After hitting a one-year high of $23.85 last July, the stock hit a one-year low of $12.08 last week. NYT opened this morning at $13.05. So far today the stock has hit a low of $12.38 and a high of $13.42. As of 1:15, NYT is trading at $13.00, up $0.16 (1.1%). The chart for NYT looks bearish and steady, while S&P gives the stock a bearish 2 Stars (out of 5) Sell rating.
For a bullish hedged play on this stock, I would consider an August bull-put credit spread below the $12.50 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 19.0% return in just four weeks as long as NYT is above $12.50 at August expiration. NYT would have to fall by more than 4.3% in the next few weeks before we would start to lose money. Learn more about this type of trade here.
MOST NOTEWORTHY: Lam Research, Deutsche Telekom and France Telecom were today's noteworthy upgrades:
Credit Suisse upgraded Lam Research (NASDAQ:LRCX) to Outperform from Neutral citing margin expansion and valuation. Lam was named the firm's top pick in SCE names for 2H08.
JP Morgan upgraded shares of Deutsche Telekom (NYSE:DT) to Overweight from Neutral as they expect a stronger second half of the year for the industry.
France Telecom (NYSE:FTE) was upgraded to Buy from Neutral at Merrill and to Buy from Hold at Societe Generale after the company walked away without bidding for Sweden's TeliaSonera.
TheStreet.com's Jim Cramer says massive debt at the newspapers means they no longer work as businesses.
Maybe newspapers don't work as businesses. The shocking 10% workforce reduction announced this week by McClatchy (Cramer's Take) (NYSE: MNI), formerly the best-run chain out there, is a reminder that all of these companies have borrowed too much money and don't generate the cash flow to make it work. McClatchy, with an 8% yield, is showing signs of collapsing under its own weight, something that has been exacerbated by Wall of Shame performer Gary Pruitt, a man who is still, amazingly, the CEO.
But all of this was totally predictable. I have never seen an industry attract so many buyers with so much debt and so little equity.
Take Tribune (Cramer's Take). Sam Zell's a smart guy. He let the newspaper employees do the heavy lifting when he bought the Tribune company. That was so smart. He will be out very little if the deal fails. The workers will be out their retirement money. That was a smart deal -- unless you work there -- but I have spoken against that deal so many times I am sick of talking about it.
McClatchy could have weathered this downturn, instead of -- it is a bit unthinkable, but I think it will happen -- defaulting on its debt, if it hadn't been determined to buy a bunch of properties for much more than they are worth. The New York Times (Cramer's Take) (NYSE: NYT) and Gannett (Cramer's Take) (NYSE: GCI) spent a lot of money, but they didn't have to buy back stock. Gannett's 6% yield isn't tempting in the least.
After the 3G iPhone was finally announced Monday, with a price tag and a business model that could take the funky phone to the masses, Apple Inc. (NASDAQ: AAPL) ended lower on some profit taking. But have no fear. Already this morning, Citigroup raised Apple's price target to $287 from $248 with a Buy rating, and Lehman raised it to $234 from $202, maintaining its Overweight rating. Despite the stock trading higher in European markets, it's still not showing signs of recovery in premarket trading in the US.
ThinkPanmure initiated Intel Corp. (NASDAQ: INTC) with a Buy, claiming it is gaining market share over rival Advanced Micro Devices (NYSE: AMD). The analyst also said Intel is gaining prominence in the server, desktop and notebook markets.
Hewlett-Packard Co. (NYSE: HPQ) updated its desktop and notebook computers. It introduced Tuesday in Berlin a new ultra-thin portable, the Voodoo Envy, to rival Apple's MacBook Air. H-P also added a new version of a touch-screen desktop PC and 16 notebooks for consumers and businesses.
The Tribune is not a public company anymore, but CEO Sam Zell says enough about his plans that it might as well be.
According toThe New York Times, Zell "announced a set of deep cuts, saying that shrinking revenue left them no choice." One of the things that means is fewer pages devoted to news as newsprint use is reduced.
The Tribune carries a lot of debt, so it is in more trouble that other chains such as The New York Times Company (NYSE: NYT) and Gannett (NYSE: GCI). But, other large paper operations including McClatchy NYSE: MNI) and Gatehouse (NYSE: GHS) also have massive debt burdens from money they borrowed to expand their empires.
What all of this means is that more reporters and editors will lose their jobs and the typical reader will get a newspaper that is thin as toilet paper. For newspaper company investors it means that stocks, some already down 50% to 70% in the last year, are going down even further.
The trouble also may spell the end of nearly a century of big papers like The New York Times being the news sources of record. The company recently cut 100 people, most of them from the news operation. Covering major national and international stories is becoming more difficult and at some point it may be impossible.
There is always CNN.
Douglas A. McIntyre is an editor at 247wallst.com.
Display ads are hurting while online search ads remain strong, the New York Times reports today. Specifically, PubMatic, an advertising-technology company in Palo Alto, CA that runs an online-pricing index, found the prices paid for online ads bought through ad networks dropped 23% from March to April 2008.
This drop in pricing has hurt some companies' results:
Time Warner Inc. (NYSE: TWX)'s AOL, parent of BloggingStocks, saw an 18% decline in display advertising revenue to $191 million.
The New York Times' (NYSE: NYT) Internet ad revenues increased 16%; a year earlier, though, they increased 20%.
WebMD Health (NASDAQ: WBMD) revised down its 2008 revenue guidance to a range of $380 million to $395 million, from a range of $395 million to $415 million thanks to lower expected ad revenues.
The good news? Surprise! -- Google Inc. (NASDAQ: GOOG). In the most recent quarter, Google had a profit of $1.31 billion on revenues of $5.19 billion. Its United States revenue was up 30%. The reason is that display ads don't offer a tangible payoff to advertisers whereas search ads do.
Advertisers are simply trying to maximize their returns on the advertising investment (ROAI). If someone comes along and offers a higher ROAI than Google, advertisers will switch to that provider. Meanwhile, those stuck with display advertising will suffer at Google's hands.
Fortune and BusinessWeek are piling on the story of Harbinger Capital Partners, a $19 billion hedge fund, seeking to take over the New York Times (NYSE: NYT). Harbinger now owns 19% of its Class A shares. Of course, Harbinger is not the only threat to management of the Times -- News Corp.'s (NYSE: NWS) Rupert Murdoch is doing his part as well. Will Steve Rattner, a long-time friend of Times publisher Arthur Sulzberger and Managing Principal of Quadrangle Group, come to the rescue and take the Times private?
In play here are Phillip Falcone, a Harbinger partner who made $1.7 billion last year, and the quaint idea of protecting a media company's founding family by maintaining two classes of stock: Class A for the public to make insiders liquid and Class B for the insiders. Murdoch and Sulzberger enjoy protection for their family dynasties thanks to that two-tiered structure.
Falcone thinks that the Times is leaving huge amounts of money on the table by not "monetizing" all the comments on its stories. What sparked this idea was a January opinion piece by Caroline Kennedy comparing Barack Obama with her father, President John F. Kennedy. There were only a few comments about the article on the newspaper's Web site, nytimes.com, but there were hundreds on Huffington Post and Digg.com. BusinessWeek quotes Scott Galloway, founder of hedge fund Firebrand Partners and Falcone friend who said: "We came to the collective conclusion that there was so much upside in terms of billions of pages the paper wasn't monetizing. He [Falcone] never looked back."
Rupert Murdoch is facing off against the Federal Communications Commission (FCC) as he seeks to take control of two TV stations and three newspapers in New York -- including Newsday -- The New York Times reports. A December 2007 FCC rule allows a company to own just one paper and one television station in the same city in the top 20 markets so long as there are at least eight other independent sources of news and the station is not in the top four. (The stations that News Corp. (NYSE: NWS) controls are the fourth- and sixth-largest in the New York market).
Meanwhile, I am fascinated by the Wall Street Journal's [subscription required] coverage of the departure of its own managing editor, Marcus Brauchli, yesterday. The punch line was that everything is fine because Brauchli was simply doing what the boss wanted. Brauchli's new role? Providing "guidance to senior management in a wide range of areas," including whether Murdoch's Star-TV service in Asia should launch a business-news channel. Sounds like a good fit.
In contrast to the Journal's corporate press release on its page one, The New York Times reported that Brauchli was fired. It noted that a few weeks prior to his departure, Murdoch's henchmen indicated they were unhappy with the pace of change at the Journal. The Times wrote: "At some point, They told him, 'We don't think this is working,' and Brauchli replied that in that case, he should consider leaving."
It appears that News Corp (NYSE: NWS) will buy the largest newspaper on Long Island, Newsday, from The Tribune Co., increasing pressure on The New York Times Co. (NYSE: NYT) in its home market. News Corp already owns The New York Post. Recent press reports indicate that News Corp is adding more political and international content to The Wall Street Journal to better compete with the Times.
According to The Wall Street Journal, the price for Newsday could be about $580 million, and final details of the purchase or lack of government approval could still kill the deal.
Tribune needs to make the sale to cover debt it took on in its LBO.
The news is especially bad for The New York Times Co. While the Post does not take much advertising from the Times, it does have a circulation of over 600,000 in New York City. Newsday has a daily circulation of about 400,000 in the well-to-do area of Long Island, just east of New York.
The New York Times is already in enough trouble. It posted a loss last quarter, and in March advertising revenue fell about 11%. The firm's stock trades at $20, but many observers believe that it it were not the target of investors who hope to break it up or sell it that the shares price would be much lower.
The value of the company just got undermined again.
Douglas A. McIntyre is an editor at 247wallst.com.
The short interest in most large stocks traded on the NYSE increased as measured on March 14. The figures compare to February 29. Car stocks were hit especially hard. Shares short in Ford (NYSE: F) moved up 20.3 million to 248.9 million. For GM (NYSE: GM) the number was up 19.4 million to 85.9 million.
Despite the fact that many big financial stocks are already close to lows, traders were willing to bet that they would fall off further. Shares short in Washington Mutual (NYSE: WM) moved up 15.9 million to 168.8 million. The short interest in Citigroup (NYSE: C) jumped 7 million to 125.6 million. For Wells Fargo (NYSE: WFC) the number added 9.3 million to 117.5 million. For Countrywide (NYSE: CFC) the figure was up 9.3 million to 111.5 million and at Wachovia (NYSE: WB) shares sold short were up 2.2 million to 105.4 million.
Other notable financial stocks with large increases included Fannie Mae (NYSE: FNM), up 11.4 million to 78 million, Thornburg (NYSE: TMA), up 11 million to 25.8 million, and CIT (NYSE: CIT), up 10 million to 20.1 million.
Troubled firms that have recently had bad news were hit very hard. Shares short in Sprint (NYSE: S) moved up more than any other NYSE-traded company, jumping 30.1 million to 75.2 million. Shares sold short in Blockbuster (NYSE: BBI) increased 8 million to 57.8 million.
Shorts moved out of Micron (NYSE: MU) where the number fell 4.3 million to 87.5 million, Wal-Mart (NYSE: WMT) where short interest dropped 3 million shares to 45.1 million, CBS (NYSE: CBS) which lost 2.7 million shares short falling to 29.2 million, The New York Times (NYSE: NYT) with shares short dropped 2.8 million to 30.6 million, and Time Warner (NYSE: TWX) which saw its short interest drop 2.2 million to 38.5 million.
The New York Times Co. (NYSE: NYT) has agreed to give activist hedge funds Harbinger Capital Partners and Firebrand Partners control of seats on its board of directors. The funds own a 19% stake in the company, but that really doesn't matter. The New York Times Co. has a dual-class voting structure, so the Sulzberger family controls 10 directors while the outside shareholders elect 5. So Harbinger and Firebrand control 2 out of 15 directors and the maximum any shareholder could ever dream of electing is 5 out of 15 directors.
In a display of journalistic integrity, the New York Times itself admitted that this move is pretty much irrelevant, saying that "The new arrangement could make for some uncomfortable internal politics, but it is not clear that it will have any effect on the company's direction."
The company says, of course, that it looks forward to working with the new directors, who have pushed for asset sales and more aggressive investment in the internet.
But the problem is that having 2 seats on a 15-member board won't provide any additional leverage, as far as I can tell.
This quixotic activist campaign, however noble, is likely to result in a big fat nothing.
Originally, I wrote, "What people, particularly those outside of the media, need to realize is that there rarely are smoking guns in these sorts of stories and that anonymous sources are a necessary evil. At times, journalists have to build their cases using circumstantial evidence the same way lawyers do in court."
But after reading Clark Hoyt, the paper's ombudsman, blast the piece in his column Sunday, I realized that I was too easy on the paper. The story, as Hoyt noted, "did not say what convinced the advisers that there was a romance. It did not make clear what McCain was admitting when he acknowledged behaving inappropriately - an affair or just an association with a lobbyist that could look bad."
MOST NOTEWORTHY: Mortgage finance companies, Motorola and General Motors were today's noteworthy downgrades:
Goldman downgraded shares of Washington Mutual (NYSE: WM), Freddie Mac (NYSE: FRE) and Fannie Mae (NYSE: FNM) to Sell from Neutral on concerns of significant credit losses from the housing market downturn.
Motorola (NYSE: MOT) was lowered to Perform from Outperform at Oppenheimer after Q1 channel checks indicated a material shortfall in Q1 handset demand. They no longer see support for shares on a sum-of-the-parts valuation.
Deutsche Bank downgraded shares of General Motors (NYSE: GM) to Hold from Buy as they believe the cyclical North American downturn could be deeper and more protracted than previously expected.
OTHER DOWNGRADES:
Aventine Renwable (NYSE: AVR) was downgraded to Sell from Hold at Soleil.
UBS lowered James River (NASDAQ: JRCC) and Peabody Energy (NYSE: BTU) to Neutral from Buy.
Deutsche Bank lowered New York Times (NYSE: NYT) to Sell from Hold.
According to people familiar with the matter, the Wall Street Journal reported that an investor group that includes Harbinger Capital Partners is expected to report a raised stake in The New York Times Company (NYSE: NYT). The raised stake is expected to be close to matching the 19% stake owned by the Sulzberger family.
The Goldman Sachs Group Inc (NYSE: GS) has been spared many of the problems of the subprime mortgage crisis, but other areas where it's involved, such as investment banking and leveraged loans, are hurting the firms profitability, the Wall Street Journal reported.
OTHER PAPERS:
Cablevision Systems Corporation (NYSE: CVC) is seeking to put a valuation on its Rainbow Media unit, in order to possibly sell it, sources say. In the past, the unit, which consists of several cable channels, has been valued at $3B, but the Dolan family is hoping to obtain a higher price, according to the New York Post. Possible buyers include Liberty Media Corporation (NASDAQ: LCAPA) and News Corporation (NYSE: NWS).
Elan Corporation (NYSE: ELN) is considering splitting its biopharmaceuticals arm, which markets Tysabri, from its drug technology division, the Sunday Times noted. The potential spin-off could unlock up to $1.5B to share holders.
Shares of The New York Times Co. (NYSE: NYT) are trading higher today after the company posted a second-quarter profit of $21.1 million, or 15 cents per share. NYT's adjusted profit came in at 26 cents per share, beating analysts' estimates of 22 cents per share. The company also annouced an increase int eh newsstand price from $1.25 to $1.50. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on NYT..gif){kind=logo}
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