After a nearly 40% decline year-to-date (YTD), at the current price of around $29 per share, we believe New York Times’ stock (NYSE: NYT), a diversified media company that includes newspapers, internet businesses, television, and radio stations, could see gains in the long term. NYT stock has declined from around $48 to $29 YTD, largely underperforming the broader indices, with the S&P declining about 20% over the same period. Fears of a slowing economy, driven by record inflation, are largely responsible for the stock decline during this period. Another reason for the decline in share price is the M&A strategy adopted by the company to support its growth. NYT stock may remain under pressure for the foreseeable future due to macroeconomic concerns, but we believe it might rise in the longer term based on its strong digital subscription growth.
NYT earned 19 cents a share (down 27% year-over-year), excluding one-time items, on revenue of $537 million (up 14% y-o-y) in the first quarter – as it got a huge user boost from its acquisition of Wordle. Subscription revenues jumped on growth in the number of digital-only subscriptions as well as a migration to higher prices from introductory promotional pricing. That said, the company reported net additions of 387,000 digital subscribers in Q1, including those from The Athletic after that deal closed on Feb 1. This resulted in a total of 9.1 million total subscribers, with 10.4 million total subscriptions. It should be noted that the media company began reporting its unique subscribers along with the growth of the individual subs from this first quarter. Of the 9.1 million subscribers, 8.33 million were paid digital-only subscribers, with 9.62 million paid digital-only subscriptions. The Athletic alone brought 1.1 million subscribers with 1.23 million subscriptions. The company now set a new target of at least 15 million total subscribers by the end of 2027.
As of now, the media company continues to grow its subscriber base of digital-only subscribers, but this growth is largely a result of discounted offers. In response to escalating costs and a fear of losing subscribers, the company has also not been able to raise its subscription prices. It is for these reasons NYT acquired the sports news website The Athletic – its largest acquisition to date of $550 million. The Times also bought the popular word game Wordle, which was a much smaller deal, yet more evidence that the company is seeking out external growth sources.
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We forecast NYT’s Revenues to be $2.3 billion for the fiscal year 2022, up 12% y-o-y. Looking at the bottom line, we now forecast earnings per share (EPS) to come in at $1.07. Given the changes to our revenues and EPS forecast, we have revised NYT’s Valuation to $33 per share, based on a $1.07 expected EPS and a 31.0x P/E multiple for the fiscal year 2022 – almost 14% higher than the current market price. That said, the company’s stock appears cheap at the current price. NYT’s P/E multiple has increased from 34.7x in fiscal 2019 to 37.9x in fiscal 2021. While the company’s P/E has now declined to 31x, there is an upside potential when the current P/E is compared to levels seen in the past years.
For Q2, including The Athletic, NYT sees digital-only subscription revenue rising 16% to 18% y-o-y, and total subscription revenue up 7% to 9%. It also expects digital ad revenues to be flat to down in the low single-digits, with total ad revenue up between 2% and 5%. In addition, the company forecasts cost growth to slow down considerably in the second half of 2022.
It is helpful to see how its peers stack up. NYT Peers shows how NYT’s stock compares against peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.
With inflation rising and the Fed raising interest rates, New York Times has fallen 40% this year. Can it drop more? See how low can NYT stock go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.
|S&P 500 Return||2%||-19%||72%|
|Trefis Multi-Strategy Portfolio||4%||-22%||211%|
 Month-to-date and year-to-date as of 7/7/2022
 Cumulative total returns since the end of 2016
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