CURI Stock: Why This Streaming Company Is a Top Buy!
July 27 2021 - 5:51AM
Finscreener.org
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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