This company just can’t seem to get it together. The stock price is at the same level that it was back in September 1990. That is some serious value destruction given huge opportunity costs and inflation that has eaten away that capital over 20 years. Unfortunately, I don’t see any improvement for the stock going forward.
The stock I am referring to is New York Times Co. (NYT). This once-proud company has fallen on hard times along with the broader newspaper industry. The advent of the internet and smart gadgets have killed the print industry, especially those who have failed to adopt the new technologies. The economy is still hurting and companies are keeping a tight seal on their advertising budgets, which spells bad news for NYT.
Warning: Sales Less Than Expected
The company warned this week that it now expects to post a loss for the third quarter, mostly due to the continued malaise in newspaper advertising. Subscription revenue and newsstand sales are also running below expected. Digital ad sales are a positive, but that isn’t enough to offset the other negatives. Specifically, print revenue will drop about 5% from last year, which is in addition to the 6% slide in the second quarter.
I personally still love going to the website to read certain articles from the newspaper, but I have gotten to do it for free for so long that it would be hard to shell out money to do so going forward. I am sure that many others feel the same way, so charging for content on the website will be unlikely to make a huge dent in revenues.
Unless the company can somehow create new and dependable streams of revenues, the stock will probably be dead money at best. It isn’t particularly expensive at 10.6x current-year estimates of 73 cents per share, but that won’t be enough to bring in a surge of buyers. NYT’s balance sheet also sports over $770 million in debt, which is no insignificant sum. It’s tough to set a price target for the stock given its poor growth prospects, but I would guess that it would be dead money until investors have some reason to have more confidence in the future. At the very least, there are much better places for your hard-earned investment dollars.
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