Shares of The New York Times (NYT) have been at the bottom of Wall Street's reading list for some time now, but that's likely to change. Although most analysts remain skeptical, a few have turned upbeat and some investors are nibbling on the stock.

Already the stock has picked up some speed since tumbling to $5.98 on Apr. 30, 2012. With the stock is now trading at more than $9, it's starting to catch the eye of some value investors scouting for depressed media stocks whose prospects over the long haul are changing fast -- for the better.

It's true that advertising sales have slumped over the years, driving down total revenue from $3.19 billion in 2007 to $2.32 billion last year, with some analysts now forecasting a further decline in 2012, to $2.07 billion. And operating earnings, which totaled $492 million, or 76 cents share, in 2007, have dropped to $347 million, or 67 cents a share last year, according to S&P Capital IQ.

Diverse revenue stream

But there are reasons to buy the stock, according to Zacks Investment Research, which has raised its recommendation on the New York Times to an "outperform" on Aug. 8, 2012, from its "neutral" rating on July 4, 2012.

"The company has been adding diverse revenue streams which include circulation pricing model and a pay-and-read model for the NYTimes.com, International Herald Tribune, and BostonGlobe.com to make it less susceptible to economic conditions," says Zacks in a recent report on the publishing company.

Equally important, The New York Times is also adapting to the changing face of the multi-platform media universe, which now includes mobile, social media networks, and reader application products in its portfolio, notes Zacks.

Potential buyout

Some analysts believe the recent appointment of British Broadcasting Corp. chief Mark Thompson as its next CEO is part of a hidden agenda of Chairman Arthur Sulzberger Jr. to spruce up the company and make it palatable to potential suitors. Although Bloomberg reports that the company has denied that the company is for sale.

Of course, there is nothing to be gained for any company intending to put itself up for sale to acknowledge in advance that it is hatching such a plan. Nonetheless, the Times company has enough cash to take itself private, according to Bloomberg.

Usually, rumors on such going-private ideas are difficult to quell, especially in the case of the beleaguered New York Times whose sales, earnings and stock price have been depressed for some time now.

Potential reinstatement of dividend

This, along with other factors, is making the positive spin on the Times as an appealing stock to buy a more enticing proposition for some value investors. Another positive issue adding to the recent upbeat view on the stock is the possibility of reinstating the dividend which the company eliminated in 2008.

"Over the next few quarters, we expect the appointment of a new CEO and potential reinstatement of the dividend to be triggers over and above the continued gain in digital subscribers," argues Kannan Venkateshwar, the U.S. Special Opportunities analyst at Barclays Capital. Although Barclays has an "equal weight" rating on the stock, which is equivalent to a neutral stance, the analyst praises the success that the NYT has had with digital subscription gains without any corresponding losses on the print side.

Such gains have been "unmatched by any other company thus far and this has mainly been driven by the strength of NYT's content and brand," says Venkateshwar. "In our opinion, it is unlikely that others attempting this transition will attain the same degree of success as NYT, and therefore we expect NYT to trade at a premium to its peers," such as Gannett (GCI), the largest U.S. publisher, in spite of the latter's broadcast business, he says.

The Barclays analyst expects the Times to reinstate the dividend over the next couple of quarters, which should help boost the stock. He estimates that with the company's cash stash of $570 million, the Times may start with a relatively conservative payout ratio of about 20%, which implies a dividend of 19 cents a share and a dividend-yield of 2.5%. He notes that the dividend payout ratio for NYT was 15% to 30% during normalized years before the financial crisis.

Improving financials

The company remains committed to reducing its debt load through cash generated from operations and divestitures. In efforts to offset the declining revenue and shrinking market share, the Times "has been realigning its cost structure and streamlining its operation to increase efficiencies which have contributed to improved operating performance," says Zacks. The company ended the second quarter with net debt of $206 million, down from $343 million at the end of the first quarter.

Part of Zacks' optimism on the Times stock is the company's positive 2012 second quarter results. The quarterly earnings of 14 cents a share beat Zacks' consensus estimate by a penny, and rose 27.3% from 11 cents earned in the prior-year's quarter.

"The quarter reflects favorable response to the digital subscription and iPad application," notes Zacks. The company has introduced a plan of 99 cents under which a reader will be able to enjoy all digital offerings for one month. Online visitors, however, aren't allowed to access more than 10 free articles a month.

The Times has been selling non-core assets, including its remaining stake in the Fenway Sports Group, which it sold in May 2012, and the Regional Media Group, to refocus on its major newspapers and its online operations. Plans are afoot to also sell its About Group, consisting of websites of several websites, including About.com that mainly focuses on delivering content personally relevant to its users' needs, and ConsumerSearch.com, which recommends products based on its analysis of consumer product reviews. The Times has confirmed that it is in talks with certain parties to sell the About Group.

Bottom line

The Times' big strides and advance in its digital operations undoubtedly put the company ahead of many of its peers. Based on its fast growing stream of revenues from digital subscription, "we expect the growth in digital circulation revenues to more than offset the declines in the company's print advertising revenues," says Barclays' Venkateshwar.

"That is a "material milestone, in our view, especially with respect to the company's business model."

Gene Marcial wrote the column “Inside Wall Street” for Business Week for 28 years and now writes for MSN Money’s Top Stocks. He also wrote the book "Seven Commandments of Stock Investing," published by FT Press.