If you don’t think newspapers are going to make it, then all newspaper company stocks will eventually go to zero. But, if any company can make it out of the fight alive, it is Gannett (GCI). Aside from owning USA Today, which, along with the Wall Street Journal, vies for first place in circulation among US newspapers, Gannett has the only newspaper in several dozen markets. It can price circulation and advertising up to what the market will take without other papers pushing competitive pricing. The company owns several large markets like Honolulu, Indianapolis, Nashville, Louisville, Detroit, Newark and Cincinnati.
Gannett also has a huge network of news websites, lead by USAToday.com, that are helping to offset drop-offs in revenue from printed products. Very few companies can get access to this many readers online.
Despite pressure on newspaper costs and circulation, Gannett brought in operating income of over $2 billion last year on $7.6 billion in revenue.
Some savvy investors are starting to catch on to the fact that Gannett may be undervalued. Vontobel Asset Management just bought 2% of Gannett’s outstanding shares. The reason, according to the fund’s manager: "The stock is cheap here, and we expect it to be in the mid-70s in 12 months"
And, with newspaper companies like The Tribune and Knight-Ridder emerging as buy-out candiates, who knows?
Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that the writes about.
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