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NY Times (NYT) Marches Ahead of the Industry, Up 35% YTD

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The New York Times Company (NYT - Free Report) has been keeping pace with the changing times by utilizing technological advancements to reach their target audience more effectively. Notably, the company’s business model with greater emphasis on subscription revenues and lower dependency on traditional advertising revenues and sturdy balance sheet positions it better to tide over the pandemic.

The company has been diversifying business, adding new revenue streams, realigning cost structure and streamlining operations to increase efficiencies. The company is not only gearing up to become an optimum destination for news and information but is also focusing on lifestyle products and services. We believe that such consistent endeavors will help the stock to retain momentum.

It comes as no surprise that the concerted efforts have led the shares of this news and information provider to gain 34.9% so far in the year compared with the industry’s rally of 29.8%. This Zacks Rank #2 (Buy) stock is trading close to its 52-week high of $47.95. In all likelihood, the company with a Growth Score of B can attain new highs.

Let’s Delve Deeper

Rapid digitization in the core areas of advertising, subscriptions and sales, and distribution services has turned out to be a major source of revenues. With the growing inclination of readers toward the Internet, newspaper companies started trimming their print operations, and divert resources toward online publications. The New York Times Company has been constantly making efforts to rapidly acclimatize to the changing face of the multiplatform media universe.

Notably, the company’s paid digital-only subscribers reached roughly 5,670,000 at the end of second-quarter 2020 — rising 669,000 sequentially and 1,890,000 year over year. Of the 669,000 total net additions, 493,000 came from the digital news product, while remaining came from Cooking, Crossword and audio products.

Subscription revenues improved 8.4% to $293.2 million primarily courtesy of increase in the number of subscriptions to the company’s digital-only products, which include news product, and Cooking, Crossword and audio products. Revenues from digital-only products jumped 29.6% to $146 million. Management now projects third-quarter 2020 total subscription revenues to increase about 10%, while digital-only subscription revenues are projected to surge approximately 30%.

Near Term Concerns

Advertising remains a significant source of revenues for The New York Times Company. Total advertising revenues declined 43.9% during the second quarter, while digital advertising revenues decreased 31.9%. Looking into the third quarter, management cautioned about sharp fall in advertising revenues. Total advertising revenues in the third quarter are estimated to decline approximately 35-40%. Also, management expects digital advertising revenues to decrease roughly 20% in the third quarter, thanks to the ongoing pandemic.

Wrapping Up

The U.S. newspaper publishing industry has been grappling with declining print readership and advertising revenues for quite some time now, and the scenario has worsened due to the coronavirus pandemic. Nevertheless, the industry participants are evolving from being just pure news-content providers and advertisement platforms.

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