President Trump Continues To Power Shares Of The New York Times

Jul. 29, 2020 2:48 PM ETThe New York Times Company (NYT)3 Comments1 Like
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Don Dion
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Summary

  • Shares of the New York Times have skyrocketed more than 302% since we first recommended the stock in March of 2017.
  • We believe that upside remains. Interest in the election, coverage of the coronavirus and political division in America will continue to attract readers to The New York Times.
  • We recommend that readers purchase shares of NYT now and hold them up to the election.

Since March 6, 2017, we have issued five buy recommendations for The New York Times (NYSE:NYT). At that time, NYT traded at $14.60. Today, the stock is trading around $44.20 for a stunning increase of 302%.

We have consistently recommended NYT as a buy with articles on June 7, 2017; March 18, 2018; June 10, 2019; and January 24, 2020.

We continue to recommend the Gray Lady as a buy. The recent controversies surrounding the resignation of two prominent editors have stoked curiosity that we believe will lead to more growth in subscriptions. In addition, we believe the George Floyd/BLM protests as well as the continuing polemics between President Trump and the NYT will further drive share prices higher.

Controversial Resignations Stoke Curiosity

Recently, two prominent editors resigned from the NYT. Each resignation had its basis in controversies over publishing divergent opinions. The resignations made headlines on front pages across the country and the world, and the result has been growing attention to the venerable media institution, which has been publishing "news" since 1851.

The first resignation came from Times Opinion section editor, James Bennet. Mr. Bennet approved the publication of an op/ed written by Senator Tom Cotton (R), which called for U.S. military intervention under the Insurrection Act during the protests following the death of George Floyd.

The second resignation came from op/ed editor, Bari Weiss. She published a blistering letter of resignation on her blog heavily critical of a toxic environment that smothers any thought other than what liberal progressive staffers at the NYT deem politically correct.

Both Mr. Bennet, hired in 2016, and Ms. Weiss, hired in 2017, had been brought in to broaden the scope of discussions and opinions published by the Times. Both left after their efforts failed.

Disregard for Diverse Voices Attracts Attention

The noteworthy resignations also call attention to questions surrounding the NYT's ability to increase its market penetration. The focus of the reporting is increasingly tilted towards current liberal and progressive thinking. Thus, analysts now question whether the media outlet will begin alienating centrist and conservative customers. The assumption is that centrist and conservative subscribers will abandon the paper as more conservative options become available. One America News Network is an example, although it does not publish a print version of its news. Even social media is drawing conservative voices away from stalwarts Facebook and Twitter. Parler is growing rapidly in subscribers.

However, we believe the controversy over the resignations will actually help the media giant. The Times continues to thrive in a digital world driven by headlines that result in clicks. Moreover, gaining access to the controversial content published behind the paywall means paying for a subscription.

In May, the paper reported it had added 587,000 new online subscribers for the first quarter of 2020. Its core news product currently has over 4.0 million subscriptions, and the paper gained 468,000 new digital customers in the same quarter.

NYT Stock Performance Reflects Its Current Business Model

In addition, we believe the recent performance in share prices supports our insights. On February 18, the stock was at $39.59. President Trump was riding the wave of a strong economy and spectacular unemployment numbers. By April 1, after the start of the coronavirus pandemic shutdowns, shares had declined to $28.44 along with the rest of the tanking financial markets.

Share prices began to recover to pre-pandemic levels reaching $39.30 on May 26. However, George Floyd died a day earlier on May 25. The protests began soon after. The Times published Senator Cotton's opinion essay on June 3. Mr. Bennet resigned on June 7. Ms. Weiss resigned on July 14.

Since then, shares in the NYT have increased to trade in the range of $44 to $45. This is close to a 16% increase. Ironically, Ms. Weiss criticized the NYT for allowing Twitter to become its ultimate editor. The current business model of the Times places a focus on growth in digital subscriptions and a decreasing reliance on traditional advertising. It is a model that currently works for the Times.

Fundamentals

For the first quarter of 2020, the Times had over 5.0 million online customers, which is an increase of close to 1.4 million year over year. The majority of the increase is for its news products, while the balance represents subscribers to the crossword, cooking, and audio products.

Subscription revenue related to digital-only products increased 5.4%. Management expects total subscription second quarter revenue to increase between 5% and 10%. Expectations for digital-only revenue to increase closer to 25% to 30%. On the negative side, advertising will likely decline. Total advertising revenue decreased by 15.2% in the first quarter of 2020. Digital advertising revenue declined by close to 8%.

We also believe that the recent acquisition of the popular podcast Serial could also draw a new group of younger online viewers.

Risks to Consider

Overall, print newspaper circulation is declining. Both Sunday and weekday circulation levels are at their lowest since the 1940s. The highest recorded circulation for weekday papers reached 63,147,000 in 1973, and in 2018 that number had declined to 28,554,137. In addition, the NYT is third in the nation for circulation. USA Today is at the top with 1,629,090 print subscribers. The Wall Street Journal is #2 with 1,180,460 print subscribers. The NYT has 597,960 subscribers, which means its print readership accounts 0.02% of print distribution. Local newspapers continue to constitute the vast majority of readership in the United States.

Digital circulation can present challenges to determine an exact number. Keeping the paper behind the paywall discourages sharing articles to non-paying readers. Still, the NYT and the Wall Street Journal report increases of digital circulation of 27% for the NYT and 23% for the Wall Street Journal. The challenge for the Gray Lady will be to fully replace the decline in print readership with adequate gains in online subscribers.

According to its financial statements, the NYT also considers other risk factors such as its ability to produce high-quality journalism, pricing, internet visibility, brand strength in relation to competitors, its ability to attract and retain talent, and its ability to attract new readers, among other issues.

Final Thoughts

NYT remains a buy recommendation.

Its business model places an emphasis on increasing digital subscriptions rather than relying on advertising revenue.

The contentious resignations, the current political environment, and the continuing controversies surrounding the Gray Lady's capacity to attract new readers willing to pay for the Gray Lady's liberal bias reporting will only help the Times.

This article was written by

Don Dion profile picture
12.68K Followers
Don Dion is the CEO of Inland Management, a company focused on acquiring, subdividing, developing and marketing large tracts of land on the fringes of major metropolitan markets. Inland Management has sold land in all 48 contiguous states totaling billions of dollars. As CEO, Don is responsible for helping to maintain and enhance the firm’s strong financial position and identifying opportunities for growth. In addition to his role at Inland Management, Don Dion is the Chief Investment Officer of DRD Investments, LLC. Based in Naples, FL. and Williamstown, MA., DRD Investments is a family office focused on managing a long/short hedge fund, real estate, venture capital and various other financial assets for the Dion family. Don also serves as the trustee of the Dion Family Foundation, which focuses on helping individuals with tuition assistance at Catholic Institutions for grammar school, high school, and college education. The foundation also helps individuals by supporting Massachusetts General Hospital. Don is on two leadership boards and advisory committees at Massachusetts General Hospital and the Home Base Program (a partnership between Mass General and the Red Sox Foundation). He consults with Saint Dominic's Academy and serves as a trustee of Saint Michael’s College. Previously, Don was the founder and CEO of Dion Money Management, a fee-based investment advisory firm for affluent individuals, families and non-profit organizations. Founded in 1996 and based in Williamstown, MA. and Naples, FL., Dion Money Management managed approximately one billion in assets for clients in 49 states and 11 countries. While at Dion Money Management, Don was responsible for setting investment policy, creating custom portfolios, and overseeing the performance of client accounts. Don sold the firm to NYC-based Focus Financial Partners (FOCS) on September 1, 2007 and no longer manages money for other families or institutions. Don remains a shareholder of Focus Financial Partners (FOCS). Don is also the retired publisher of the Fidelity Independent Adviser family of newsletters, which provided a broad range of investor commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With nearly 100 thousand subscribers in the United States and 29 other countries, Fidelity Independent Adviser published two monthly newsletters and one weekly newsletter. The flagship publication, Fidelity Independent Adviser, was published monthly for 16 years and reached over 60,000 subscribers. In 2011 Don and his daughter Carolyn co-authored the Ultimate Guide to ETFs, available on Amazon.com. Prior to founding Dion Money Management, Don co-founded Litchfield Financial Corp. (LTCH) with Summit Partners. Don served as Chairman and CEO of Litchfield, which was listed on the Nasdaq in 1992 and acquired by Textron Corp. (TXT) in 1999. Don was also the Executive Vice President, CFO and General Counsel for Patten Corporation (BGX) from 1986 to 1988, where he played a critical role in the company’s successful initial public offering on the New York Stock Exchange. From 1983 to 1985, Don was a corporate lawyer with the Boston Law Firm of Warner and Stackpole. Before joining Warner and Stackpole, Don worked as a C.P.A. for Ernst and Young from 1979 to 1983. Don graduated with honors from Saint Michael’s College in 1976 with a B.S. degree in Economics and Business Administration. He received his J.D. from the University of Maine Law School in 1979 and his LL.M. from Boston University Law School in 1982. Don can be reached at donalddion@gmail.com
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Disclosure: I am/we are long NYT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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