CuriosityStream (NASDAQ: CURI) is a streaming service with a mission to “satisfy humanity’s enduring curiosity” with premium factual content. The company operates in 175 countries worldwide and went public via a special purpose acquisition company (SPAC) in 2020.
After a somewhat volatile start to life on the public markets, these are the reasons I am buying this little-known streaming company.
A look at CuriosityStream’s financials
In Q1, 2021, revenue increased by 33% year-over-year (YoY) to $9.9 million with a gross margin of 58%. Its gross margin is better than other more established streaming platforms such as Netflix and Roku. It also has a relatively large cash pile of $178 million, which it will use to continue to invest in the business, and also has very little debt. Furthermore, management stated that it already has 90% of its $71 million revenue goal committed for 2021, which would equate to 80% revenue growth YoY.
What I like about CuriosityStream
CuriosityStream is benefitting from the cord-cutting trend, where the streaming industry is set to grow at a compound annual growth rate (CAGR) of 21% from 2021 to 2028. This leaves a massive opportunity for growth for multiple players.
The company estimates that its factual content costs as little as 10% of producing non-fiction content. This is critical due to its smaller cash reserves than larger competitors. It now has over 3,100 episodes in its library, with roughly one-third originally produced. This low cost allows the company to undercut other streaming players with its standard pricing of $2.99 a month or $19.99 annually.
The low cost has enabled it to expand its customer base, which grew by 80% YoY to 16 million in the latest quarter. It is also partnering with other streaming services such as Apple TV, Hulu, and more. Another area that it targets is colleges and educational partnerships with multi-year agreements, which would create a predictable revenue stream. It also targets bundled distribution, program sales, and advertising. In total, CuriosityStream has five different revenue streams to exploit, which it estimates represents a $390 billion opportunity by 2025.
The management team is an essential factor to consider when deciding to invest. At CuriosityStream, there is a vastly experienced management team led by CEO Clint Stinchcomb, who has over 25 years of traditional and digital experience. John Hendricks is its founder and chairman and launched CuriosityStream in 2014. He has a successful track record, having built a media empire with Discovery Communications. Hendricks also owns a significant stake in the business at roughly 44%, which is a positive sign for investors as his values are aligned with shareholders.
CuriosityStream continues to expand and acquire One Day University, which has over 500 unique talks and lectures from college professors. Its services also include live and streamed events along with premium digital courses. This acquisition should provide synergies and long-term revenue opportunities along with tapping into the accelerating digital learning space. Stinchcomb is hugely excited about this acquisition and stated, “Sometimes when businesses get very lucky, one plus one equals three. In this case, it equals four.”.
Risks to CuriosityStream’s share price
Arguably the most considerable risk to CuriosityStream is the immense competition from streaming giants Netflix and Disney’s National Geographic, as well as Discovery.
CuriosityStream is also operating at a loss that widened to $18.8 million in Q1. Its customer concentration levels are another risk to consider when investing in the business. In 2020, its top three customers accounted for 41% of revenue.
CuriosityStream’s growth potential:
CuriosityStream is a niche player in a growing industry and continues to expand rapidly with a strong balance sheet. Furthermore, it has an experienced management team that has a successful track record. CuriosityStream offers an attractive risk versus reward scenario as it attempts to dominate its niche. I believe it has the potential to be a ten-bagger with its market cap sitting at under $1 billion today.
MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.
Contributing Writer at MyWallSt
Colm's favorite stock is Virgin Galactic as it is representative of his visions for our world in the future.