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Should You Invest in This Small Streaming Company?

Chicken Soup for the Soul is a company that provides entertainment across different platforms, including streaming video-on-demand networks, books and more. CSSE classifies itself as being socially conscious with a diverse team. They recently announced their monthly dividend for August, which has brought media and analysts’ attention to the corporation.

CSSE has a parent company where 10% of revenue-share is paid out to them each year. After factoring this in, Analyst Laura Martin from Needham discovered that the EV/Net Rev multiple of 5.7x of 2022 estimate that the company trades at is less expensive than other streaming companies covered by Needham.

Martin raves about the company and specifically points out a few things: “a) it is a small cap, pure play streaming company; b) it enters into contracts that cover its costs prior to greenlighting new content production; c) it maximizes FCF from each piece of content it controls through its licensing arm; d) it is building a large AVOD library, which is increasingly valuable to its streaming competitors; e) its 3rd AVOD service should accelerate revenue growth; and f) CSSE management has a long track record of value-added deal making.”

It is believed that CSSE sold out all of the ad units for the past year and that with the launch of its new streaming service, Chicken Soup for the Soul, it will grow revenue from advertising for millions of new ad impressions.

A portion of revenue for the company comes from selling CTV (connected TV) ad units. CTV revenue is expected to grow by 30-50% in each of the next 2 years by eMarketer’s, but Needham’s prediction is even higher than that!

Chicken Soup for the Soul Entertainment has also been adding to its 100$ owned content library by in a low-risk way with new production. They do this by buying other libraries at good prices, where the larger the library, the more valuable it is to become the largest streaming competitor. Martin believes the CEO would sell CSSE for the right price.

Currently, CSSE has the right to distribute 11,374 films and 23,981 TV episodes. They also own 100% of the copyright and distribution rights for 2,100 TV episodes and 2,077 films. Their licensing business also maximizes the FCF for each piece of content that it controls or distributes, which Martin believes will help nearly double their content ROICs.

It was also found that they make more money by using direct sales tactics – humans – for more than 90% of its ad inventory. The company commands 40% more revenue per content hour than it would have if it was selling its ad inventory using machines.

Sony also invests in this company, with $40mm of perpetual preferred stock with a 9 ¾% coupon and $10 share warrants that are exercisable let into 4mm common shares, which represents 20% of CSSE’s diluted shares outstanding.

After analyzing all of these considerations, Martin rates this stock ad a Buy with a price target of $45.00.

The Street is all in agreement when it comes to CSSE, with 6 total ratings all saying to Buy. The average price target is $50.83 with ~46% upside and a market price of $34.90.

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Breena Rettig
Breena Rettig was raised in New Jersey. She will soon be entering her 3rd year at the University of Maryland studying for a double degree in accounting and finance. For the summer, she is living in Tel Aviv and is working as a financial blogging intern at TipRanks.