A Diamond in the Rough

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An investment inspiration

Written by Brook Schaaf

Affiliate Slack star Mike McNerney (“He of Three E,” as I call him) recently shared an investment recommendation on Seeking Alpha (free registration) that caught my attention.

The author, Lawrence Fuller, argues that Gannett, which owns Reviewed by USA Today, is undervalued because its multiple is trading below that of competitors — specifically an EV/EBITDA (the ratio of Enterprise Value to Earnings Before Interest Tax Deductions and Amortization) of 4.7, compared to 18 for The New York Times, 11 for News Corporation, and a median of 10 for the sector.

Despite Gannett’s debt and the legacy business, the author contends that future monetization opportunities abound, going so far as to claim that its 185 million-plus users “makes Gannett one of the largest ‘influencers’ there is today.”

This seems to me a dubious claim insofar as influencers are traditionally personalities — though eyeballs are still eyeballs and, of course, Gannett could potentially give a platform to such personalities, perhaps as employees or through a joint venture, as Forbes Marketplace has arranged.

Affiliate monetization is presented as part of a “triple tailwind for 2023” along with cost cuts and lower commodity prices, though the exact terms were not, to my knowledge, publicized.

While other numbers in the piece are very specific (including debt carrying costs, market cap, and revenue), the term “affiliate” comes off as a sort of halo. This makes me wonder if affiliate is becoming a positive concept for publishers that try it out, something between a panacea and a nostrum.

Nonetheless, there is money to be made in affiliate monetization, and time will tell how much, just like the little stock bet I just placed.

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