We recently published a list of the 12 Best News and Digital Media Stocks To Buy. In this article, we are going to look at where Gannett Co., Inc. (NYSE:GCI) stands against other news and digital media stocks to buy now.
American Consumers and Digital Media
Digital experiences comprise a significant part of consumers’ lives in today’s digital age. According to Deloitte, consumers spend an average of eight hours engaging in online activities every day, which makes up about half of their waking hours. These trends are more prominent among Gen Z and millennials, who spend around nine hours on average on online activities every day. In contrast, Gen X and boomers spend around seven and six hours on average daily, respectively.
Around 7 in 10 respondents claim that they go online daily to use social media, carry out general web browsing, or communicate with their friends and family. 74% of Gen Z and millennials check their social media several times every day, with 20% of Gen Z checking their feeds at least every hour. In contrast, 57% of Gen X and 39% of boomers check their social media multiple times a day.
61% of consumers surveyed said that they interact with digital media daily by consuming entertainment (watching movies, sports, or television) on a streaming service. Similarly, around 48% said they listen to a podcast or music daily.
A study by Deloitte shows that US households spent around $760 on average on acquiring connected devices in 2024, down from $800 in 2023. Consumer technology spending fell between 2022 and 2023, primarily due to pandemic-driven supply chain disruptions, higher inflation, and slower economic growth.
However, estimates show that this spending is expected to bounce back, experiencing a 1% growth in revenue in 2024 and an extra 4.4% growth in 2025. Deloitte’s 2024 Connected Consumer Survey corroborates this claim, as it shows that 28% of respondents have plans to increase their device spending in 2025, up from 9% in 2023. In contrast, around 23% of people are planning to reduce their device purchase spending, up from 7% in 2023. This trend is attributed to the ongoing financial pressures on US consumers.
Are Americans Losing Interest in News?
Recent Pew Research Center surveys show a falling number of US adults who follow the news closely. Consumers for several older types of news media, such as local television stations, public radio, and newspapers, are dwindling as well. However, audiences for a few particular media brands are increasing, including newer digital platforms such as podcasts and social media.
According to a 2023 Pew Research Center survey, nearly 50% of all US adults claimed that they sometimes get news from social media. Although those who use social media to get news like various things about it, such as speed, convenience, and preciseness, some consumers express concerns about the practice. They claim news attained from social media isn’t always accurate, is seldom low in quality, and tends to be politically biased. Inaccuracy is increasingly becoming the most disliked aspect of social media news, going from 31% who said the same to 40% in the past five years.
Similarly, an Ernst & Young (EY) report on key entertainment and media trends for 2024 showed that consumer dissatisfaction with paying for unused television channels was leading to the rise of streaming services. Such services allowed households to personalize their content and reduce costs simultaneously.
Media companies are now facing the challenge of maintaining a profitable balance between traditional cable and linear broadcast networks and streaming platforms. Digital media companies are also employing artificial intelligence to regulate their operations, boosting incremental growth and productivity. However, risks regarding the implementation of GenAI persist. These include intellectual property protection, creative industries’ job security concerns, and privacy and accuracy challenges.
Our Methodology
To compile our list, we consulted online sources and ETFs to select 15 top news and digital media stocks. We then chose the top 12 stocks that were the most popular among hedge funds. We sourced the hedge fund data from Insider Monkey’s database. The stocks are arranged in ascending order of the number of hedge funds that hold stakes in them.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Gannett Co., Inc. (NYSE:GCI)
Number of Hedge Fund Holders: 28
Gannett Co. (NYSE:GCI) is a diversified media company that operates through the Newsquest, Domestic Gannett Media, and Digital Marketing Solutions (DMS) segments. The Domestic Gannett Media segment operates USA TODAY. The company operates the Newsquest segment in the UK, which comprises more than 220 digital news and media brands across its portfolio. This includes over 150 weekly and daily newspapers and over 70 magazines. Gannett Co. (NYSE:GCI) also offers digital advertising and marketing solutions.
The company’s digital revenue categories saw strong growth in fiscal Q3 2024. As a result, its total digital revenues surpassed 45% of total revenues, marking an all-time high for the company. It also generated around $20 million of free cash flow, showing a 168% increase compared to 2023.
Gannett Co.’s (NYSE:GCI) audience also experienced growth in fiscal Q3 2024, surpassing 200 million average monthly unique visitors for the first time in the company’s history. This reflects a 7% growth compared to 2023. The primary drivers of audience growth for the company in fiscal Q3 2024 included political events, the kickoff to football season, and the Paris Olympics.
The company’s digital-only subscription business is also bringing new highs. Its revenue surpassed $50 million in fiscal Q3 2024, and the average digital-only revenue per unit (ARPU) exceeded $8. Investors are bullish on the stock as this segment suggests considerable upside for the company through both pricing and volume growth. Fiscal Q3 2024 marked the company’s second consecutive quarter of year-over-year subscription growth, along with another quarter of sequential growth in digital-only paid subscriptions.
Miller Deep Value Select Strategy stated the following regarding Gannett Co., Inc. (NYSE:GCI) in its Q3 2024 investor letter:
“During the quarter, our two largest positive contributors were Gannett Co., Inc. (NYSE:GCI), whose market share price up 20% and United Natural Foods (UNFI), with a market share price up 31%. Gannett continues to make progress with their long-term transformation to a digital media company. Management expects digital revenues to become more than 50% of company sales over the coming year which would support the company’s return to annual revenue growth. In September, the DOJ presented a very strong case against Google for their Ad Tech business. Gannett’s anti-trust case against Google is very similar to the DOJ case, and we believe it remains overlooked by the marketplace. Gannett is being represented by Kellogg Hansen who won the two largest anti-trust verdicts ($1.2B and $1.3B) and were also successful in defending the appeals of those verdicts. While it is impossible to know with certainty the outcome of Gannet’s legal case, we find it interesting that Kellogg Hansen’s only compensation is tied to Gannett having success in winning their case. This is an important indication of alignment to us. In a scenario where Gannett wins a verdict in the neighborhood of the amount they are seeking, it may mean a windfall greater than all the net debt on the balance sheet. Assuming, as we do, that the current share price has not priced in such a development, the result would be a share price below two times normalized Enterprise Value to EBITDA (EV/EBITDA). Compared with The New York Times, which currently trades at greater than nineteen times EV/EBITDA, a valuation at half of that multiple on normalized EBITDA would support an equity market cap more than $4B for Gannett. While there are risks of temporary setbacks with multi-year transformations, the current market valuation framework appears to remain focused on the company’s historical secular growth challenges. The biggest near-term risk would be unexpected weaker trends in print advertising, creating greater near-term secular revenue headwinds. A successful transformation, positive anti-trust case verdict, and potential non-core asset sale could lead to significant upside over time. We believe the shares remain significantly mispriced at only .3 times revenue and greater than 40% normalized free cash low yield.”
Overall, GCI ranks 10th on our list of the best news and digital media stocks. While we acknowledge the potential of GCI to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than GCI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
