In the past five trading days, many of America’s largest publicly traded newspaper companies have been under siege on Wall Street. Shares of McClatchy Co. (NYSE: MNI) are off 22% for the period. Shares of Tronc Inc. (NASDAQ: TRNC) are down 14%. Shares of Dallas Morning News publisher A.H. Belo Corp. (NYSE: AHC) are down 7%. Shares of industry leader, based on revenue, Gannett Co. Inc. (NYSE: GCI) are off 8%.
Just as dramatic as the drops are the extent to which they have pushed stocks to or near their 52-week lows. McClatchy hit a new period low yesterday. Gannett traded within 12 cents of its bottom for the period. Tronc shares have dropped back to where they traded in November. Belo shares are the lowest they have been since August
Three things that might account for the drop off have happened recently. One is that Time Inc. (NYSE: TIME), which has business and financial characteristics similar to newspaper companies, spurned potential buyers. Time’s shares traded just below $19 on the anticipation the publisher would be offered $20 a share in a buyout. Once Time’s board said it would keep the magazine publisher independent, shares fell below $12, a 35% drop, in two weeks. Time faces the challenge of falling print advertising, high costs of paper and printing, and digital ad and subscription revenue, which has not grown fast enough to balance legacy sales attrition. By the measure of Time’s sell-off, the value of several related legacy media stocks was reset downward. This includes many of the largest newspaper chains.
Another observation made increasingly often is that the large newspaper companies have been divided into “have” and “have-not” segments. The primary difference between the two is that the haves, best represented by New York Times Co. (NYSE: NYT), count paid digital subscribers in the millions. The Wall Street Journal can claim the same. The have-not group has struggled to get even several hundred thousand people in total to subscribe across all of their dozen of papers. McClatchy, for example, had 84,500 digital subscribers at the end of the first quarter. The publisher has 30 properties. This trend, in turn, raises the question of whether newspaper companies can get readers to value their content enough to make any meaningful change to the P&L challenges.
Finally, the earnings posted by most newspaper chains were poor. Revenue fell across the board, when acquisitions are backed out. Bottom lines where either slim or negative. Not a single company made unequivocally positive comments about the balance of the year.
Whatever the exact nature of the newspaper stock sell-off is, one thing is certain. Most of the industry, not just any one company, is being beaten down. There is no reason to believe the trend will not continue.