San Francisco-based ValueAct said in a letter to investors Thursday that it now owns a 7% stake in The New York Times. It said it believed the current valuation doesn’t reflect the company’s long-term growth prospects in almost any potential economic environment and that management has several opportunities to offset the macroeconomic headwinds that face the industry.

Key to this growth will be a more aggressive roll-out of all its subscriber-only products, it said. Those products include the Athletic, as well as crosswords and games, cooking and news.

“Our research suggests that most current readers and subscribers are interested in the bundle and would pay a large premium for it, but are not aware the offering even exists,” ValueAct said in the letter, a copy of which was obtained by Bloomberg. “This is an opportunity we believe management needs to drive with urgency, as it is the biggest lever to accelerate growth, deepen NYT’s competitive moat, and ensure the long-term strength and stability of the platform.”

Revenue growth

The investment firm believes that, over the long run, there is potential for The New York Times to see strong double-digit digital revenue growth and see margins expand by up to three times, it said.

“We believe NYT may be one of the few consumer subscription businesses well positioned for the current environment,” ValueAct said. “They are in the early innings of penetrating a large, addressable market, can sustainably increase their customer lifetime value, are already solidly profitable, and have a much more attractive competitive environment.”

The company’s shares had fallen about 32% this year before Thursday. They rose as much as 12% and were up 10.8% to $35.11 at 2.11pm in New York trading, giving the company at market value of about $5.8-billion.

“We are aware that ValueAct has made an investment in the company,” a spokesperson for The New York Times said in an email, adding that the company speaks regularly with shareholders about strategy. “Members of our management team have had conversations with ValueAct to hear their views and share ours. The board and management team will continue to make decisions that we believe are in the best interest of the company and all company shareholders.”

A representative for ValueAct declined to comment.

The New York Times has been one of the rare success stories in publishing as it has built a large and growing digital subscription business. The company has 9.2 million subscribers and is targeting 15 million by 2027. Its advertising business, though, is slipping as marketers pull back spending in a weaker economy.

Earlier this month, The New York Times said second-quarter digital advertising revenue decreased 2% and it expects total advertising sales in the third quarter to be flat or down low single digits.

‘Generational Shift’

ValueAct said its research showed there is a competitive advantage at The New York Times. A bundle customer’s lifetime value is 2.5 times that of a new only-digital subscriber, it noted.

“A generational shift is under way where US consumers prefer to consume high-quality news digitally – across websites, social medial channels, mobile apps, podcasts, email newsletters, push alerts, and other surfaces – which can only be satisfied by a scaled franchise with a trusted brand like NYT,” ValueAct said in the letter.

“This shift creates tremendous competitive pressure,” it said. “While most of its fragmented competition is challenged for growth, NYT is building a bigger, more profitable, and more defensible business.”

ValueAct, founded in 2000, has pushed for changes at some of the largest and most prominent companies in the world, including Citigroup, Seven & i Holdings and Nintendo.