Some individual newspapers may still be tallying nice profits, but the overall industry outlook is not terribly encouraging in the near term, and this gloomy view has affected Wall Street's view of
the entire sector. Goldman Sachs several days ago said it could not recommend newspaper stocks to investors; they's weak and will get weaker, said the investment advisory firm. Summarizing Goldman's
advice,
Editor & Publisher said, "The group has a way to fall--a correction of 16 percent is necessary--before the stocks are considered a value." Quoting Goldman's note on the
subject: "In our view, valuations have not yet reached the level where investors are 'paid to wait' for a cyclical bounce in industry growth." Given the "ever-increasing fragmentation
in the local media marketplace, we believe we are experiencing a permanent downward shift in valuation levels." Goldman concludes that the sector is still too expensive and operating fundamentals
remain "sloppy." Furthermore, there is little hope for significant consolidation in the industry. Only two major companies, Tribune and Gannett, are not controlled by families.
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