NYT Stock Trades Above 200 & 50-Day SMA: How Should Investors Play?
Closed at $54.52 yesterday, shares of The New York Times Company NYT are trading above 200-day and 50-day simple moving averages (SMA) of $48.80 and $54.22, respectively, signaling strong upward momentum and price stability. Now investors must decide how to approach this stock, should they invest more or hold their current position? Let us analyze the situation.
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The NYT stock has risen 25.3% in the past six months, outpacing the industry’s and the S&P 500's growth of 24.6% and 9.5%, respectively.
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Despite the uptick in the stock price, The New York Times Company is currently trading at a discount to its historical and industry benchmarks. NYT’s forward 12-month price-to-earnings (P/E) ratio stands at 26.9, slightly below its median level of 27.26 in the past year and lower than the industry’s forward 12-month P/E ratio of 27.31. This suggests that, relative to its earnings potential, the NYT stock might still be undervalued. For investors, this presents an attractive opportunity to buy at a more favorable valuation.
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But is only a favorable valuation enough to justify buying the stock?
The New York Times’ Growth Story
The New York Times Company has effectively grown its subscriber base while boosting engagement, enabling stronger and more diverse revenue streams. It remains committed to investing in premium journalism and enhancing digital offerings to maintain a competitive edge and fuel sustained long-term growth.
At the close of the second quarter of 2024, The New York Times Company had approximately 10.84 million subscribers across its print and digital offerings. Of this total, 10.21 million were digital-only subscribers, including around 4.83 million bundle and multiproduct subscribers.
NYT has strategically broadened its digital offerings beyond traditional news and information, venturing into lifestyle areas such as games, cooking and sports. This diversification includes the launch of digital subscriptions for NYT Cooking, a popular recipe site and app. The company plans further investments in content, product development and marketing for its games and cooking platforms. It is also prioritizing bundled subscription packages to provide subscribers with more value and options.
The sustained expansion of The New York Times Company's subscriber base is undeniably pivotal. As the subscriber base increases, so does the company's influence and market standing, making it an appealing platform for advertisers eager to connect with a wider and more engaged audience.
In the second quarter, subscription revenues grew 7.3% year over year to $439.3 million. Digital-only subscription revenues saw a 12.9% jump to $304.5 million, driven by increased revenues from bundle and multiproduct subscriptions, as well as growth in single-product subscriptions. Looking ahead, management projects third-quarter 2024 subscription revenues to rise 7-9% with digital-only subscription revenues expected to grow 12-15%.
NYT’s Financial Health Snapshot
The New York Times Company ended the second quarter with cash and marketable securities of about $724 million. The company remains debt-free with a $350 million revolving line of credit available. It also looks well-positioned regarding dividends. On Feb. 7, 2024, the company’s board of directors raised the quarterly dividend by 2 cents to 13 cents per share. The next dividend payment is scheduled for Oct. 24, 2024, for its shareholders on record as of Oct. 9.
What Might Hurt NYT Stock?
The New York Times Company's advertising revenues face potential challenges due to the fast-changing media landscape. A key challenge is the shift in consumer behavior toward digital platforms and social media, where advertisers often seek more cost-effective and targeted options. This shift has been exacerbated by the ongoing decline in traditional print readership. Print advertising revenues fell 10% year over year in the second quarter of 2024. Print subscription revenues have also decreased 3.6%, reflecting reduced domestic home-delivery revenues.
The company also contends with stiff competition in advertising and circulation from various sources, including newspapers, magazines, websites, television and other media formats. Key factors such as audience reach, demographics, pricing and advertising effectiveness are critical in this competitive landscape. Digital platforms with extensive reach, rich audience data and advanced targeting capabilities pose a significant threat.
What Should be Your Approach on NYT?
The New York Times Company demonstrates a robust growth trajectory, evidenced by its expanding subscriber base and diversified revenue streams. The stock's recent performance coupled with its favorable valuation metrics, presents a compelling case for potential investment. However, investors must also weigh the challenges faced by the company. The shift toward digital media and the decline in print revenues pose risks, particularly as advertising competition intensifies from traditional and digital platforms. Given these dynamics, investors with a long-term horizon should hold on to NYT shares. Currently, The New York Times Company carries a Zacks Rank #3 (Hold).
Stocks Worth Looking
Here, we have highlighted three better-ranked stocks, namely Workday, Inc. WDAY, PayPal Holdings PYPL and Datadog DDOG.
Workday provides enterprise cloud applications in the United States and internationally, and currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
WDAY has a trailing four-quarter average earnings surprise of 9.1%. The Zacks Consensus Estimate for Workday’s current-financial year sales and earnings suggests growth of 15.6% and 19.4%, respectively, from the year-ago reported numbers.
PayPal Holdings operates a technology platform that enables digital payments on behalf of merchants and consumers worldwide and currently has a Zacks Rank #2 (Buy). PYPL has a trailing four-quarter average earnings surprise of 14%.
The Zacks Consensus Estimate for PayPal Holdings’ current-financial year sales suggests growth of 7.3% from the year-ago reported numbers.
Datadog operates an observability and security platform for cloud applications in North America and internationally, and currently carries a Zacks Rank #2. DDOG has a trailing four-quarter average earnings surprise of 21.7%.
The Zacks Consensus Estimate for Datadog’s current-financial year sales and earnings suggests growth of 23.4% and 24.2%, respectively, from the year-ago reported numbers.
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The New York Times Company (NYT) : Free Stock Analysis Report
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