Payment Disruptions Will Pressure Revenues While Recovery Signals Emerge

Key Takeaways

• Disruptions in payment processing and regulatory shifts are suppressing subscriber acquisition, revenue stability, and long-term growth prospects.
  
• Mounting privacy concerns, competition from free content, and macroeconomic uncertainty may increase churn and limit future audience expansion.
  
• Reliance on credit card payments, regulatory pressures, and reduced marketing spend threaten revenue stability, customer growth, and long-term investor confidence.

Catalysts

Sells subscription-based streaming services that bundle movies and series, music, audiobooks, sports, and games to consumers in Germany, North America, Europe, Latin America, and internationally.

• While global digitalization and content streaming trends should provide a long-term tailwind for subscriber growth, the company's ability to access this expanding audience is severely hampered by recent global payment ecosystem changes. New industry-wide card scheme rules and acquiring bank restrictions are actively disrupting the company's primary payment channel, affecting 98 percent of current sales, which is likely to suppress both revenue and customer growth until alternative payment solutions are fully integrated and functional.
  
• Although Cliq Digital has taken decisive steps to streamline operations, reduce costs, and increase EBITDA margins, these gains are currently offset by a material decline in customer acquisition and an inability to process payments for a segment of existing subscribers. This results directly from tightening regulatory and payment processing standards, which may lead to prolonged top line pressure and increased customer churn, ultimately weighing on future net earnings.
  
• While the widespread adoption of the subscription economy has historically benefited digital content platforms through recurring revenue, the company's current operational model relies disproportionately on credit card billing. Recent policy enforcement by card networks raises the risk that friction in onboarding and renewals could erode what has previously been a stable source of revenue, threatening the predictability of cash flows and the company's ability to maintain or grow ARPU.
  
• Despite having a strong net cash position and no bank borrowings, the withdrawal of financial outlook for 2025 due to payment processing disruptions points to significant uncertainty regarding forward visibility on sales and contract cost recovery. If the company cannot restore or replace core payment functions swiftly, longer-term profitability and the balance of capitalized costs could be structurally impaired.
  
• While advancements in personalization and direct-to-consumer content would typically reduce churn and support long-term user retention for platforms like Cliq Digital, elevated scrutiny over consumer privacy and the increasing appeal of free or ad-supported digital content may further dampen demand for paid subscriptions. Combined with ongoing macroeconomic uncertainty, these issues could constrain the company's ability to grow its addressable audience or return to historic levels of revenue growth.

Cliq Digital Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Cliq Digital compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Cliq Digital's revenue will decrease by 34.6% annually over the next 3 years.
• The bearish analysts are not forecasting that Cliq Digital will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Cliq Digital's profit margin will increase from -12.3% to the average DE Software industry of 12.2% in 3 years.
• If Cliq Digital's profit margin were to converge on the industry average, you could expect earnings to reach €7.5 million (and earnings per share of €1.5) by about August 2028, up from €-27.0 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 bearish analyst cohort, the company would need to trade at a PE ratio of 2.7x on those 2028 earnings, up from -0.6x today. This future PE is lower than the current PE for the DE Software industry at 31.0x.
• Analysts expect the number of shares outstanding to decline by 2.33% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.69%, as per the Simply Wall St company report.

Cliq Digital Future Earnings Per Share Growth

Risks

• Stricter global payments regulations and changes introduced by card schemes and acquiring banks, such as Visa's acquiring monitoring program, are already causing material restrictions on Cliq Digital's ability to process payments for existing customers and acquire new subscribers, posing a direct threat to revenue and recurring sales streams.
  
• Heavy dependence on credit card processing, which currently supports 98 percent of group sales, means any disruption in this payment channel can have an outsized and immediate impact on the company's core business operations and top-line revenue.
  
• Recent and ongoing payment disruptions, combined with the inability to forecast the full financial impact, have forced Cliq Digital to withdraw its outlook for 2025, increasing uncertainty and potentially undermining investor confidence in the company's ability to deliver future earnings growth.
  
• Reduced customer acquisition spend to preserve profitability has led to a sharp drop in customer numbers and declining sales, indicating the challenge of maintaining growth without sustained marketing investment, which endangers both revenue and long-term net margins as the addressable customer base contracts.
  
• Regulatory pressures such as the FTC's click-to-cancel rule and global shifts toward streamlined cancellations have already produced elevated churn, while further compliance requirements may continue to increase customer attrition and compress lifetime value, thereby putting continued pressure on both revenue and overall company earnings.

Valuation

• The assumed bearish price target for Cliq Digital is €3.4, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Cliq Digital's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €8.0, and the most bearish reporting a price target of just €3.4.
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be €61.6 million, earnings will come to €7.5 million, and it would be trading on a PE ratio of 2.7x, assuming you use a discount rate of 6.7%.
• Given the current share price of €2.88, the bearish analyst price target of €3.4 is 15.3% 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.