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Goldman Sachs On Newspaper Stocks

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A Wall Street observation on the obvious from the GS “AM Daily”:

14. The impact of lower newsprint prices – Publishing News & Views

Lower Demand driving softening newsprint prices

After several years of significant increases, we believe the upward pressure on newsprint prices will ease in 2007. While this alone will not dramatically alter the challenging near-term economics facing newspaper publishers, it is a rare bit of good news for an industry that has been lacking in this commodity (i.e. good news, not newsprint!) for some time. Unfortunately, the more favorable dynamics in newsprint pricing are largely a result of declining consumption due to soft circulation, weak ad trends, and efforts taken by the newspaper companies to lower waste and shrink the size of the print newspaper rather than increases in capacity. Our bottom line: While stabilization in newsprint prices is clearly a positive, in the absence of an uptick in revenue trends, we’d continue to avoid the newspaper stocks. In the following pages we examine the economics of newsprint and explore which companies have the greatest leverage to changing newsprint price dynamics.


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