The advent of the internet in the early 2000s wrecked havoc on traditional media, especially newspapers. People slowly realized they don’t have to spend money to read the news when they can look it up online for free. As a result, advertisers realized they need to spend their ad budgets elsewhere. That elsewhere was increasingly Google and Facebook. As a result, traditional media outlets such a TV stations and newspapers suffered immensely. The New York Times was one of the most well-known victims of the internet revolution.
The future still looked bright when NYT stock climbed to a record of $53 a share in June 2002. Unfortunately for its shareholders, it then took it almost two decades to reclaim that level. By February 2009 the stock was trading below $3.50, down 93.5% from that 2002 high. Declines of over 90% usually mean something is terribly wrong with the company. And something really was terribly wrong at The New York Times as it struggled with declining reader numbers and revenue.
But The New York Times rose from the ashes like a phoenix. Despite the fact that its 2021 sales are still 37% below their 2006 level, the company is almost as profitable. The stock has also been doing much better as it reached a new record of $58.73 in January, 2021. Who would’ve thought that investing in a newspaper in 2009 would produce a 16-fold gain in twelve years?
However, the past year or so has been rather disappointing for The New York Times investors. The stock closed yesterday’s session at $45.25, up $8 per share from its bottom three months ago, but still down from its 2021 record. It is by no means cheap, though, as it trades at a forward P/E ratio of 39. Can investors still rely on the uptrend to continue or should they get more defensive? That is question we hope to answer with the help of the Elliott Wave chart below.
The weekly chart above depicts the 2002-2009 crash as well as the following rebirth of The New York Times Company. The structure of the latter is what we are more interested in now. It appears to be a five-wave impulse, whose fifth and final wave is still missing. Waves (1)-though-(4) are in place already with the five sub-waves of wave (3) visible as well.
There are several Fibonacci relationships between the waves within this impulse pattern. Wave (3) is 4.618 times longer than wave (1). Wave 2 retraces almost 61.8% of wave 1. Waves 3 and 5 are both 2.618 times longer than wave 1. And finally, wave (4) corrects 38.2% of wave (3). It also has a clear three-wave corrective structure, which gives us confidence to expect one last push higher in wave (5).
Wave (5) is supposed to exceed the top of wave (3), putting $60 a share within the bulls’ reach. From the current level of ~$45 a share this would be a 33% gain, give or take. On the other hand, the theory states that a three-wave correction follows every impulse. Reaching the $60 mark should not be seen as a reason to celebrate. Instead, it would be the bulls’ final chance to take profits. The corrective phase of the cycle is likely to drag NYT back to the support of wave (4) near $35 a share. This would be a 40+% decline most investors would rather avoid.
Before you dismiss all this as just meaningless scribbles on a chart, consider the following: this is the same pattern that led to, among others, the 50% crash in OneWater Marine and the 70% demolition of SNAP stock. After ten years of experience, we’ve learned to heed its warning.
Similar Elliott Wave setups occur in the Forex, crypto and commodity markets, as well. Our Elliott Wave Video Course can teach you how to uncover them yourself!