CuriosityStream (NASDAQ: CURI) operates a factual streaming service in over 175 countries and was founded in 2015. It went public in 2020 through a special purpose acquisition company (SPAC), but is this small-cap company a good investment?

The bull case for CuriosityStream:

The streaming services market is set to grow at a compound annual growth rate of 21% between 2021-2028. COVID-19 has meant that increasing numbers are turning to online streaming platforms instead of cable TV, and CuriosityStream should continue to benefit from this shift in the coming years.

CuriosityStream is the only public factual streaming company and has a unique opportunity to dominate in this niche. It has over 3,100 episodes in its library, with approximately one-third originally produced and some of which have won major awards and featured celebrities such as Stephen Hawking and Sir David Attenborough.

CuriosityStream's focus on factual content is more cost-effective than dramas or movies and can be produced for roughly one-tenth of the cost. This allows it to produce content and compete with larger players and attract subscribers by undercutting the competition. In 2020, the number of subscribers on the platform grew by 50% year-over-year (YoY) to approximately 15 million and has jumped more than ten-fold since 2018. 

It has several revenue streams, with two-fifths of revenue currently coming from direct to consumer and corporate and educational partnerships. It plans to target Fortune 500 companies and colleges with long-term contracts to create a predictable source of income with an estimated market opportunity of $20 billion. A further 35% of revenue is generated by bundled distribution with partners such as Sky, which increases its subscriber count significantly. An additional 15% of revenue in 2020 was generated through program sales to partners such as Prime Video and Apple TV with the remainder coming from advertising. As it builds its library and, it will become more attractive to both partners, consumers, and advertisers, which should fuel growth. 

CuriosityStream reported revenue of $39.6 million in 2020, an increase of 120% YoY, and management stated that it would "definitely hit our full-year numbers" in 2021 of 80% growth. Its gross margin in 2020 was an impressive 61%, which is higher than other streaming platforms such as Roku and Netflix. Management forecasts approximately $400 million in revenue by 2025, with the direct and bundled revenue streams making up over half of this. 

John Hendricks is the founder and chairman of CuriosityStream. Hendricks has a successful track record in the space, having founded and grown Discovery Channel and built a media empire with Discovery Communications. He is also the largest shareholder with approximately 44% ownership, meaning that his interests will be aligned with shareholders and is a positive sign for investors. CuriosityStream is led by CEO Clint Stinchcomb, who has over 25 years of experience in traditional and digital media. Stinchcomb previously worked at Discovery Communications with several other executives. 

The bear case for CuriosityStream:

CuriosityStream is unprofitable, reporting a net loss of $38 million in 2020, compared to $42 million in 2020. It is a long way from profitability but is investing heavily in the business to grow and build brand awareness. 

CuriosityStream is also very small compared to its larger competitors, with a market cap of roughly $800 million, and the stock is likely to be volatile. There are a growing number of competitors in the space, and companies like Disney and Netflix have more significant market share. Disney+ has National Geographic and the Discovery channel also pose a threat. These competitors have larger cash reserves than CuriosityStream that it can use to enter or expand its offering in the factual streaming space. 

There is also a concentration risk which is not unusual with smaller companies but is certainly worth watching. Its top three customers accounted for 41% of revenue in 2020, with one customer making up 26% of revenue, and if it were to lose one of these, it would negatively impact the company.

So, should I buy CuriosityStream stock?: 

CuriosityStream looks highly promising, but investors may want to wait to see at least two quarters as a public company before investing. Currently, it looks like one for the watchlist and may warrant an addition if management can demonstrate its ability to execute in the coming quarters. 

Quickfire Round:

Is CuriosityStream publicly traded?

Yes, it started trading on the Nasdaq on October 15, 2020.

Where is CuriosityStream headquartered?

It is headquartered in Silver Spring, Maryland, United States. 

What is CuriosityStream's ticker symbol?

Its ticker symbol is CURI.

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