Fit For Future Program Will Improve Profitability Through Cost Efficiency And Digital Expansion

Key Takeaways

• Fit for Future program and balanced marketing spend aim to enhance cost efficiency and profitability, potentially improving net margins and earnings.
  
• Diversification of sales channels and digital products, along with leveraging customer data, is expected to drive customer acquisition, revenue growth, and broaden the customer base.
  
• Increased competition and strategic adjustments in the digital advertising segment pose execution risks, limiting revenue growth and increasing investor uncertainty.

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 the Fit for Future program aims to enhance cost efficiency and profitability through expense reductions, which could improve net margins over time.
  
• The diversification of sales channels, including the Magnificent Seven omnichannel approach, and expansion into new digital products and monetization models are expected to drive customer acquisition and revenue growth.
  
• CLIQ's strategy to expand its digital product portfolio, such as AI-driven services and AVOD, positions it to increase its revenue streams and capture a broader customer base, thereby impacting revenue positively.
  
• The company's focus on leveraging customer data for monetization, particularly in the U.S. market, presents a new revenue opportunity that can bolster earnings.
  
• CLIQ's continued emphasis on balancing customer acquisition costs with lifetime value and maintaining profitability in marketing spend is designed to stabilize and potentially increase earnings through effective cost management.

Cliq Digital Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Cliq Digital's revenue will decrease by 3.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from -11.5% today to 4.3% in 3 years time.
• Analysts expect earnings to reach €9.5 million (and earnings per share of €1.62) by about April 2028, up from €-27.8 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 6.6x on those 2028 earnings, up from -1.2x today. This future PE is lower than the current PE for the DE Software industry at 26.7x.
• Analysts expect the number of shares outstanding to grow by 2.85% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.96%, as per the Simply Wall St company report.

Cliq Digital Future Earnings Per Share Growth

Risks

• The company experienced a 26% decline in sales in 2024, primarily due to a reduction in customer base and higher churn rates, significantly impacting revenue streams.
  
• CLIQ Digital faced a net loss of €28 million in 2024, largely attributed to a €27 million goodwill impairment, affecting its bottom line.
  
• The company has had to adjust its customer acquisition costs and reduce marketing spend by 45% to focus on profitability, leading to fewer new customer acquisitions, which could limit future revenue growth.
  
• Tougher market conditions and increased competition in the digital advertising landscape have pressured revenues, necessitating strategic shifts in marketing channels and product offerings, which carry execution risks.
  
• The suspension of a medium-term outlook due to market volatility and unpredictability reflects uncertainty around future earnings, increasing potential risks for investors regarding revenue and profitability stability.

Valuation

• The analysts have a consensus price target of €8.75 for Cliq Digital based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €222.1 million, earnings will come to €9.5 million, and it would be trading on a PE ratio of 6.6x, assuming you use a discount rate of 6.0%.
• Given the current share price of €5.85, the analyst price target of €8.75 is 33.1% 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.