UBS Makes A Good Call On The New York Times
September 22, 2010 by Douglas A. McIntyre
Too often, most Wall Street analysts are a day later and a dollar short. UBS analyst John Janedis, however, managed to get it right about the New York Times Co. (NYSE: NYT).
Janedis, one of Wall Street’s savvier media observers, initiated coverage yesterday of the Times with a sell rating. His reasoning was simple but persuasive: “We think the cyclical recovery in newspaper advertising has somewhat obscured the reality that in a more normalized ad environment, newspapers will still witness declines in ad growth.” This was a gutsy call for many reasons.
Wall Street had begun to take a shine to the Times, whose management was hated as much as the politics of its newspaper. Shares of the publisher are down only 8 percent over the past 52 weeks. For most stocks, that would a terrible performance. Newspaper stocks have been beaten down so long that NYT’s performance seems respectable. Some analysts — three to be precise — say the stock is worth more than $11, well above the $7.61 where it currently trades. Sentiment on the stock remains bullish though its important to remember that fewer analysts are covering the newspaper publishers than in previous years.
The stock was the most active gainer on the S&P 500 on September 8 as options traders believed in latest rumors that the Sulzbergers would sell the business to Mexican billionaire Carlos Slim. They haven’t yet and probably never will.
Shares of the Times are trading down today after the company said third quarter revenue would be softer than expected. As Bloomberg News noted, “Revenue at Times Co., faced with competition from websites and the Wall Street Journal, is falling again after the newspaper owner posted its first increase in sales in more than two years in the previous quarter.” That’s an obvious observation but an accurate one.
Newspapers and their web sites likely will be among the last to benefit from any rebound in advertising spending. Advertisers get more bang for their buck elsewhere. The future for the Times remains as uncertain as it has ever been.
By the way, Janedis isn’t too keen on Gannett Inc. (NYSE: GCI) either. He predicts that shares of the No. 1 newspaper publisher will “tread water.”
–Jonathan Berr
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