The New York Times Company (NYSE:NYT) stock has seen quite the run recently, rising 35% year to date and 41% in the past 12 months. The stock's gain comes as the company has proved its recent reinvigorated growth could be sustained beyond the big bump it saw from the 2016 election.
With the newspaper's stock trading so much higher, investors need to be sure they fully understand the underlying business and whether it's deserving of its higher stock price. To better understand the company, here's a look at some key quotes from management during the earnings call last month (via an S&P Capital IQ transcript).
1. Understanding The New York Times' addressable market
Asked to dream about where New York Times digital subscriptions could be about five years from now, CEO Mark Thompson gave investors several ways to think about the company's significant addressable market. First, Thompson noted the 30 million to 40 million people coming to the Times' website every month -- a figure he said is increasing. In addition, he referenced the company's ongoing growth in domestic subscribers, which Thompson says are still growing "strongly."
But Thompson summed up the Times' addressable market by looking to English-speaking college graduates:
"The overall addressable market, if we think of a group of people around the world with college degrees, let's say, these are rough indicators of potential for the Times, and with a good command of English, there are many hundreds of millions of people in that category. And you wouldn't need to penetrate to that market very deeply where you had a much, much larger subscriber base."
2. What to expect from subscriber growth
The Times has already seen incredible growth in digital subscribers. Total digital-only subscriptions hit about 2.8 million in the company's most recent quarter. This was up 25.5% year over year, driven by a 20.5% year-over-year increase in digital news product subscriptions to 2.3 million, and a 60.1% year-over-year increase in digital crossword and Cooking app subscriptions.
But how high can subscriptions go from here? Thompson has his sights set on 10 million subscribers, with no particular timeline:
"So when we think about 10 million, we're talking about 3x increase, recognizing that over the time I've been chief executive, we've already seen more than 2x increase in subscription. So I mean -- for me, without being fanciful -- I think there is potentially a great deal of scope for this model to grow, and indeed to grow in a way which will not see the direct costs growing at the same rate."
3. Getting readers to convert to a membership
As The New York Times Company continues to invest in its digital products, it wants to ensure it's getting better at converting visitors into paying subscribers. To do this, the Times recently halved -- from 10 to five -- the number of articles a user can read free each month before having to subscribe. Though readers are getting less for free, the move is ultimately driving higher conversion, said COO Meredith Kopit Levien:
"So I would say we did a fair amount of testing as to what the results would be from taking the meter from 10 to 5, and our results are broadly in line with what we expected to see. So generally, get more people to the gateway, and you convert better."
More important, management believes there's a lot of room for continued improvement in customer conversion, particularly on mobile. "We're doing quite a bit of work on mobile conversion specifically," Levien said, "and I would say we are just beginning to get better at that, and there is a lot of running room there, so you can see us continue to improve there."
Management's discussion of its large addressable market for digital subscriptions, expectations to get to 10 million digital subscribers, and efforts to boost subscriber conversion reinforce some of the reasons that investors are betting on The New York Times Company stock.