Zacks Investment Research has recently initiated coverage of DallasNews Corporation (DALN Quick QuoteDALN - Free Report) with a Neutral recommendation. The company, which owns and operates The Dallas Morning News and the marketing firm Medium Giant, is navigating a challenging transition from its legacy print business to a digital-first model while simultaneously undertaking strategic cost-cutting measures.

DallasNews is making a significant operational shift by transitioning to a modern, cost-efficient printing facility in Carrollton. This move, expected to be completed by the first quarter of 2025, is aimed at reducing expenses and improving profitability. Additionally, the company is in the process of selling its Plano property, with the proceeds expected to be reinvested in digital expansion and other growth initiatives.

The company has seen encouraging signs in digital subscription growth, with more than 3,100 new subscribers in the third quarter and 2,500 more in early the fourth quarter of 2024, driven by a revised pricing model. To strengthen its digital presence, DallasNews has invested in innovative initiatives, including a new video platform, improved user engagement tools, and election-related digital resources. These projects aim to boost user interaction, attract advertisers and enhance the company's long-term digital revenue potential, as highlighted by the research report.

The transition to the Carrollton printing facility is expected to significantly lower costs and improve profit margins by the first quarter of 2025. The revised pricing strategy has helped reverse a 14-month decline in digital memberships, signaling the potential for sustained digital revenue expansion. Medium Giant’s steady growth and continued investment in digital advertising tools offer additional revenue opportunities beyond traditional print media. The company saved $4.2 million in the third quarter of 2024 through targeted reductions in distribution, labor and newsprint expenses.

Despite these growth drivers, DallasNews’ challenges warrant caution, as highlighted in the report. Print circulation revenues fell $0.5 million in the third quarter of 2024, reflecting an industry-wide shift away from physical newspapers. Digital advertising revenues declined as website referral traffic from Google weakened, limiting the company's ability to offset legacy revenue losses. 

DallasNews remains heavily dependent on the North Texas market, restricting its scalability and increasing vulnerability to local economic conditions. Despite the 2024 election cycle, the company reported minimal gains from political advertising, suggesting limitations in capturing event-driven revenue growth.

DallasNews’ stock has seen strong gains in recent months, reflecting investor interest in its strategic transformation. Despite this appreciation, the company continues to trade at a lower valuation relative to industry peers, which could indicate lingering concerns about its long-term revenue sustainability. 

With its ongoing shift to digital, cost management initiatives, and growth in Medium Giant, DallasNews shows promise. However, continued print revenue declines and struggles in digital advertising pose significant challenges. For a comprehensive analysis of DallasNews’ growth potential and risks, read the full Zacks Investment Research report on DALN.

Read the full Research Report on DallasNews here>>>

Note: Our initiation of coverage on DallasNews, which has a modest market capitalization of $37 million, aims to equip investors with the information needed to make informed decisions in this promising but inherently risky segment of the market.