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The New York Times’ subscriber goals increasingly depend on an election-year jolt, analysts say

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The New York Times Co. will need a big 2024 presidential election to hit long-term subscriber targets, as news subscriber growth shows signs of maxing out and demand trends among existing subscribers get harder to read, Morgan Stanley analysts said on Friday.

Against that backdrop, analysts Thomas Yeh and Benjamin Swinburne downgraded the media company to their version of a hold rating from buy, but kept their price target of $37. Shares of the New York Times
slid around 4% on Friday.

“Our prior Overweight thesis on NYT was based on our view that its leading position in a growing paid news market supports strong subscriber penetration, pricing power, and healthy long-term operating leverage as the business scales,” analysts Thomas Yeh and Benjamin Swinburne said in a note on Friday.

See also: The ‘subscription economy’ could soon become the ‘consumption economy’

“The recent slowdown in net adds has elevated our concerns that the subscriber penetration opportunity has reached a greater level of maturity sooner than expected, and broader cyclical pressures could add incremental downside risks if overall U.S. consumer spending weakens,” they continued.

Yeh and Swinburne also said the slowdown in subscription additions came despite solid website traffic during an intense news cycle this year that included Russia’s invasion of Ukraine and the U.S. midterms. Next year could make for difficult comparisons, particularly in the first quarter.

“This puts greater pressure on the need for meaningful acceleration in 2024E (benefiting from the U.S. presidential election) and beyond to achieve long-term guidance for” 15 million subscribers by the end of 2027, the analysts said.

Shares of the New York Times and other media companies jumped in 2016 after former president Donald Trump’s surprise election victory, partly because investors were betting that the drama between Trump and the media would lead to more business for the latter. Trump last month announced he was running for president again.

Morgan Stanley downgraded the stock as other news outlets — from Gannett Co. Inc.
to CNN to the Washington Post — cut staff or plan layoffs as recession fears grow. Journalists at the New York Times held a strike earlier this month. Local news outlets have suffered disproportionately amid the industry’s longer-term troubles, as ad revenues dry up and private-equity investors gut newsrooms.

The Morgan Stanley analysts said the New York Times was “unique” among other news outlets in that it still had leeway to charge longtime subscribers more. And they said the Times’ newsroom was still growing, even as other outlets cut back. The analysts also said that the company was focused on boosting subscriber volumes rather than raising prices, and that a broader array of products could attract a wider range of customers.

The analysts said the Times’ higher-priced, all-access digital package — which includes access to the sports news site The Athletic, its Wirecutter product-review site, as well as its recipes and crosswords — “has decreased our visibility into the underlying quality of subscriber trends.” They added that “not all subscribers deliver the same unit economics.”

And with the prospect of a bigger recession weighing on news subscriptions, the analysts cut their outlook for digital-subscription sales to 11% to 12% growth over the next five years. That forecast compared to prior estimates for “low-teens” growth.

The analysts said they expected the Times to add around more than 550,000 digital-only news subscribers this year, below last year’s levels and those before the pandemic.

Shares of the New York Times are down 33% so far this year. By comparison, the S&P 500 index
has fallen 20% year-to-date.


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