Miller Value Partners - Gannett: An Opportunity To Unlock Significant Equity Value
Summary
- Gannett was down more than 14% during the quarter.
- We continue to believe GCI's multi-year transformation plan has an opportunity to unlock significant equity value.
- GCI is expecting FCF to grow at a 40% CAGR through 2025.
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The following segment was excerpted from this fund letter.
Gannett Co Inc (NYSE:GCI)
One of our largest holdings was also one our largest detractors during the quarter as Gannett was down more than 14%. The company was adversely impacted in Q4 by weaker advertising revenue, inflationary pressures in their newspaper operations, and headwinds from the resurgence of Covid.
We continue to believe the company's multi-year transformation plan to transition from an analog to digital media company has an opportunity to unlock significant equity value. We see limited value in the share price for the company's Business-to-Business digital marketing services (DMS) platform and Business-to-Consumer platform, which should generate high margin, recurring subscription revenue.
In addition, Gannett's sports medium, national events business, and sports betting operation are underappreciated assets. With a price-to-sales now less than .2x, the marketplace appears to be overlooking Gannet's significant asset base and future cash flow potential.
Management is expecting free cash flow to grow at a 40% Compound Annual Growth Rate (CAGR) through 2025 and recently announced a new share buyback program which at current market prices has the ability reduce the share count by more than 15%.
We continue to believe that success of the transformation plan will lead to long-term upside potential in Gannett's share price, multiples of the current price level.
Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.
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