Should You Buy Shares of This Streaming Company Right Now?

Shares of CuriosityStream have declined by 73% from all-time highs and might be an attractive bet for contrarian investors right now.

In the past few years, several streaming services have been introduced to the global populace. While Netflix remains the undisputed leader in this space, heavyweights such as Apple, Amazon, and Disney have recently entered the streaming market. The COVID-19 pandemic acted as a massive tailwind for streaming providers, and the cord-cutting phenomenon should also increase subscriptions over time.

Keeping these factors in mind, let’s see if CuriosityStream (NASDAQ: CURI), a small-cap streaming company, should be part of your portfolio right now.

The bull case for Curiosity Stream

Valued at a market cap of $303.6 million, CuriosityStream is a streaming platform that aims to create a niche in the educational content vertical. It provides video programming services in categories including history, science, nature, and society.

The company increased sales from $18 million in 2019 to $39.6 million in 2020. In Q3 of 2021, its sales more than doubled to $18.7 million, compared to just $8.7 million in the year-ago period. It ended Q3 with 20 million paying subscribers, an increase of 43% year over year. 

Further, CuriosityStream reported an EBITDA loss of $7.9 million compared to a loss of $6.7 million in Q3 of 2020. In 2021, CuriosityStream estimates sales of at least $71 million which indicates a growth of 80% compared to 2020.

In Q3, the company entered into a strategic partnership with Nebula, the world’s largest creator-owned streaming platform. Nebula has over 140 active creators, 350,000 paying subscribers, and 120 million subscribers on YouTube. It also disclosed a multi-year distribution partnership with fuboTV providing it access to live streaming.

The bear case for CuriosityStream

CuriosityStream remains unprofitable and ended Q3 with a cash balance of $80.84 million. While analysts forecast CURI to narrow its loss per share from $2.77 in 2020 to $0.51 per share in 2022, the company might have to raise additional capital to support its high cash burn rate, which will dilute shareholder wealth and drag share prices lower.

CuriosityStream will also find it challenging to compete with tech giants that have unlimited resources to fund their expansion plans, create original content and enter new markets. Content production is a capital-intensive process but is equally necessary for streaming providers to acquire and retain subscribers.

So, should I buy CuriosityStream stock?

CuriosityStream is forecast to grow revenue to $122.8 million in 2022, valuing the stock at a forward price to sales multiple of less than 3x, which is quite reasonable. CURI stock is down 75% from all-time highs and is the perfect contrarian bet at current valuations. Further, the company might also be viewed as an attractive acquisition target given its beaten-down stock price.

Wall Street is bullish on CURI stock and has a 12-month average target price of $15.5, almost 200% above the current trading price.

Quickfire round

What is CURI’s market cap?

CURI stock has a market cap of $303 million.

Is CuriosityStream profitable?

No CuriosityStream is still reporting an adjusted loss.

Is CuriosityStream publicly traded?

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