Monday, August 18, 2008

Morningstar: McClatchy stock is overvalued... analysts expect 4.7 percent annual revenue decline over next 5 years

Analysts at Morningstar say McClatchy and other newspaper stock are overvalued. Editor & Publisher:
Morningstar said The McClatchy Co. stock has a fair value of just $1.95, but Monday its shares (NYSE: MNI) were trading at $4.26, up 7 cents, or 1.67%, from the opening.

"McClatchy doubled down its bet on the future of newspapers with the $4.6 billion acquisition of Knight Ridder in 2006," Morningstar wrote. "The $2.5 billion in extra debt assumed in the deal only exacerbated McClatchy's shaky financial footing. Barely a year passed before McClatchy had to write down $3 billion of the acquisition's purchase price. Another problem in the current environment is McClatchy's outsize exposure to California and Florida, with their floundering housing markets. We expect McClatchy to see 4.7% annual revenue declines over the next five years and only irregular profitability."


Anonymous said...

Wow, from a high of $76 in 2005 to an evaluation today by Morningside that puts the market value of the stock at under $2. Ironically, Gary Pruitt last December said Wall Street would eventually wake up and fairly value the company. Looks like that is happening, and not the way he intended.
This has been such a sorry merger with KR, and such a sorry outcome for MNI employees who now face yet another round of layoffs next month (if rumors are correct.). I think MNI needs now to make even more radical cuts now to prevent further cuts later, and also reassess Pruitt's future employment. He's made the problem worse with his rosy forecasts. They have all turned sour and a cleanup of the top of this company might reassure Wall Street of MNI's future viability.

Kevin Gregory said...

Morningstar pins McClatchy's crushing debt on the Knight-Ridder deal, which Pruitt engineered. (Pruitt also got a sweet $1 million bonus for overseeing the deal... nice for him, huh.)

Pruitt rightly gets alot of the blame for McClatchy's mess. I agree about Pruitt neeeding to go. The guy who got you in the hole isn't the guy to lead you out.