strong
News Corp. stock been on a bullish run for the last several years. The stock is now pulling back a bit so it may need some time before it gets going again. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, News Corp. is trading slightly above its rising key averages, which signal neutral to bullish price action in the near-term.
(Source: Thinkorswim)
Taking a look at the implied volatility (red) and implied volatility skew levels of News Corp. options may help determine if investors are bullish, neutral, or bearish.
| Implied Volatility (IV) | 30-Day IV Percentile | 90-Day IV Percentile | |
| News Corp. Options | 25.36% | 60% | 57% |
What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.
| Put IV Skew | Call IV Skew | |
| July Options | Flat | Average |
| August Options | Flat | Average |
As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.
On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.
E = Earnings Are Improving Quarter-Over-Quarter
Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on News Corp.’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for News Corp. look like and more importantly, how did the markets like these numbers?
| 2013 Q1 | 2012 Q4 | 2012 Q3 | 2012 Q2 | |
| Earnings Growth (Y-O-Y) | 221.05% | 140.48% | 235.71% | 273.83% |
| Revenue Growth (Y-O-Y) | 13.54% | 5.01% | 2.22% | 3.87% |
| Earnings Reaction | 4.48% | -2.33% | 1.60% | -0.21% |
News Corp. has seen improving earnings and revenue figures over the last four quarters. From these numbers, the markets have had mixed feelings about News Corp.’s recent earnings announcements.
P = Excellent Relative Performance Versus Peers and Sector
How has News Corp. stock done relative to its peers, Time Warner (NYSE:TWX), Viacom (NASDAQ:VIA), Walt Disney (NYSE:DIS), and its sector at large?
| News Corp. | Time Warner | Viacom | Walt Disney | Sector | |
| Year-to-Date Return | 27.13% | 22.30% | 26.98% | 30.59% | 25.33% |
News Corp. has been a relative performance leader, year-to-date.
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News Corp. provides a wide range of media and information services to consumers and companies interested in the latest and greatest around the world. The stock has been on a strong run in recent years but is now seeing a slight pullback that may take some time. Over the last four quarters, earnings and revenue figures have been improving, however, investors have had mixed feelings about their reports. Relative to its peers and sector, News Corp. has been a year-to-date performance leader. Look for News Corp. to continue to OUTPERFORM.
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