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small-cap

Should Investors Make an Exit From This NASDAQ-Listed Entertainment Stock – CURI

Feb 17, 2022 | Team Kalkine
Should Investors Make an Exit From This NASDAQ-Listed Entertainment Stock – CURI

 

CuriosityStream Inc.

CuriosityStream Inc. (NASDAQ: CURI) is a media and entertainment company that provides premium video programs in science, history, society, nature, lifestyle, and technology spanning the entire category of factual entertainment. Direct to Consumer, Partner Direct Business, Bundled Distribution, Program Sales, Corporate & Association Partnerships, and Other are the six products and services that create money.

Why Should Investors Exit?

  • Margins Stress: In Q3FY21 (ended September 30, 2021), the company's gross margin was 48.9%, compared to the industry norm of 56.9%. The company further witnessed a fall in gross margins from 62.7% in Q2FY21 to 48.9% in Q3FY21, indicating a substantial increase in the cost of revenues.
  • Rise in Operating Losses: The company reported an increase in operating losses to USD 8.23 million in Q3FY21 from USD 6.75 million in Q3FY20, due to higher advertising and marketing expenses.
  • Technical Weakness: On the daily chart, CURI prices sustain below the downward sloping trend line and face the same resistance. Furthermore, the momentum oscillator RSI (14-period) is trading at ~41.14 level. However, on the daily chart, the prices are trading below the trend-following indicators 50-period and 200-period SMA, which may act as a resistance level for the stock.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

CURI's share price has fallen 65.84% in the past six months and is currently leaning towards the lower end of its 52-week range of USD 3.61 to USD 24.00. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 3.50. As the company is operating at shallow margins, increase in operating expenditure, operating losses, current valuation, and other technical indicators, we recommend a "Sell" rating on the stock at the closing price of USD 3.99 as of February 16, 2022.

Two-Year Technical Price Chart (as of February 16, 2022). Analysis by Kalkine Group 

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.