Even if Fox Sports 1 fetches a fraction of the carriage fees that ESPN commands, the impact would be significant. David Bank, an analyst with RBC Capital Markets, estimates Fox Sports 1 could generate over $1 billion in such carriage revenue by the company's year ending June 2017.
Of course, that growth comes at a cost in the near term. Investments in Fox Sports 1, along with an entertainment network called FXX and some Asian sports channels, will cost a combined $400 million to $500 million over the next couple of years, according to the company. Fox also just spent $680 million in January to increase its stake in regional sports network YES to 80 percent from 49 percent.
But such investments look different from some of Fox CEO Rupert Murdoch's previous deals like MySpace that wound up being big losers.
Fox already has plenty of experience in sports and is building these channels on its own rather than betting on unproven operators. That suggests the company can deliver on its target of more than $9 billion of earnings before interest, taxes, depreciation and amortization (EBITDA) by the end of fiscal 2016—a big jump from the consensus estimate for $6.7 billion in the year through June.
Fox still has to endure some ups and downs. Currently, about 30 percent of total revenue comes from advertising. The Fox broadcast network, in particular, has had a tough time recently as aging hits like "American Idol" have seen ratings drop sharply. But even a modest improvement could be enough to impress investors: Viacom saw a huge swing in its share price when ratings at its Nickelodeon network turned the corner last year.
What's more, Fox continues to have flexibility to make generous share repurchases. In the year through December, the company reduced its share count by 3 percent, giving earnings per share a healthy boost.
Over the next few years, the company can continue to purchase $4 billion to $4.5 billion worth of stock each year and still keep net debt below two times EBITDA, estimates Alan Gould, an analyst with Evercore Partners. Given the company's target of up to three times leverage, there will be billions of dollars in cash available for investing, repurchases or a bigger dividend.
Fox investors will need a little patience, given its recent investments won't bear fruit for another few quarters. But as the stock continues to drag, the opportunity looks brighter by the day.
—By CNBC's John Jannarone.