Vancouver-based Wow Unlimited reported its fourth quarter and fiscal year ended December 31, 2017, financials last Friday, producing revenues of $44.7 million for the fiscal year, an increase of 153 per cent over F16. Its Networks and Platforms segment, which features the YouTube-based Channel Frederator Network, brought in $12.7 million for the year (with viewership reaching 4.3 billion for Q417, up 46 per cent on the quarter), while its Animation Production segment revenue was $32.0 million, an 85 per cent increase over F16.
Goff says the company’s Q417 revenue of $16.6 million came in near the top end of its guidance released on March 27 and above his estimate of $16.0 million.
“Our bullish view towards WOW shares considers its strategic positioning as a digital, multi- platform, integrated production and distribution company, where commercial arrangements with Netflix, Amazon and AT&T internationally along with BCE domestically, speak to the strength of the company’s network and programming,” says the analyst.
“We believe the company made significant gains in 2017 that are not reflected in its $30.7 million enterprise valuation. In particular the y/y tripling of viewership at its programming incubator, Frederator Networks, where viewership has now reached 1.5B+ monthly views,” he adds.
Goff singles out Wow’s first original series, Castlevania, which launched in July of last year and has become one of the top 20 original digital programs for Netflix globally. The analyst says that Castlevania has become a “core asset” for Netflix and he looks to see key milestones for it as well as other production releases such as ReBoot and Bee & Puppy Cat during 2018.
The analyst’s $3.00 target price represents a 10.0x terminal-year EBITDA multiple and a 17 per cent discount rate and projects a 12-month return of 129 per cent at the time of publication.
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