On Monday, Citi updated its outlook on New York Times shares (NYSE:NYT), raising the price target to $57.00 from the previous $52.00, while reiterating a Buy rating on the stock. The revision comes as part of an adjustment to the firm's financial model ahead of the company's second-quarter 2024 results.
The adjustment in the price target reflects slight revisions to revenue and EBITDA estimates for the years 2025-2026. The upward revisions are attributed to a more optimistic advertising forecast and some reduced expense expectations. The new price target is based on a multiple of 17 times the projected 2025 adjusted EBITDA.
Citi's analysis indicates that while the estimates for 2024 remain largely unchanged, the forecast for the subsequent years shows an improved financial outlook for the New York Times. The analyst notes that the updated model takes into account these minor adjustments, leading to the increased price target.
The New York Times has been assessed with the expectation of continued strength in its financial performance, particularly in the area of advertising revenue. The moderated expense items also contribute to a more favorable projection for the media company's earnings before interest, taxes, depreciation, and amortization.
The New York Times also reported a 3% growth in digital advertising revenue and an approximately 8% increase in licensing, affiliate revenues, and Wirecutter revenues. Moreover, adjusted diluted earnings per share (EPS) rose from $0.19 to $0.31. Looking ahead, the company forecasts a 6-8% growth in total subscription revenues and 11-14% in digital-only subscription revenues for Q2.
However, the company did experience a slight decline in total advertising revenue and anticipates a 4-5% rise in adjusted operating costs in Q2. Despite these challenges, the New York Times remains focused on cost discipline and expects another year of enhanced profitability and strong free cash flow.
InvestingPro Insights
In light of Citi's updated outlook on New York Times shares, an examination of key financial metrics and InvestingPro Tips can provide additional context for investors. With a market capitalization of $8.18 billion, The New York Times is trading at a P/E ratio of 32.78, reflecting investor sentiment on its earnings capacity. The adjusted P/E ratio for the last twelve months as of Q1 2024 stands at 30.16, indicating a slight premium compared to the broader market.
A noteworthy InvestingPro Tip is that The New York Times has raised its dividend for 5 consecutive years, illustrating a commitment to returning value to shareholders. Additionally, the company's solid balance sheet is evident as it holds more cash than debt, providing financial flexibility and stability. With analysts predicting the company will be profitable this year and 4 analysts having revised their earnings upwards for the upcoming period, the outlook on earnings seems optimistic.
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