The Wall Street weekly says Gannett and other newspaper stocks may be worth another look. (Caution! Keep reading to the bottom of this post to see how Barron's badly overstated GCI's prospects more than seven years ago.) In a story yesterday, the weekly says:
Investors worry newspapers are in terminal decline because of steady advertising and circulation losses. Newspaper shares are depressed, but many companies have valuable nonprint assets, like TV stations and Internet properties, that get little love on Wall Street.
GCI's stock -- which closed yesterday at $13.79 a share -- trades for under seven times projected-2011 profit of $2.20 a share. Investors effectively pay little for the company's newspapers -- including USA Today, 81 mostly small-market dailies, and U.K. regional papers -- when factoring in the company's 23 TV stations around the country and digital properties, notably a 51% stake in CareerBuilder, a leading online help-wanted site.
The TV stations could be worth $3 billion and the Internet properties another $1 billion. Investors, therefore, may be paying only two times annual-cash flow for the still-lucrative newspapers. A conservative GCI is earmarking cash flow mainly for debt repayment, but some investors want a big boost in the dividend, now 1%. Fans think the stock could hit $17 this year.
But remember this?
Barron's gushed over GCI's prospects in its Dec. 1, 2003, cover story, "Gannett's Good News: A reviving ad market should boost the shares of a hungry media giant." GCI traded at $86 a share at the time.
Institutional investors were, of course, bullish: "This is a company with some of the highest margins in its business, some terrific assets and a proven first-class management team focused on doing the best for stockholders," said Henry Berghoef, director of research for the Oakmark Fund, which counted Gannett among its 20 holdings. "Not only should this industry see a good bounce back, but Gannett should bounce back harder and faster than others."
GCI's stock -- which closed yesterday at $13.79 a share -- trades for under seven times projected-2011 profit of $2.20 a share. Investors effectively pay little for the company's newspapers -- including USA Today, 81 mostly small-market dailies, and U.K. regional papers -- when factoring in the company's 23 TV stations around the country and digital properties, notably a 51% stake in CareerBuilder, a leading online help-wanted site.
The TV stations could be worth $3 billion and the Internet properties another $1 billion. Investors, therefore, may be paying only two times annual-cash flow for the still-lucrative newspapers. A conservative GCI is earmarking cash flow mainly for debt repayment, but some investors want a big boost in the dividend, now 1%. Fans think the stock could hit $17 this year.
But remember this?
Barron's gushed over GCI's prospects in its Dec. 1, 2003, cover story, "Gannett's Good News: A reviving ad market should boost the shares of a hungry media giant." GCI traded at $86 a share at the time.
Institutional investors were, of course, bullish: "This is a company with some of the highest margins in its business, some terrific assets and a proven first-class management team focused on doing the best for stockholders," said Henry Berghoef, director of research for the Oakmark Fund, which counted Gannett among its 20 holdings. "Not only should this industry see a good bounce back, but Gannett should bounce back harder and faster than others."
A hat tip to a Gannett Blogger, who pointed us to this story.
ReplyDeleteI don't think it's fair to say their 2003 prediction was way off because nobody could have predicted this economic downturn.
ReplyDelete11:52. No, if you look back, there were many predictions of this, but they were not listened to at the time. Even Alan Greespan (a very bright guy) has admitted he got it all wrong at this time, while the financial press lionizes previously obscure Nasim Taleb and Nouriel Roubini because they got it right. I recall sitting through a briefing by a well-respected newspaper executive who outlined pretty well what wss hitting us, and that was around the 2003 era. I didn't believe this was possible then and a colleague thought he had gone off the deep end. I was so horribly wrong.
ReplyDeletetypo: Greenspan
ReplyDeleteCan you imagine the money they are making on that Deal Chicken Phoenix site?
ReplyDeletehttp://www.washingtonpost.com/blogs/faster-forward/post/groupon-files-for-ipo/2011/06/02/AGmTMTHH_blog.html
11:52 Gannett's stock peaked in the low $90s several months after the 2003 Barron's article, then began sliding downward well before the recent Great Recession.
ReplyDeleteAs long ago as September 2007, when stock markets were at record highs, and I first started publishing this blog, GCI stock was already trading as low as $46 a share -- nearly half its price when Barron's wrote that effusive cover story.
Im going to try to stay positive. But Barron's track record regarding sci has been lousy. Coupled with inept senior management, im selling all the 401k contributions I get.
ReplyDeleteBarron's has a history of some excellent investigative journalism on business and it should stick to that. It's as valuable as Cramer on picking stock, and anyone can watch a replay of the Jon Stewart smackdown to see what I think of Cramer.
ReplyDeleteThanks 7:08 a.m. Let's see, Groupon lost 145 million in first quarter. Lost more than 400 million last year. Now that's a great business model. Annualized that means its losing more this year than last. I think i will invest the whole 401kay in it.
ReplyDelete6:36 I wish someone in corporate would see this. It certainly might help justifying that $21 billion pricetag on the IPO. Smarter people than I am make these projections. It also might help to explain why Phoenix, one of our strongest papers, is struggling. But then someone else is paying the overhead of the Chicken.
ReplyDelete