Liberum initiated coverage of newspaper and magazine publisher Reach on Tuesday with a ‘buy’ rating and 475p price target as it said the shares have done well in recent months, but are at the start of the next growth phase.
“We believe that Reach can attain an inflection point at which growth in digital begins to offset declines in print faster than the market is currently anticipating,” the broker said.
“Print advertising is structurally declining but is profitable and cash generative and, considering that the cohort of customers who purchase newspapers have circa 10-15+ years before they are essentially underrepresented, there are sufficient cash flows to fund investment into growing digital.”
“Liberum also noted that circulations are resilient given the habitual nature of buying newspapers and are “relatively inelastic in essence”.
The broker sees low/mid-single-digit declines moving forward.
