The New York Times Company (NYSE:NYT) has done a great job in recent years of selling off its non-core assets in order to focus on maximizing the core New York Times brand all around the world. However, over the past month or so, shares of the company have begun to look a little too spiky, and I’m a bit concerned. Since early February, shares have popped 22% from the $8.20 level to right around $10. Has something changed to warrant such a jump, or is The New York Times Company (NYSE:NYT) just moving too far too fast, a victim of the recent market rally?
The “New” New York Times?
Over the past couple of years, New York Times has successfully shifted to a business model in which it charges for content on its website, NYTimes.com. Paid advertising, particularly in print media, has been in a secular decline for some time now, and the company is trying to rely less and less on advertising revenues to sustain it.
They have done a great job of increasing digital revenues, which represented just 12% of the company’s total in 2006 and have grown to double that percentage today. While this is certainly a good transition, overall revenues have been declining for some time (see chart below) and have not shown signs of stabilizing just yet.
What to Do Instead
For those who agree with me that The New York Times Company (NYSE:NYT) is a good company, but a little too expensive, let’s take a quick look at some alternatives. I do believe that the news companies who successfully make the transition to the digital age, and mobile ads and content in particular, will flourish for decades to come. I’d like to look at two companies that have similar business models to NYT, The Washington Post Company (NYSE:WPO) and Gannett Co., Inc. (NYSE:GCI), as well as a larger, more diversified company, News Corp (NASDAQ:NWS).
The Washington Post Company
I love Washington Post as a company, however they have had just as much of a jump in price as New York Times over the past few months. What most investors don’t realize, though, is that the newspaper division only accounts for 15% of the company’s revenues. The majority (59%) is a product of Kaplan (yes, the education company), which is a wholly-owned subsidiary of The Washington Post Company (NYSE:WPO). So, Kaplan is a good alternative if you’re bullish on the need for educational services such as test prep and career programs and still want news exposure. Making the company even more attractive is the fact that Berkshire Hathaway Inc. (NYSE:BRK.B) believes in it, with a 23% stake.