Cliq Digital is a German-listed media company that offers movies, series, music, audiobooks, games, and sports for a single monthly fee.
Last year, Cliq hit it big by transitioning to this new all-in-one model, and the stock price reacted very positively. However, after the spring general meeting and Q1 results, things have cooled down considerably.
Perhaps the market is concerned about growth slowing down, as revenue has hovered around €30M for the past three quarters. The Q2 report, to be published on August 3rd, will be important to see if growth continues compared to the same period last year. If the Q2 report shows signs that management’s targets are realistic, I believe the stock has good prerequisites to jump to a higher level.
Management is targeting €140M in revenue for this year with an 18% EBITDA margin. The revenue target means a 30% increase compared to last year.
The streaming market is predicted to see quite nice growth in Cliq Digital’s categories.
In a growing market, is there room for an all-in-one monthly subscription budget option? Cliq certainly won’t compete with global competitors focused on a single media type in terms of content quality. Netflix, Amazon, Disney, Spotify, Storytel, etc., will undoubtedly dominate in their respective categories, but the price also starts to add up in a completely different way than Cliq’s service if you have one monthly subscription for movies, another for music, and a third for audiobooks. Perhaps Cliq’s more affordable option could be a good compromise for those who are on a tighter budget or are simply frugal. Like Storytel, the company also tries to invest in local languages and content.
Last year was indeed revolutionary, and profits were generated in a completely different way than before. Previously, Cliq apparently sold content more individually, trying to trick customers into longer subscriptions. This dark history could be one reason for the affordable pricing, in addition to the small market capitalization.
This year, Cliq intends to continue the transformation that began last year, where the company invests in its own marketing and content acquisition instead of affiliates.
One red flag, in my opinion, is that the company is clearly marketing itself very actively to investors. The company’s calendar is full of various investor events they are participating in, and they apparently pay several parties for analysis. The target prices are very attractive compared to the current €26 level, with one exception.
Analysts are predicting quite good growth, enthused by last year’s performance. If the forecasts are met, the multiples are very modest compared to peers.
Analyst reports can be found at this link under section 4.
A large part of the screenshots are from the July-dated investor presentation
Value Investors Club also had a good write-up on the company (requires registration) I joined the Value Investors Club after reading Mohnish Pabrai’s Dhandho Investor book. The forum was founded by Joel Greenblatt, and membership is only granted by writing a sufficiently good analysis of a company, with maintaining membership requiring a couple of new analyses per year. However, all registered users can read older writings, which are quite high quality due to the forum’s rules and the selected group of writers. (Significantly better than this opening post.)
As a word of caution, the company pays dividends (around May Day), and the German tax authorities withhold too much tax from them. I have circumvented the problem by holding the shares in a segregated account (OST) and selling the shares before the ex-dividend date, then buying them back cheaper from the “dividend dip.” Fortunately, my current position in terms of share count is only 55% of the original, but I might put the cash in my brokerage account (AOT) to work and buy a position there as well before the August quarterly report.
Another warning about the volatility of the company’s stock price. It tends to fluctuate quite strongly even within a day. For example, my first sale hit the day’s high of 34.80, and the price then closed over 10% lower. However, this is not a particularly low-volume stock; even on quiet days, over ten thousand shares change hands.
For me, this is a two-sided company; on one hand, it’s hard to believe that it can compete by offering cheaper and older content, but on the other hand, last year’s performance is convincing, and the valuation is attractive if growth continues according to management’s targets. In its reporting, the company should provide more information about customer numbers and, especially, their retention. I am a little concerned that customers might subscribe for a six-month period, find the content poor, and not renew their subscription.
As a catalyst for higher valuations, it should be enough if upcoming quarters show growth compared to last year’s comparables and management’s targets are met, because for a profitable company growing at 30% per year, the current multiples are very low.
) and from there one can access the actual peer companies. Here’s the analysis page: 
