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Morgan Stanley analysts downgraded New York Times Company (NYSE:NYT) stock to Equal Weight from Overweight while reiterating a $37 per share price target.
The analysts are less optimistic about NYT stock following a recent underperformance in net additions. The company, which owns and publishes the popular word game Wordle, could struggle to capture the long-term opportunity, Morgan Stanley added in a downgrade note.
“Our prior Overweight thesis on NYT was based on our view that its leading position in a growing paid news market supports strong subscriber penetration, pricing power, and healthy long-term operating leverage as the business scales. The recent slowdown in net adds has elevated our concerns that the subscriber penetration opportunity has reached a greater level of maturity sooner than expected, and broader cyclical pressures could add incremental downside risks if overall U.S. consumer spending weakens,” the analysts wrote.
Overall, they see a more balanced risk-reward at current levels, hence a move to the sidelines. On the 2023 outlook, they believe the slowing penetration and near-term headwinds on advertising and licensing revenues could limit growth.
“We remain constructive on improving unit economics due to pricing opportunities and an attractive cost structure,” the analysts concluded.
New York Times stock is down about 2% today. Based on yesterday’s closing price of $33.46, NYT stock is down just over 30% year-to-date (YTD).
