Donald Trump likes to call it “horrible” and “failing,” but one of the biggest winners since his election has been the New York Times Co.
Shares of the Gray Lady, one of the last publicly traded newspapers, have more than tripled since the 2016 election. Subscriptions have grown steadily, thanks to a surge in digital readership that has exceeded expectations for the past three quarters.
Wall Street is now wondering, of course, how long that growth can continue. Trump suggested an answer when he tweeted in June that, once he’s no longer president, the Times and the Washington Post “will quickly go out of business & be forever gone!”
But investors seem to disagree. With digital subscriptions growing at almost 30%, the stock is increasingly being viewed as a long-term investment, Evercore ISI analyst John Belton said. The company is due to report second-quarter results on Wednesday.
“As long as year-over-year subscriber growth can continue in the mid-to-upper 20% range through the rest of 2019, I think the setup for the stock going into 2020 is very positive,” Belton said in an interview.
One sign of that long-term bullish sentiment came in February after Chief Executive Officer Mark Thompson set a new goal of increasing subscribers to 10 million from 4.3 million by 2025. The stock jumped more than 10%, its biggest single-day gain of 2019. The shares have risen almost 60% year to date and touched a 14-year high Monday.
That surge shows how the market gives more robust values to the digital business than the legacy print business, said Vasily Karasyov, owner of Cannonball Research, who sees the potential for more share gains.
While the company has bolstered its digital offerings through products such as NYT Cooking and Crossword, the stock’s health hinges on the core news product, Karasyov said.
“If the news product stops growing and you see growth in the other products, I don’t think the stock works,” Karasyov said.
The run-up to next year’s elections is likely to give the Times another boost, but there are some near-term hurdles. A popular promotion that offered 12 months of digital access for $1 per week lapses in August, forcing subscribers to decide whether to renew at higher prices.
“Everybody’s going to be looking for any indication of churn,” said Belton, who added he doubted readers would flee given the company’s flexibility in managing subscription prices.
Another hurdle is that New York Times shares aren’t particularly cheap. The stock trades at a forward price-to-earnings ratio of 39, almost double peers in the S&P Supercomposite Media & Entertainment Index. Shares have traded above the average price target of $33.75 since the beginning of July.
Still, despite that and Trump’s dire prediction, Wall Street remains decidedly bullish on the stock. Four of the six analysts tracked by Bloomberg hold a buy-equivalent rating.