This article first appeared on GuruFocus.
The New York Times Company (NYSE:NYT), the publisher behind one of the world’s largest digital news platforms, got crushed Wednesday as shares plunged more than 13% after subscriber growth came up short. The company added about 280,000 digital-only subscribers during the second quarter, missing the 295,300 analysts expected and slowing from the 310,000 added in the previous quarter. Total subscribers still climbed to 13.35 million, but investors weren’t paying for “good enough.” They wanted acceleration, not deceleration.
The GF Value chart tells a similar story. After the sharp selloff, NYT trades at $63.58, only 1.68% above its GF Value estimate of $62.53, suggesting the market has already priced in much of the disappointment instead of leaving the stock looking obviously expensive.
The bigger issue wasn’t the quarter itself but what comes next. Management said weaker Google (GOOG) search traffic and fewer referral visits are making it harder to bring new readers into the subscription funnel. Even blockbuster events like the Iran conflict and the FIFA World Cup couldn’t deliver the subscriber surge investors were hoping for. The company lifted The Athletic’s paywall for World Cup coverage and rolled out new content formats that attracted record sports audiences, but strong engagement didn’t fully translate into paying customers. To make matters worse, management forecast third-quarter digital subscription revenue growth of 12% to 15%, with the midpoint landing below Wall Street’s 14.2% expectation.
The math isn’t impossible, but the margin for error is shrinking. Subscriber additions missed expectations by roughly 15,300 and fell by about 30,000 from the previous quarter. To reach its goal of 15 million subscribers by the end of 2027, NYT still needs around 1.65 million more subscribers, or roughly 275,000 every quarter over the next six quarters. That’s slightly below the latest quarter’s result, but maintaining that pace gets tougher if search traffic keeps fading. One bright spot was advertising, where revenue climbed 11.3% to $149.1 million and beat expectations. From here, investors will be watching whether The New York Times can rely less on Google and more on its own products, sports content and direct audience relationships to keep subscriber growth alive.
