Monday August 18, 7:00 am ET
By Matthew Coffina
Newspaper stocks have been decimated over the past year, as the Internet continues to steal readers and ad revenue from traditional print media. We think the stocks have further room to fall, as declining revenues and negative operating leverage combine to create a downward spiral for this moribund industry.
…sharp price declines (including a 52% drop for Gannett (NYSE:GCI – News) an 82% dive for McClatchy (NYSE:MNI – News), and a 94% loss for rural/suburban publisher GateHouse (NYSE:GHS – News)), coupled with what may be perceived as currently cheap valuation ratios, could be tempting to value-minded investors, but we say “Look out below!”
The Internet is stealing readership and ad market share from newspapers at an accelerating pace, thanks to the Web’s numerous advantages. Online news is updated as it happens. Most Internet content is provided for free. Content can be dynamic and interactive. The reader’s hands aren’t stained by newsprint. Advertisers prefer the Internet’s younger audience and real-time feedback from click-through data. Finally, the Internet allows advertisers a low-cost way to target specific populations. We don’t anticipate these trends to reverse and consider the newspaper industry unattractive as a whole.
