CuriosityStream: Checking Out Yet Another SPAC Disaster (NASDAQ:CURI)

Television streaming, multimedia wall concept

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“You know, everybody’s ignorant, just on different subjects.” – Will Rogers

It feels like I could analyze one ‘Busted IPO‘ from the SPAC era of 2020 and 2021 a day that has resulted in a debacle for shareholders, up until year-end, and still have plenty of companies left over to research. Other than the Internet Bust a generation ago, I can’t think of a time when so many investors who bought on a company’s debut on the public market got taken to the cleaners.

CURI - Stock Chart

Seeking Alpha

The SPAC disaster ‘du jour‘ is CuriosityStream Inc. (NASDAQ:CURI). As can be seen by the chart above, the company and the stock have not lived up to their initial hyperbole. Are the shares now oversold, or still equity investors should avoid? We attempt to answer that question via the analysis below.

Company Overview

CuriosityStream is based out of Silver Spring, MD. This media company provides content streaming offerings. CuriosityStream offers premium video programming services in various categories: including science, history, society, nature, lifestyle, and technology through direct subscription video-on-demand (SVoD) platforms accessible by internet connected devices, or indirectly via distribution partners who deliver CuriosityStream content via the distributor’s platform or system.

Shows the company distributes include Secrets of the Solar System, Butterfly Effect and Faster. It has a flagship subscription video-on-demand service available in more than 175 countries. As of the end of 2021, the company had approximately 23 million total paying subscribers, including direct subscribers, partner direct subscribers, and bundled MVPD subscribers. The stock currently trades at just under $2.50 a share and sports an approximate market capitalization of $125 million. The company went public via a SPAC late in 2020.

Fourth Quarter Results

On March 24th, the company posted a GAAP loss of 22 cents a share as revenues rose some 140% on a year-over-year basis to just over $27 million. Both numbers beat the consensus. International sales more than doubled and now make-up just over half of overall sales. Paying subscribers grew 50% as well.

Leadership provided guidance for the first half of this fiscal year as well. It expects revenues of between $36 million to $40 million, which would be a 50% over FY2021 at its midpoint. However, management also expects a negative EBITDA of between $34 million to $36 million for the first half of 2022. To put this in perspective, the company posted an EBITDA loss of just over $26 million for the first half of FY2021 on lower revenues. EBITDA is increasing as the company ups its investment in building its content library through acquisitions, original content creation and tuck-in M&A.

The guidance is what crushed the stock after the earnings announcement as expectations had been for around $50 million in revenue for the first half of this year. Management did highlight it was pushing through price increases for its content this year.

Analyst Commentary & Balance Sheet

The analyst community is split on the company’s prospects. So far in 2022, four analyst firms including Roth Capital and Needham have reissued Buy ratings on the stock with price targets proffered ranging from $5 to $8. Albeit, two of these had downward price target revisions. Bank of America ($3 price target) and Stifel Nicolaus ($4 price target) have maintained Hold or Sell ratings on the stock.

One encouraging thing about the company is no insider has sold a share since the company came public. There also has been no insider buying during the stock’s decline, however. Almost 9% of the outstanding float of the shares is currently held short. The company ended FY2021 with just over $80 million in cash and marketable securities on its balance sheet after posting a net loss of $11.4 million for the fourth quarter. The company has no long-term debt I can find.

Verdict

The current analyst consensus sees nearly 40% revenue growth in FY2022 to just under $100 million in sales. However, analysts also expect CuriosityStream to post a loss of $1.10 a share this fiscal year, approximately 50% larger than FY2021. Albeit, earnings estimates are in a wide range of a loss of 85 cents a share to $1.50. Revenue was up 80% in FY2021 on a year-over-year basis in ways of comparison. Projected revenues for FY2022 were just over $120 million when the company first went public via a SPAC, it should be noted as well.

CURI appears cheap on a price-to-sales basis given its impressive revenue growth, especially if you equate for the net cash on the balance sheet. However, it is hard to predict when the company will start to move to profitability. This is probably a good story to keep an occasional eye on but I would wait on taking even a small “watch item” position in the stock until the company starts to narrow its quarterly losses and/or insiders start to step up to the plate and accumulate shares after their huge decline.

“Education…has produced a vast population able to read but unable to distinguish what is worth reading.” – George Macaulay Trevelyan

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