By: Mark Fitzgerald
Stock in E.W. Scripps is unlikely to swoon dramatically because the market has largely priced in its pessimism about the newspaper industry’s future, Goldman Sachs suggests in a report released late Thursday.
“After significant selling pressure from the historically growth-oriented Scripps investor base, we believe the grim outlook for the Scripps traditional media properties is largely priced into the shares,” wrote analysts Peter Appert and Stephanie Withers.
When Scripps split its company in two on July 1 — with its high-flying lifestyle cable networks and online properties in a new company called Scripps Networks Interactive — investors sold off shares in E.W. Scripps — which will operate newspapers, local broadcast and the United Media syndication home of “Dilbert” — in volumes more than 10 times the normal trading
The Goldman Sachs analysts rated E.W. Scripps “neutral,” saying that at 3.8 times estimated 2008 cashflow, the long-term structural changes impacting traditional media such as newspapers, plus the cyclical pressures on advertising, are mostly priced in the share price.
They note that the industry average for stock shares is about 5.5 times EBITDA (earnings before interests, taxes, depreciation, and amortization.)
Goldman Sachs introduced a post-spin-off 12-month price target of $3.50 a share, suggesting an upside of about 8%.
Scripps (NYSE: SSP) ended trading Thursday at $3.21, down 4 cents, or 1.23%.