October 25, 2012
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of the New York Times (NYSE: NYT ) were getting thrown in the recycling bin today, falling as much as 19%, after the company badly missed on top and bottom lines in its third quarter earnings report.
So what: Revenue fell 0.6% to $449 million, well short of estimates of $479 million. Earnings per share were not any better, with a $0.01 adjusted loss on expectations of an $0.08 profit. The company's move to tighten its pay wall continued to show results, as digital subscriptions increased by 11% from the second quarter to 592,000, but advertising revenue suffered badly in the quarter, falling by 8.9%. The vast majority of that drop came from the print side, while digital ad revenue declined 2.2%.
Now what: The publisher sees similar trends going into the fourth quarter, with ad revenue at Q3 levels, and circulation revenue up 5% to 10% from a year ago, but the latest drop in ad revenue has to be disheartening for investors. While the verdict is still out on the Times subscription-based business model, digital ad revenue figures to be a key piece in the puzzle. I'd stay away until sales growth is moving in the right direction and the company is putting up consistent profits.
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