Audience-Powered Guild Expansion Will Drive Long-Term Upside From Values-Aligned Content

Catalysts

About Angel Studios

Angel Studios operates an audience powered streaming and theatrical platform focused on values driven, family friendly entertainment funded and curated by its paying Guild members.

What are the underlying business or industry changes driving this perspective?

• Rapid expansion of the Angel Guild to 1.6 million paying members, supported by highly rated franchises like DAVID, Tuttle Twins, Homestead and The Wingfeather Saga, creates a compounding base of recurring membership revenue that can outpace content costs and support accelerating top line growth.
• Growing consumer preference for values aligned, family oriented content globally, evidenced by strong audience scores and community engagement, positions Angel to capture a disproportionate share of a large streaming and theatrical market and drive sustained membership and box office revenue growth.
• Proprietary AI driven discovery that has already lifted watch time by 12 percent, combined with broader distribution across platforms such as Samsung, Amazon, Apple, Roku and LG, is intended to improve engagement, reduce churn and expand margins through better retention and lower customer acquisition costs.
• Strategic shift toward owning high performing intellectual property, including DAVID and top series on the platform, increases library durability, enables derivative monetization through licensing and experiential spin offs and supports higher long term earnings power from each successful title.
• Leveraging favorable unit economics in Guild acquisition, marketing A/B testing and scaled distribution partnerships, together with operating leverage in G&A, positions Angel to translate revenue growth into improving net margins and earnings as fixed costs are spread across a larger member base.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Angel Studios's revenue will grow by 38.9% annually over the next 3 years.
• Analysts are not forecasting that Angel Studios will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Angel Studios's profit margin will increase from -53.8% to the average US Entertainment industry of 10.3% in 3 years.
• If Angel Studios's profit margin were to converge on the industry average, you could expect earnings to reach $67.1 million (and earnings per share of $0.32) by about December 2028, up from $-130.5 million today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 46.0x on those 2028 earnings, up from -6.8x today. This future PE is greater than the current PE for the US Entertainment industry at 18.6x.
• Analysts expect the number of shares outstanding to grow 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 9.15%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The company is prioritizing extremely rapid Guild growth and marketing investment over profitability, with selling and marketing of $64.7 million driving a quarterly net loss of $38.6 million. If member growth slows as the base scales, the current spend levels could become unsustainable and pressure earnings and net margins over time.
• The secular shift toward fragmented streaming and rising competition from large global platforms means Angel must continually outbid rivals for high quality franchises like DAVID at $80 million and other acquired series. Overpaying for content or misjudging demand could compress future returns on IP and weigh on revenue growth and long term earnings power.
• The model is heavily dependent on a specific values driven and faith oriented audience segment. If broader consumer tastes shift, or if that niche proves smaller or less sticky than expected, Guild expansion and engagement could disappoint, limiting recurring membership revenue and dampening operating leverage.
• Rising recurring obligations from filmmaker royalties, premium perks such as tickets and increased platform distribution fees, even after recent savings, could offset the benefits of scale. As Guild revenue becomes a larger share of the mix, structural cost pressures may cap gross margins and slow improvement in net margins.
• The capital structure relies on a $100 million credit facility with $40 million already drawn, a $400 million shelf registration and exposure to Bitcoin holdings of $34.6 million. Any tightening in credit markets, equity dilution from new issuance or volatility in cryptocurrency values could restrict growth investments and create downside risk for earnings and shareholder value.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of $11.5 for Angel Studios 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 $14.0, and the most bearish reporting a price target of just $9.0.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be $650.2 million, earnings will come to $67.1 million, and it would be trading on a PE ratio of 46.0x, assuming you use a discount rate of 9.1%.
  
• Given the current share price of $5.25, the analyst price target of $11.5 is 54.3% 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.