Peanuts And Teletubbies Will Ride Global Streaming Momentum

Key Takeaways

• Strong brand licensing, digital dominance, and growing social media presence position WildBrain for sustained, high-margin growth across global markets and new revenue streams.
  
• Corporate simplification and potential regulatory changes could unlock strategic partnerships, improved leverage, and drive incremental value through expanded business opportunities.
  
• Heavy dependence on aging legacy brands, digital disruption, tightening regulations, fierce competition, and high leverage all threaten future revenue growth and financial flexibility.

Catalysts

Engages in the development, production, and distribution of films and television programs in Canada, the United States, the United Kingdom, and internationally.

• Analysts broadly agree that Peanuts, Strawberry Shortcake, and Teletubbies are strong licensing engines, but surging global demand, sold-out launches like the Starbucks/Peanuts collaboration, and proven scalability of Strawberry Shortcake and Teletubbies (with historic retail sales of $800 million and $1 billion USD respectively) position WildBrain for multi-year, above-expectation revenue acceleration and structurally higher net margins as sell-through phases drive sustained licensing royalties.
  
• While consensus expects the simplification of WildBrain's corporate structure and channel divestiture merely to reduce costs, in reality, regulatory approval and removal of foreign ownership restrictions could unlock transformational strategic options including global partnerships, M&A, and re-ratings, fundamentally improving leverage, lowering SG&A, and fueling both bottom-line and market valuation upside.
  
• WildBrain's market-leading position in digital kids' content distribution (including AVOD, FAST, and YouTube) paired with rising digital advertising spending on family-safe platforms, points to an inflection in high-margin digital ad revenue and EBITDA as advertisers aggressively shift budgets to premium, brand-safe kids' entertainment over the coming years.
  
• The company's skyrocketing social media engagement is proving to be a powerful, direct lead indicator for retail sell-through and licensing momentum, signaling a runway for outsized growth in consumer products revenue as global expansion into untapped regions (such as Latin America, APAC, and Europe) ramps up for franchises like Strawberry Shortcake and Teletubbies.
  
• Having fully vertically integrated content production, global brand management, and direct ad sales capabilities, WildBrain is uniquely positioned to capitalize on the industry-wide trend toward cross-platform IP exploitation-including gaming, live experiences, and collaborative brand activations-unlocking a pipeline of incremental, recurring, and diversified revenue streams with superior margin profiles over the medium and long term.

WildBrain Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on WildBrain compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming WildBrain's revenue will grow by 7.4% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from -33.7% today to 1.0% in 3 years time.
• The bullish analysts expect earnings to reach CA$6.6 million (and earnings per share of CA$-0.06) by about August 2028, up from CA$-173.6 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 144.1x on those 2028 earnings, up from -2.2x today. This future PE is lower than the current PE for the US Entertainment industry at 247.9x.
• Analysts expect the number of shares outstanding to grow by 3.01% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.02%, as per the Simply Wall St company report.

WildBrain Future Earnings Per Share Growth

Risks

• WildBrain's increasing reliance on a handful of legacy brands such as Peanuts, Strawberry Shortcake, and Teletubbies exposes the company to risks of brand fatigue and stagnation; as these intellectual properties age, declining consumer engagement could negatively affect future licensing revenues and limit top-line growth.
  
• The fragmented landscape of media consumption, marked by the rapid rise of user-generated content and short-form video platforms like TikTok and YouTube Shorts, threatens to divert kids' attention away from traditional IP-driven content, likely reducing viewership and digital monetization opportunities, and thereby exerting downward pressure on revenues and margins.
  
• Heightened competition from deep-pocketed global streaming and tech giants such as Netflix, Disney+, Amazon, and Apple TV+ increases the bargaining power of these distribution partners, leading to lower royalty and licensing rates for WildBrain and potentially compressing both gross margins and overall earnings power.
  
• Evolving regulatory frameworks around children's digital privacy and advertising-such as COPPA in the US or similar forthcoming global laws-could meaningfully constrain WildBrain's ability to monetize digital content, directly impacting future advertising revenues and limiting growth in its AVOD, FAST, and digital divisions.
  
• Despite progress on leverage, WildBrain's balance sheet remains highly leveraged at 4.4 times, which restricts investment flexibility for content creation and limits its ability to compete in bidding for new properties or distribution, increasing vulnerability to higher interest expenses and constraining net margin expansion.

Valuation

• The assumed bullish price target for WildBrain is CA$3.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of WildBrain's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CA$3.0, and the most bearish reporting a price target of just CA$1.75.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be CA$638.1 million, earnings will come to CA$6.6 million, and it would be trading on a PE ratio of 144.1x, assuming you use a discount rate of 11.0%.
• Given the current share price of CA$1.76, the bullish analyst price target of CA$3.0 is 41.3% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.