Streaming Expansion And Global News Demand Will Shape A Stronger Long Term Outlook

Catalysts

About Newsmax

Newsmax operates a multi-platform news and information business spanning cable, streaming, digital, print and international licensing.

What are the underlying business or industry changes driving this perspective?

• Ongoing shifts in audience behavior toward connected TV and OTT viewing align with Newsmax2’s strong double-digit viewership growth. This positions the company to capture higher digital ad budgets and improve total revenue growth as CTV CPMs rise.
• Industry demand from MVPDs and virtual distributors for live news to offset cord cutting supports continued affiliate fee rate increases from a still-low base. This drives high margin affiliate revenue expansion and improves overall net margins.
• Rising global appetite for differentiated, values-driven news content underpins the scaling of Newsmax en Español, Newsmax Balkans and other international partnerships. These can add new high contribution revenue streams without fully proportional cost growth, supporting earnings leverage over time.
• Accelerating consumer adoption of direct to consumer streaming subscriptions supports the build out of Newsmax+. Deeper content libraries and exclusive channels like World at War can lift ARPU and reduce churn, which may drive higher recurring subscription revenue and more predictable cash flows.
• Structural fragmentation of legacy media and advertisers’ need for targeted, multi-platform reach favor Newsmax’s integrated digital backbone and 22 million plus social followers. This enables better monetization of cross-platform campaigns and ancillary products, which can enhance revenue diversification and smooth EBITDA volatility.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Newsmax's revenue will grow by 13.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from -60.2% today to 4.9% in 3 years time.
• Analysts expect earnings to reach $13.1 million (and earnings per share of $0.1) by about December 2028, up from $-111.1 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $16.1 million in earnings, and the most bearish expecting $3.3 million.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 259.7x on those 2028 earnings, up from -11.3x today. This future PE is greater than the current PE for the US Media industry at 16.0x.
• Analysts expect the number of shares outstanding to grow by 0.73% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.96%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The news cycle and advertising demand are structurally tied to election intensity, so a prolonged period of lower political engagement or fewer galvanizing events could cap advertising price growth and keep advertising revenues subdued relative to expectations, limiting overall revenue expansion.
• Newsmax is increasing production, programming and personnel spending at a time when adjusted EBITDA has already swung from a positive $4.4 million to a negative $1.8 million. If these content and talent investments fail to deliver corresponding audience and pricing gains, net margins and earnings could remain negative for longer than anticipated.
• The strategy depends heavily on favorable affiliate fee renegotiations with MVPDs and streamers in a shrinking pay TV ecosystem. Any pushback on rate increases, loss of carriage or slower than expected renewal cadence could stall affiliate revenue growth and constrain total revenue and earnings.
• Although Newsmax2 and Newsmax+ are benefiting from the secular shift to CTV and OTT, competition from much larger news and entertainment platforms for viewers and ad dollars may make it difficult to sustain double-digit streaming growth. This would weigh on digital advertising revenue, subscription revenue and the pathway to scale-driven margin improvement.
• The model relies on monetizing a large digital and social footprint and cross-selling books, magazines and other products. However, social platforms share limited economics and publication subscriptions are already flat to down, creating a risk that ancillary and direct-to-consumer monetization underperforms and leaves overall earnings and net margins below bullish expectations.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of $21.0 for Newsmax based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be $266.5 million, earnings will come to $13.1 million, and it would be trading on a PE ratio of 259.7x, assuming you use a discount rate of 7.0%.
  
• Given the current share price of $9.71, the analyst price target of $21.0 is 53.8% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.