VALUATION HIGHLIGHTS

1. Subscription constitutes 64% of the Trefis price estimate for New York Times's stock.
2. Other Revenue constitutes 20% of the Trefis price estimate for New York Times's stock.
3. Advertising constitutes 16% of the Trefis price estimate for New York Times's stock.

WHAT HAS CHANGED?

NYT Saw A Mixed Q3

In Q3, the company's adjusted earnings per share (EPS) stood at $0.45, surpassing expectations of $0.41, showcasing solid performance. Despite a slight miss on revenue estimates of $640.2 million, the company indicated a robust 7% growth, affirming positive digital subscriptions and profitability momentum. During the quarter, The New York Times experienced a significant boost in digital subscription numbers, adding 260,000 new digital-only subscribers, achieving a total of 10.47 million. Despite strong digital strides, challenges in print advertising persist, with revenue in that segment declining by 12.6% year over year. This decline reflects a broader industry trend toward digital consumption. Additionally, the company reported $4.6 million in litigation-related costs associated with efforts to get compensation and/or halt generative artificial intelligence's (AI) use of NYT content, marking a significant one-time expense impacting its financials.

In terms of margins, The New York Times achieved a 20.7% increase in operating profit, with the adjusted operating margin expanding by 130 basis points to 16.3%. These improvements indicate effective cost control and operational efficiency. The company declared a dividend of $0.13 per share, up from $0.11, signaling continued shareholder returns.

Note: NYT's FY'23 ended on December 31, 2023. Q3 2024 refers to the quarter that ended September 30, 2024

Outlook

The New York Times management forecasts continued robust digital subscription revenue growth, projecting increases between 14% and 17% for the fourth quarter. It also anticipates digital advertising revenue growth in the high-single to low-double-digit range. These projections underscore confidence in its ongoing digital transformation strategy, leveraging its comprehensive digital products portfolio. Investors should watch for the company's progress in mitigating print advertising declines and managing litigation costs. Forward guidance indicates a rise in adjusted operating costs by 5% to 6%, as the company invests in its technology infrastructure and content development.

Athletic Continues To Lose Money

The Athletic, which the company acquired for $550 million in 2022, continues to lose money. But the losses shrank to $2.4 million in Q2, from $7.8 million during the same period last year. Revenue at the website grew to $40.5 million, up 33% y-o-y, because of a jump in the number of subscribers as well as an increase in revenue from display advertising. The Athletic had 5.3 million digital-only subscribers (by the end of Q2), which includes those who have a stand-alone subscription to the site and those who have access to it through a Times subscription bundle. That’s up from 3.6 million the same time last year. Since Q3, the company plans to discontinue supplemental disclosure of subscribers with entitlements to The Athletic, which may reduce transparency.

BUSINESS SUMMARY

The New York Times Co. (NYT) is a media company primarily in the newspaper business. Currently, the company makes money through print newspapers, online advertising, and newspaper circulation fees. In 2011, the company launched its paid subscription service for NYTimes.com, adding a digital circulation revenue stream. A growing number of digital subscribers - subscribe to more than one of The Times’s products, which include the news report, games, recipes, the Wirecutter review site, and The Athletic, a sports news website.

KEY TRENDS

Digital content increasingly gaining relevance

Online media provides more abundantly available information, at a faster rate and at cheaper prices when compared to print media. This has effectively rendered print newspapers obsolete, and online reading is made further easier by tablets/smartphones, both physical circulation and print advertising within newspapers should see a decline going forward.

Social and Mobile to drive future growth

Social networking leader Facebook has initiated a unique concept of "frictionless sharing" through their Open Graph tools, which enables publishers to instantly get their articles/content shared across a user's network of friends. Various media companies like Yahoo! and Washington Post have adopted the Open Graph to increase user engagement. We expect more websites to join the bandwagon if they increase both web traffic and user engagement. Additionally, the growing penetration and bandwidth capabilities of smartphones and tablets would play a major role in increasing traffic and viewership for media companies. NYT has also made headway in this segment by releasing smartphone and tablet-specific apps.

Last Price Hike For Digital Subscription Service in 2020

The price of the digital-only subscription to the main news product every four weeks increased to $17, from $15, the company mentioned during the Q1 2020 report. It was the first increase in the digital subscription price since The Times decided to charge readers for online content in 2011.