The New York Times has a new assignment. ValueAct Capital Management, the pushy investment firm led by Mason Morfit, disclosed a 6.7% stake in the $5 billion news outfit with the idea that it should push a bundle of products the way Netflix does. There’s logic to the plan, but it’s a risky move given the Ochs-Sulzberger family's control.
ValueAct already is talking to management and the board. It also claims – in a letter the fund sent to its own investors, according to Reuters– to have research showing that subscribers would pony up a premium for a package that includes news, Wirecutter product recommendations, crossword puzzles and more.
The New York Times is a rare financial success story in the news business. Just last week, it reported more than 8 million digital-only subscribers in the second quarter, a 36% increase from the same period a year earlier. Chief Executive Meredith Kopit Levien is targeting 15 million by the end of 2027.In theory, at least, there are ways to boost the valuation.
Looked at another way, the company is trading at a robust 31 times estimated net profit for the next year, according to Refinitiv. Assume ValueAct’s ideas could lift the margin to 10% instead of this year’s 7%. Applying the same valuation multiple, the top line would have to grow to $3.3 billion, or a little more than 7% annually on a compound basis to double the market capitalization to $10 billion in five years. The current expectation is roughly 5% revenue growth.
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