The New York Times Company’s (NYT) latest earnings pointed to continued sluggishness in the advertising business with overall advertising revenues down slightly vs. 3Q 2009. The earnings also pointed to the growth of the online advertising business that rose 18% vs. print advertising that declined 8% for the first nine months of 2010. 
NYT shares have slipped 45% from around $14.60 earlier this year to about $7.75 now on concerns regarding the print business and increased competition from companies that have news services like News Corp (NWS), Yahoo (YHOO), Google (GOOG), Microsoft (MSFT) and AOL (AOL).
We currently estimate that NYT’s online business makes up around 20% of our $8.46 price estimate, which is about 10% higher than the market price. However we believe that 25% additional upside can come from the online business.
Mobile and Social are the New Growth Formula
NYT went to great lengths to make its online site easy to use and navigate after early missteps. More recently, it focused on making sure its pages and applications would load easily on smartphones and tablets like Apple’s (AAPL) iPad.
We believe these efforts are starting to pay off, and largely based on the rise in mobile internet, we believe 25% upside exists from our price estimate.
+10% Upside – Tablets, Smartphones and Rise of Mobile Internet
We believe that tablets, like the iPad, provide a better reading experience and revenue generator than a smartphone or a PC given its 1) mobility vs. the PC, 2) bigger screen vs. the smartphone, and 3) more page views leading to increased opportunity for advertising.
Below we estimate page views per month for visitors to NYTimes.com, and our conservative assumptions call for an increase from around 95 per month in 2010 to 100 by 2016. With the rise in mobile internet, this could easily grow 30-35% to around 130 page views by 2016, which would add about 10% to our estimate.
+15% Upside – Social Networking Drives More Unique Visitors
Recently, the company added a new social media feature to NYTimes.com called “Log in with Facebook,” which enables users to link their NYTimes.com and Facebook accounts. Users can then share articles from NYTimes.com with their Facebook friends.
This is one example of how social networking will lead to higher page views, more ad revenues and change the way we consume news and media.
We estimate that the average number of unique visitors per month increased from 15.5 million per month in 2006 to 27.5 million per month in 2009. We expect this number to double to around 54 million per month by the end of Trefis forecast period.
However, if this number reaches 80 million per month by the end of Trefis forecast period, this adds 15% upside to our current estimates.
Notes: Taken from Q3 10-Q
Disclosure: No position