Is CuriosityStream Stock a Buy?

CuriosityStream (CURI) is a relatively new media company that was founded in 2015 by John Hendricks from the Discovery Channel.

The company features factual video content, including short- and long-form video media, such as documentaries, to its subscribers.

On October 15, 2020, the CuriosityStream public IPO debuted at $13 per share through a SPAC merger completed the same month. The firm’s main focus is streaming educational content, like documentaries showcasing scientific or technological breakthroughs and advancements. It has several partnerships with schools and universities, as well as with streaming networks, such as Netflix (NFLX), Roku (ROKU), and Amazon (AMZN).

Thanks to its direct channels and bundling arrangements, this is a streaming contender with tons of potential – even in an otherwise crowded industry. And it’s for these reasons, the stock has grown like a weed.

The company’s 2-year CAGR is at 106% and it had 16 million subscribers in March 2021. That said, it’s still a small company that brought in under $40 million for FY2020 sales. The market cap is underwhelming – less than $600 million. As the stock’s gained a presence in social channels, retail investors have boosted its share price further – giving it the strength it needed to join the streaming lineup with a bang. It was this that boosted the stock to its first highs in the beginning of 2021.

By June, however, Bank of America (BAC) had downgraded its Buy signal, stating the meteoric rise in price had catapulted it over into overvaluation territory. To add to the woes, company earnings weren’t spectacular and haven’t been in any of the company’s reported quarters since IPO. 

CuriosityStream Second Quarter Earnings

According to the CEO, Clint Stinchcomb, all quarters since IPO have grown robustly on the direct subscription side of the business – by 56% YOY as of the end of Q2.

“New subscribers are joining our service at a rapid clip,” said Stinchcomb on the earnings call. He also added that 72% of subscribers due to meet their one-year anniversary had resubscribed. That beats out the top streaming services:

Netflix (NFLX) – 71%

Disney (DIS) – 55%

Hulu – 52%

Stinchcomb attributes the low churn to high-value service and a successful subscription strategy. While he says the company was worried about lockdown restrictions getting lifted equating to lost subscriptions, the company still retained “a higher percentage” of subscribers “than any other streaming service, including Netflix.”

Monthly churn also remained low (single-digit) throughout Q2.

Strong Partnerships

CuriosityStream announced a Spiegel TV partnership. Spiegel TV is the German equivalent of CuriosityStream – fact-based content for a streaming audience.

The partnership builds on CuriosityStream’s North American subscribers and bolsters the company’s reach globally. It accelerated the company’s growth by adding German dubbed programming to its already existing library of titles and offers its programming to German subscribers – a win/win for CuriosityStream.

Stinchcomb believes this highlights the company’s commitment to strong, international markets and strategic, global partnerships. The partnership increases the company’s European profile and could substantially accelerate revenues.

Fast Growth

CuriosityStream’s revenue grew 55% from Q1 to close Q2 with $15.3 million. Overall, paid subscriptions grew by 40% YOY to 20 million – that’s a 4-million-subscriber jump just from Q1 2021.

Looking forward, the company believes the second half of the year will be just as strong and continue showcasing revenue and subscriber increases. Subscriber churn was nearly flat YOY and from Q1 to Q2.

According to media analytics company, Antenna, CuriosityStream was the leader in the streaming industry overall and in retaining subscribers from April 2020 to May 2021.

Compelling Subscription Strategy

Part of the reason for CuriosityStream’s valuation is due to its subscription strategy – instead of a monthly option, the company only offers annual subscriptions.

So, where the company’s competitors normally have just a month – a free trial month, to boot – to prove the worthiness of their services, CuriosityStream has an entire year for algorithm training.

That’s 12 months of learning its customers, their likes and dislikes, and how to offer the type of content that will keep them subscribing year after year.

Plus, original subscribers have promotional pricing – renewing subscribers have regular pricing. And the various subscription tiers also play a role – by enhancing the value of the premium tier, the company brought in further revenue which Stinchcomb also believes is responsible for the great boost in Q2 from Q1 – which he believes will also continue growing.

CuriosityStream Q2 Financials

Key takeaways from the Q2 earnings call include:

• Revenue growth of 27% YOY
• Q2 2021 revenue of $15.3 million
• Q2 2020 revenue of $12 million
• Q2 2021 revenue cost $5.7 million (37%)
• Q2 2020 revenue cost 39%
• Q2 2021 gross margin 63%, up 2% YOY

Advertising expenses totaled $11.5 million, up $3.2 million YOY

The company remains opportunistic with marketing spend. Overall operating expenses totaled $26.4 million, up $10 million YOY.

These may appear to be losses, but as Stinchcomb points out, there are greater costs associated with becoming a public company – more new hires, greater wages, and greater marketing investments. The company is still on track to deliver revenue for FY 2021 of $71 million.

Is CuriosityStream Stock A Buy?

The company is a niche provider, but they’re good at what they do. Regardless of a falling stock price, the company is still growing and still outranking major companies.

At the end of the day, it’s just too early to tell if the company can make it in the long term and become one of the leading, go-to streaming content providers.

So far, though, the company seems headed in the right direction. And according to the report from Bank of America (the one that said “sell, sell, sell”), CuriosityStream would make for a heck of an acquisition.

Either way, both scenarios play out well for investors. If you’re on the fence, even getting your feet wet with this stock may not be a bad idea. No one’s saying it’s time to go all-in, but this is definitely a stock to watch.

Investing is always a private decision. Could CuriosityStream be a good stock for your portfolio?

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.