AVOD Launch In US Will Attract Users Through Ad-Supported Content

Key Takeaways

• The introduction of an omnichannel sales ecosystem and diversified digital products is expected to boost revenue and improve earnings.
  
• Cost efficiencies from the Fit For The Future program and a share buyback initiative are enhancing profitability and shareholder value.
  
• CLIQ Digital faces short-term revenue challenges due to disappointing sales, high churn rates, competitive market pressures, and increased operational expenses.

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.

• The introduction of a new omnichannel sales ecosystem, including diversified sales channels like search engine advertising and social media marketing, is expected to revitalize sales growth, potentially increasing revenue.
  
• CLIQ's move towards more varied digital products and leveraging customer data for monetization offers could create new revenue streams and improve overall earnings.
  
• The AVOD model launching in the U.S. allows users to access services for free in return for watching ads, potentially boosting customer acquisition and revenue.
  
• The Fit For The Future program is driving cost efficiencies and focusing on profitability first, improving net margins and EBITDA through streamlined operations and optimized tech infrastructure.
  
• The ongoing share buyback program is reducing the number of shares outstanding, which can contribute to higher EPS, adding shareholder value and potentially making the stock more attractive.

Cliq Digital Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Cliq Digital's revenue will grow by 7.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from 3.0% today to 7.4% in 3 years time.
• Analysts expect earnings to reach €25.8 million (and earnings per share of €4.47) by about February 2028, up from €8.4 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 3.3x on those 2028 earnings, up from 3.1x today. This future PE is lower than the current PE for the DE Software industry at 22.1x.
• Analysts expect the number of shares outstanding to decline by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.06%, as per the Simply Wall St company report.

Cliq Digital Future Earnings Per Share Growth

Risks

• CLIQ Digital reported disappointing sales performance and a higher churn rate, which are challenges for revenue growth in the short term.
  
• The company is operating in a highly competitive streaming services market, focusing on increasing its product diversity. This could impact revenue if not successfully diversified.
  
• Reliance on a single sales channel created operational limitations; while diversifying channels indicates potential growth, it also introduces execution risks affecting future revenues.
  
• CLIQ Digital's strategy includes higher operational expenses for transformation, impacting net margins and profitability short term.
  
• Geographic sales declines and regional variances in payment flows, particularly in Europe and Latin America, suggest external market challenges affecting overall earnings.

Valuation

• The analysts have a consensus price target of €18.0 for Cliq Digital based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €20.0, and the most bearish reporting a price target of just €16.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €346.3 million, earnings will come to €25.8 million, and it would be trading on a PE ratio of 3.3x, assuming you use a discount rate of 6.1%.
  
• Given the current share price of €4.36, the analyst price target of €18.0 is 75.8% 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.