Exploring Base, Bull And Bear Case Scenarios For New York Times – Part One

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The New York Times Company (NYSE:NYT) is one of the leading newspapers in the U.S.  However, over the past few years, the secular decline in the print industry, accentuated by the increase in content on the internet, has had an adverse effect on the company’s revenues. In order to compete in the increasingly connected world, the company is aggressively building a digital platform that delivers content across devices with different form factors. In part one of the  note, we explore the base case for the company. In Part two, we will explore the bull and bear case. A summary of this is as follows:

EPS in 2015 Price
Base Case $           0.59 $  12.04
Bull Case $           0.70 $  16.45
Bear Case $           0.49 $  8.63

Click here to see our complete analysis of New York Times

Base Case Scenario

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In the base case scenario, we estimate that the NYT’s stock is worth $12.04. While its print and digital circulation division contributes 54% to the stock price estimate, NYT’s print (23.3%) and online ads division (22.8%) makes up for the rest.

Print Circulation Division: – The key drivers for print circulation division are the NY Times daily and Sunday circulation, and NY Times average selling price. With the advent of the internet, a plethora of content is available for free for its users. As a result, print circulation is declining. In the base case, we project NY Times daily circulation to decline to 690,000 by 2021 and its Sunday circulation to stabilize at 1.27 million. Additionally, since the company has been able to increase the print circulation price in the past few years, we project that the NY Times average pricing for circulation should increase marginally to $12.12 by 2021.

NYT Digital Subscription Division: – The key drivers for digital circulation division are the number of NY Times’ digital subscribers and average revenue per subscribers. The company is leveraging the popularity of its content and expanding its content services abroad to attract new subscribers. We estimate that, as a result of these of efforts, the NY Time’s subscriber base will grow to 1.64 million and the fee per subscriber will stabilize at $24 per month by 2021.

Print Advertising: – The print advertising in the U.S. is witnessing a secular decline. The NY Times has not been able to buck the trend. While we project that its market share will grow to 3.1% by 2021, the secular decline in the print industry would lead to a long-term decline in revenues to $391 million by 2021.

Online Advertising: – The key drivers for the NY Time’s online ads division are page views per visitor, number of unique visitors and revenue per page view. In the base case, we projects the number of unique visitors for the NY Times online properties will grow to 59 million by 2021, due to international expansion and growth of existing content services. Furthermore, an increase in content should result in the growth of the number of page views and an increase in the time spent on properties due to better engagement. This would further translate into more ads shown and, therefore, increase in revenue per page view (RPM). We expects page views per unique users to increase to 14.64 per month and RPM to grow to $32.40 by 2021.

See our complete analysis of NYT’s Scenario

In the next article, we explore bull and bear cases for NYT.

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