NYTimes Stock – A Screaming Buy?

So, the early results for the NYT’s digital subscription plan are out and it seems like has about 250 to 400k subscribers depending on the way you slice the numbers. Their 1 year target is about 1M subscribers which comes to about $250M in revenue ~$20/Month per subscriber. Based on the early trends, they will blow past that pretty soon.

The NYT is currently at a $1.3BN market cap.

A very simple back of the envelope, 50k ft etc etc. sensitivity analysis on the subscriber on impact on market cap below.
  • 1M Subs X $240/Sub = ~$250M Rev X 15 Times = $3.75BN (~2.5x Multiple from current market cap)
  • 2M Subs X $240/Sub = ~$500M Rev X 15 Times = $7.5BN (~5x Multiple from current market cap)
  • 3M Subs X $240/Sub =~ $750M Rev X 15 Times = $11.25BN (~7.5x Multiple from current market cap)
  • 4M Subs X $240/Sub = ~$1BN Rev X 15 Times = $15 BN (~10x Multiple from current market cap)
  • 5M Subs X $240/Sub = ~$1.25BN Rev X 15 Times = $18.75BN (~12.5x Multiple from current market cap)
The main assumptions for this are:
  1. There are varying subscription plans but I am assuming about $20/Month = $240/Yr . More here.
  2. This assumes no further decline in print circulation and online advertising. This is not a good assumption and its very likely that print will at some point go to zero.
  3. Pretty much all of the revenue goes straight to the bottom line. This is a fair assumption since the newsroom costs are already being borne by the print side. But, this assumes that there is no further decline in print (see earlier point)
But even if we assume print goes to zero and all one needs to do is support the current NYT newsroom costs of about $200M, then the NYT needs about 2M subscribers generating about $500M to have a market cap of about $6BN i.e. about 4-5x current market cap. The $6BN market comes from $500M rev (2M X $240/sub)- $200M newsroom costs – $80M Other Random Cost=$300M Operating cash flow X 15x multiple = $4.5 BN.
I think for the NYT to hit 2M subscribers is relatively easy. And then there is margin of safety in print NOT going to ZERO, About.com, the NYT building etc, etc…
UPDATES AS WE KEEP FOLLOWING THIS “STORY”
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