When you look at the streaming space you might think of companies such as Netflix (NASDAQ: NFLX) , Disney (NYSE: DIS), Amazon (NASDAQ: AMZN), or even Roku (NASDAQ: ROKU). However, there is one small-cap company in this space that is gaining traction and has the potential to generate multifold returns for long-term investors.

Here, we take a look at several key metrics of CuriosityStream (NASDAQ: CURI) and the company’s growth potential to evaluate if the stock should be part of your portfolio.

 

An overview of CuriosityStram

CuriosityStream was launched by the founder of Discovery Channel John Hendricks in 2015. This streaming company currently has 3,000 fact-based programs that span across various categories including nature, society, history, and science among many others.

CURI has a hybrid business model as it offers DTC (direct-to-consumer) subscriptions while partnering with streaming companies such as Hulu and Amazon Prime Video. It has also bundled with pay-TV subscriptions in several countries.

In short, CuriosityStream has a multi-layered approach to generate sales. Last year, less than 50% of total sales were derived from the DTC channel including sales from channel distribution partners such as Roku. The rest was from distribution deals with providers such as Liberty Global and India-based Tata Sky Binge. These collaborations will help it improve its subscriber base and gain traction in several international markets.

In 2020, the company increased subscriber growth by 50%. Its sales have risen from $18 million in 2019 to $39 million in 2020. Analysts now expect CURI to increase sales by 79% to $71 million in 2021 and by 73.6% to $123.25 million in 2022. Its also expected to improve its bottom-line from a loss per share of $2.77 in 2020 to a loss of $0.31 per share in 2022.

On June 18 2021, CURI stock lost close to 15% in market value due to a double downgrade initiated by the Bank of America. BofA Securities maintained a price target of $14 on CURI stock while downgrading it from buy to underperform. According to the brokerage house, the company’s stock had doubled in the prior month making it overvalued with significant downside potential. CURI stock is currently trading at $11 which is 52% below its record high.

 

What next for CURI stock?

CuriosityStream has made a name for itself as a leading provider of educational content in the streaming space. Earlier this year, the stock was added to the Russell 300 which is one of the most popular indexes for small-cap stocks.

During its Q1 earnings call, CuriosityStream confirmed it has already contracted around 90% of expected sales for 2021. However, content creation is really expensive and may impact the company’s gross margins going forward. As CuriosityStream is a fairly new platform, it will also spend heavily on marketing and advertising.

CURI missed earnings estimates in Q1 by 95% after it reported a loss per share of $0.39 in the March quarter. Further, competition from established players and media companies entering this space is all set to intensify, given the cord-cutting phenomenon has been accelerating in the last few years. There is a good chance that CuriosityStream will become a target for potential acquisition as well.

Curiosity Stream has a market cap of $584 million which means its price to 2021 sales multiple is less than 8x which is not too shabby for a growth stock. CURI stock is trading at a discount of 65% compared to its 12-month average trading price.

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