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Torstar Corp. (OTC:TORSF), which publishes the Toronto Star, has been the subject of two analyst downgrades in the past week because of its exposure to what many see as a prolonged slowdown in advertising spending.

Following the company's recent release of its third quarter results, Scotia Capital analyst Paul Steep lowered his rating on the media company to ‘sector underperform’ based on his view that “[it] faces an uphill battle against cyclical and secular trends.”

Those secular trends include a bleak economic outlook for the province of Ontario, the key market for Torstar’s flagging newspaper businesses.

On Monday, RBC Capital Markets analyst Drew McReynolds dropped his rating on Torstar to "underperform."

While conceding that no media stock will be immune to an advertising slowdown, Mr. McReynolds said Torstar is particularly vulnerable because 70% of its revenue is exposed to newspaper publishing. Declining readership and ad dollars will combine with rising newsprint prices to put considerable pressure on margins the next two years, he said.

While there would likely be upside to Torstar shares in a “break-up” scenario, Mr. McReynolds said he believes that outcome is unlikely in the near future because the company would first shed its investments in CTVglobemedia Inc. or Black Press Ltd.

Source: Analysts Say Torstar Particularly Vulnerable to Declining Media Advertising