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Is New Media's Massive Selloff Rational? Citi Answers

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In a report published Monday, Citi analyst Jason B Bazinet maintained a Buy rating on New Media Investment Group Inc (NASDAQ: NEWM), with a price target of $37.

New Media's share price has declined from $22.48 to $18.72, implying a reduction of $168 million in enterprise value. The decline appears to be driven by the revelation that the company does not include tuck-in acquisitions in its same store sales.

"By adjusting year-ago revenues for tuck-ins, we estimate that New Media's top-line is likely compressing by about 300bps per annum," analyst Jason B Bazinet pointed out.

Bazinet views the decline in equity as surprising since the investors appear to have ignored the impact of New Media's incremental non-NOL based tax assets. "We estimate the value of these assets almost fully offsets the decline in top-line expectations," the report added.

"We believe that New Media's shares will rebound from these levels for two reasons. First, our analysis suggests unless 80% (or more) of New Media's investor base was unaware of the same-store sales definition, then the shares have overreacted to our note. Second, we believe that eventually, the Street will likely give credit to the firm's incremental tax assets," Bazinet mentioned.

Latest Ratings for NEWM

DateFirmActionFromTo
Jul 2019UpgradesNeutralBuy
Mar 2019UpgradesSellNeutral
Sep 2016DowngradesOutperformMarket Perform

View More Analyst Ratings for NEWM
View the Latest Analyst Ratings

Posted-In: CitiAnalyst Color Reiteration Analyst Ratings

 

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