With the improvement in the economic environment, murmurs about advertisers returning to the market are gaining strength. Gannett Co. Inc. (GCI) is expected to benefit from positive trends that are emerging in both print and digital advertising with the advertisers’ spending gaining pace.This prompts us to upgrade our recommendation on Gannett, the diversified media conglomerate, to Outperform from Neutral with a target price of $16.00.
The rate of fall in publishing advertising revenue has been decelerating since fiscal 2009, and continues to shrink in fiscal 2010 as advertising demand firms.
The significant potential risk is the company’s high dependence on advertising revenue, which is driven by the health of the economy. To mitigate this, Gannett like The New York Times
Company (NYT) is transmuting its business model by adding diverse revenue streams to hedge against economic cycles.Gannett is adapting to the changing face of the multiplatform media universe, which currently includes Internet, mobile, social media networks and outdoor video advertising in its fold.
Consequently, we believe that these factors may result in the company delivering better-than-expected second-quarter 2010 earnings. Gannett is scheduled to report its second-quarter earnings on July 16, 2010.
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