What Is Driving Our $23 Price Estimate For New York Times?

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New York Times

New York Times‘ (NYSE: NYT) performance has been mostly above its guidance and market expectations so far this year, driven largely by the political climate in the U.S. NYT has witnessed significant digital growth in its readership since the 2016 election, which largely offset the secular declines in its print business. In the first half of fiscal 2018, the company saw weak advertising trends, with both print and digital advertising revenue declining 7% y-o-y. However, the company’s overall revenues grew 3% y-o-y to $828 million in this period, driven by more than 20% y-o-y growth in digital-only subscription revenues to $194 million. NYT reported unprecedented growth in digital-only subscribers, which grew by 23% y-o-y to 2.9 million. This increase in new subscribers led to growth in NYT’s overall subscription revenues, which contribute more than half of the company’s total revenues.

New York Times’ stock price has increased nearly 25% over the course of 2018, primarily driven by impressive digital subscriber growth. Our $23 price estimate for NYT’s stock is now slightly below the current market price. We have created an interactive dashboard on what NYT is really worth, which details our key forecasts and estimates for the company. You can modify the interactive charts in this dashboard to gauge the impact that changes in key drivers for the New York Times can have on our price estimate.

Overview Of Estimates

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Digital Subscriptions Will Continue To Boost Subscription Revenues

NYT’s online subscriber base has grown from 800,000 in 2013 to 2.9 million now. In fiscal 2017, the company’s total subscription revenues increased 14.5% year-over-year (y-o-y) and surpassed $1 billion for the first time in the company’s history, with digital-only subscription revenue growing strongly at 46% y-o-y. Going forward, we estimate NYT’s online subscriber base to be its biggest value driver and forecast this growth to pick up in the coming years and reach 3.7 million by 2022. As of now, we forecast the company’s subscription revenue to grow by 15% y-o-y and reach $1.16 billion in 2018. We also forecast advertising revenue to decline in double-digits to around $480 million in 2018, on the back of the continued decline in the display (print) advertising and traditional website display advertising. Overall, we expect NYT to generate around $1.75 billion in revenues in 2018, and adjusted earnings of nearly $130 million. Our revenue forecast represents year-on-year growth of around 5%.

Going forward, we expect continued year-over-year growth for NYT for full-year 2018, albeit at a slower rate than in 2017. The digital business is likely to see sustained growth going forward as well, driven by the political climate in the U.S., which should continue to offset pressure on the print business.

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