New York Times: Thriving Amid The Decline Of Advertising Business

Summary

  • In Q2, the New York Times’s subscription revenues increased by 8.4% Y/Y to $293.2 million, while the advertising revenue declined by 43.9% Y/Y to $67.8 million.
  • Despite showing a decline in total revenues during the quarter, the company made a profit and beat its EPS estimates by $0.15.
  • With ~$750 million in cash and no debt, the New York Times continues to pay dividends and I consider it to be a safe long-term play for media investors.

New York Times (NYT) is one of the few legacy newspapers that was able to reinvent itself and thrive in the age of digital disruption. While the traditional advertising industry continues to decline amid the rise of tech disruptors like Facebook (FB) and Alphabet (GOOG)(GOOGL), who control the absolute majority of the online advertising market, New York Times found a way to offset the losses of its advertising business and secure its long-term growth. By pivoting to the subscription business model a few years ago, the company was able to get more than 6.5 million paying subscribers, who generate the majority of income for the business.

Since the beginning of the year, the New York Times stock appreciated by nearly 50% and it has even more room for growth, as we approach the upcoming Presidential elections. With more than $750 million in cash and no debt, the New York Times continues to pay dividends and I consider it to be a safe long-term play for media investors. For that reason, I'm long New York Times.

Subscription-First

As the newspaper and traditional advertising businesses are dying, the New York Times is able to thrive. After deciding to fully pivot to the subscription-based model five years ago, the company experienced an unprecedented growth of its earnings and was able to create value for its shareholders. In Q2, the New York Times's subscription revenues increased by 8.4% Y/Y to $293.2 million, while the advertising revenue declined by 43.9% Y/Y to $67.8 million. As a result, total revenues were down 7.5% Y/Y to $403.75 million, above the consensus by $14.5 million. However, the company made a profit and its non-GAAP EPS in Q2 was $0.18, also above the consensus by $0.15.

In addition, in the first half of the year, New York Times saw an unprecedented growth of online traffic, as more than two and a half billion pages were viewed during a single month at the beginning of the year, twice as much in comparison to the average month. At the same time, it reached the highest number of unique users in a month in its history (~240M) and during the first months of the coronavirus coverage, the New York Times gained more than 600 000 additional subscribers.

All of this helped the company's stock to quickly offset the losses from the early March selloff and now the shares are up nearly 50% since the beginning of the year.

Chart: Seeking Alpha

Pivoting to the subscription business model was probably the best decision that the New York Times ever made. At the end of June, the company already had 6.5 million subscribers and it's well ahead of its goal to achieve 10 million subscribers by 2025.

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