NYT Q2 Earnings Preview: What We're Watching

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The New York Times ( NYT ) is expected to release its Q2 2011 earnings results on July 21, 2011. For this quarter, we focus our attention on the newly added digital subscription feature and its potential impact on NYT's digital-based revenues. NYT competes with publications like News Corp's ( NWS ) The Wall Street Journal (WSJ) as well as Internet-based outlets like Yahoo ( YHOO ), Google ( GOOG ) and AOL ( AOL ).

We maintain a $9.20 price estimate for NYT stock , which is a 5% premium over the current market price.

U.S. Newspaper Circulation Continues to Lag

A recent report released by the Audit Bureau of Circulation (ABC) indicates that circulation has declined for 18 of the 25 largest U.S. newspapers from last year. For NYT, Sunday newspaper circulation averaged 1.34 million daily (for the six months ending March 2011), about 37,000 copies down from last year.

Digital Subscription Show Promise

With the recently launched digital subscription for NYT, the company aims to extend its digital revenue stream beyond online advertising, which increasingly faces competition from Internet giants such as Google, Facebook and Yahoo. The company expects about $13 million in incremental expenses for the digital subscription initiative for Apr-Dec 2011.

The New York Times is pursuing aggressive promotion of its digital subscription feature through discounts on its online content, mobile app and tablet app subscriptions. However, it runs the obvious risk of users migrating to other sites that provide similar content for free. The near-term benefits from moving its paywall have in fact been modest at best with unique visitors of NYTimes.com increasing marginally to 33.6 million in May 2011 from 32.9 million in April 2011. Unique visitors to the website remain a crucial factor in building an online subscriber base for NYT, which relies on the site's "heavy users" as potential subscribers.

Going forward, we will continue to closely follow NYT's paywall business and its impact on the website's unique visitor traffic.

See our full analysis and $9.20 price estimate for NYT



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks , US Markets

Referenced Stocks: AOL , GOOG , NWS , NYT , YHOO

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