Wall Street Wildlife Investing Podcast Podcast #29 - Our first hypergrowth stock, CuriosityStream
This week, we begin our search for hypergrowth stocks, smallcap and microcap companies with the potential of delivering 10X returns or higher. We set out some thoughts on the criteria we'll use in this search, and deep-dive a new player in the megatrend of streaming entertainment, CuriosityStream, as a potential hypergrowth stock.
- CuriosityStream is an online video streaming service specialising in factual content, covering subjects across science, history, technology, nature, society and lifestyle. They own most of their content and have over 3,000 titles. Their aim is to expand this to 12,000 titles over the next 5 years
- Founded by industry veteran John Hendricks, the founder and former CEO of Discovery Communications, the parent company of the Discovery Channel, Animal Planet and the Learning Channel. Hendricks has packed the management team with experience in the entertainment and media industry
- The company has multiple revenue streams from direct subscriptions, bundled subscription, program sales, ads, and corporate partnerships. They are also targeting the corporate social responsibility programming market worth an estimated $20B annually
- Producing factual content costs a fraction of the cost of a drama, about 10% on average. Is also more easily translated to other languages, more likely to play well in multiple markets, and typically has a much longer lifespan than other types of programming. This has allowed CuriosityStream to keep their subscription fees low, at $3/month or $20/year
- They're unlikely to be the primary streaming TV service for any household, but may be a secondary niche service that many households will choose, especially those with children given the educational content and learning opportunities. The low subscription fee keeps it affordable, and this is borne out by the fact that most of the subscribers choose the annual plan
- As of the end of Q3 2020, they had over 13 million subscribers in 175 countries with a low churn rate of 2.6%. The number of subscribers is a 108% increase year-over-year, and they expect their subscriber count to reach 80M by 2023
- The video streaming market is projected to reach $71B in 2021 and grow to $108B by 2025, with user penetration growing from 12.9% to 18.2%. CuriosityStream revenue for 2020 is projected to be $40M, with revenue guidance of $390M in 2025
- Revenue growth in 2019 was 93.6% and the projected revenue growth is 119% for the full year in 2020 and 83% for 2021. The business is not yet profitable but is expected to become free cash flow positive by 2024
The tremendous growth, low market cap, and early penetration of their total addressable market makes CuriosityStream a strong candidate for a Telescope Investing hypergrowth stock. Take a listen to today's episode to hear whether we picked it for our own portfolios.
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