NEW YORK (Reuters) - U.S. newspaper stocks dove on Wednesday after an influential Goldman Sachs analyst cut his revenue forecasts for the business, saying it may take five years for online revenue to offset plunging print revenue.
“2009 will see a crescendo of bad news for the already suffering newspaper publishers, with cyclical pressures on revenues, secular declines in market shares, and sharply higher newsprint costs driving unprecedented margin declines,” analyst Peter Appert wrote in a research note to investors.
“While we’ve been negative on the newspaper sector for three-plus years, it nevertheless pains us to add to the chorus of nattering nabobs of negativism,” he wrote. “It just feels like piling on given that stocks are already down 63 percent year-to-date.”
The assessment comes a day before Richmond Times-Dispatch publisher Media General Inc reports its third-quarter results, kicking off what is expected to be another round of grim results. Its shares fell 8.76 percent in midday trading.
Newspaper stock prices plunged on Wednesday, with several outpacing the broader market fall.
USA Today publisher Gannett Co Inc dropped 10.71 percent in noon trading. McClatchy Co fell 11.44 percent and the New York Times Co fell 4.45 percent.
Appert forecast a 12 percent to 50 percent downside in newspaper stocks until they hit revised price targets.
U.S. newspapers have been trying to cut costs as their ad revenue falls and more readers drop their print editions in favor of getting news online.
Ad revenue could fall 11 percent in 2009, compared with his previous estimate of a 7.5 percent drop, he wrote. “Despite yeoman-like efforts to manage costs, with newsprint prices expected to be up at least 11 percent in calendar year 2009, we think sharp margin contraction is inevitable in 2009.”
Appert said newspaper companies are not going out of business — though companies with large amounts of debt will face “particularly acute challenges.”
“We believe newspapers will re-emerge as healthy and dominant players in the local media marketplace as their business models evolve into a hybrid print and online offering,” he said, but added that margins will be significantly below the 20-percent-plus levels in the past.
Reporting by Robert MacMillan; Editing by Derek Caney