By: Jennifer Saba Prudential Securities analyst Steven Barlow predicts the real growth story for newspapers this year will "involve targeted local advertising."
In a report issued today, Barlow sung the praises of niche publications, which he thinks will be the underlying driver for the industry.
Other growth spurts: Help-wanted advertising is expected to increase 7.5% after a 10% gain in 2004. And though hard to pinpoint since many newspaper companies are beginning to consolidate online operations, Prudential forecasts more than 30% growth for online advertising.
Overall, Barlow's advertising estimates remain cautious for the year because the "advertising market is not expected to fire on all cylinders." Furthermore, the circulation boogeyman is still hanging around. There's some fear that the impact of last year's scandals will spook advertisers and cause them to reconsider budgets and media placement within newspapers.
The report forecasts 4.7% ad growth for the industry after 4.2% expected growth in 2004. Retail is expected to be up 4%, national climbing 3.5%, and classified is expected to be up 6.3%.
The real sore spot might be the national advertising category. Barlow's 3.5% growth estimate is considerably lower than 2004's 5% projection and 2003's 8.1% projection. "If last year's circulation scandals have any fallout in terms of advertising spending, it will likely be captured in the national category as large sophisticated advertisers reconsider the value of print media," the report said.
It's unlikely that publishing stocks will outperform the broader market in 2005. Prudential maintains its "neutral" rating on the group but recommends Dow Jones and Knight Ridder, both rated as "overweight."
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