Scandal hits rating of Murdoch stock

WEAKENING markets, government investigations and a witch hunt for the Murdochs add risk to owning News Corp shares, said Needham Co as it downgraded the media conglomerate’s stock.
By The Newsroom
Published 23rd Aug 2011, 12:23 BST

Media mogul Rupert Murdoch’s News Corp has historically underperformed broader indices in weak markets and this trend is set to continue, Needham analyst Laura Martin said in a note.

“Recent market volatility suggests that markets may trend downward over the next 12 months,” Martin said, adding that News Corp’s share price underperformed downward corrections in the S&P 500, typically by 15 per cent over six to 12 months.

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Martin reckons litigation costs following the News of The World phone hacking scandal will be a meaningful cost centre for the company for the foreseeable future.

“We think this expense is not adequately reflected in Wall Street models,” said Martin, who downgraded the stock to “hold” and suspended her price target.