The New York Times Company’s stock price (NYSE: NYT) remains under pressure in the wake of the company’s second-quarter results which were released last week. NYT’s bottom line came under pressure due to rising investments costs, and the company also lowered its guidance for the remainder of the year.
The stock price had risen over 60% for the year and over 190% since Donald Trump’s election victory – something that was seen as a catalyst for the publication’s growing success. The stock has now fallen 20% since the results were released, as investors wonder whether the ‘Trump Bump’ is coming to an end.
Last Year’s Revenue Growth Set a Very High Bar
Revenue of $436 million was 5.2% higher than a year ago, but $2.94 million less than analysts were expecting. Diluted EPS came in a cent ahead of consensus estimates at $0.15, which was up 7.1% than last year.
However, higher costs saw the operating profit fall $2.1 million from a year ago to $37.9 million. The company declared a $0.05 quarterly dividend.
Guidance for the third quarter was lowered due to the high base established when revenue surged in the second half of last year. The company also indicated that revenue is becoming less consistent as larger ad deals that span several months are being signed. While these deals are lucrative, they can result in months with much lower revenue.
The company also believes it is still on track to achieve 10 million paying subscribers by 2025. The core product added 131,000 digital-only subs in the quarter, while the ‘Cooking and Crosswords’ products gained 66,000 new subscribers. This brings the total number of subscribers to 4.7 million.
NYT has launched a new weekly TV program on FX and Hulu which led to a 30% increase in ‘Other Revenue.’
Subscriber Growth Needs a New Catalyst
It is generally believed that the New York Times has benefited from Trump’s presidency, although the company was already making progress monetizing its digital content ahead of 2016. It’s hard to imagine that the momentum of subscriber growth will continue without another catalyst.
Going forward the company will probably have to investigate more new channels in order to monetize its content. While NYT’s content is of high quality, it is also expensive to produce and the current channels have a limited audience.
For the previous highs to be reclaimed, the market will need to see proof that NYT can keep the subscriber growth going. In the meantime, the stock is hardly cheap and may well continue to drift. The real test will be at $24.50 which is the next major support level.
