Gannett Co. (NYSE: GCI) is in the media space and has the well-known USA Today brand in its wide portfolio of print and broadcasting properties. After the company announced plans of increasing revenues by 2% to 4% annually through 2015, Gabelli & Co. is maintaining a Buy rating. What is more interesting that the rating is that Gabelli sees a 2013 “private market value” of $29.00 for Gannett’s common stock.
The model is based on revenue enhancements via a 30% to 100% price increase for single copies of papers, a metered model for digital content, and new products all contributing about $100 million to operating earnings each year.
Gabelli is also assuming that Gannett returns $1.3 billion to holders and thinks that it can be net debt free by the end of 2015. The firm expects Gannett to raise the dividend, buy back more stock, and to make bolt-on acquisitions.
The company is expected to keep its leverage under 2-times EBITDA but the stock currently trades at 4.7-times 2012E EBITDA and 4.3-times expected 2013 EBITDA.
Keep in mind that “private market values” are not exactly the same as formal price targets. Gannett shares closed at $15.08 on Tuesday and the 52-week trading range is $8.28 to $16.75.
JON C. OGG
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