In a note released Tuesday morning, Morgan Stanley analyst Benjamin Swinburne provided some insight on Twenty-First Century Fox FOXA amid its offer for Time Warner TWX.
Morgan Stanley currently rates Twenty-First Century Fox at Overweight with a $37 price target.
Swinburne likes the stock for three reasons:
- 1) Relative to growth, the stock trades at a discount
- 2) He doesn't believe Fox is dead set on getting larger outside of Time Warner
- 3) He sees estimate cuts as "largely behind us"
Despite liking the company on a standalone basis, Swinburne sees value in the deal below a $105 per share purchase price, as he sees value in Time Warner's shares and growth drivers and he doesn't see the same gap between the two companies in terms of pure growth as the market does.
If the deal goes over $105, Swinburne said Twenty-First Century Fox would need to extract $2 billion in synergies and keep Time Warner growing at its current pace to bring its multiple back to current levels.
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