Better than expected quarterly results from WOW Unlimited Media (WOW Unlimited Media Stock Quote, Chart TSXV:WOW) have analyst Rob Goff of Echelon Wealth Partners staying bullish on the stock.
In an update to clients on Tuesday, Goff maintained his “Speculative Buy” rating and $2.00 target, which represented a projected 12-month return of 100 per cent at the time of publication.
Vancouver’s WOW! released its fourth quarter and year ended December 31, 2018, financials on April 29, featuring full year revenue of $78.6 million, up from $44.7 million in 2017.
“WOW! continues to grow – our financial results have come ahead of previous guidance and the Company continues to build its brands domestically and internationally. We are also very pleased with the launch of WOW! Preschool Playdate, WOW! World Kids and WOW! High School Hall Pass on Crave, Canada’s premiere SVOD platform from Bell Media,” said Michael Hirsh, Chairman and CEO.
For the quarter, WOW! posted a top line of $29.0 million, which was better than Goff’s forecast of $22.5 million, and an EBITDA burn of $0.9 million, also better than Goff’s expected EBITDA loss of $2.1 million.
Digging down, Goff points to WOW!’s Network and Platform revenues (mostly Channel Federators Network) which grew by 63.6 per cent year-over-year, while the company experienced viewership growth of 15 per cent over the previous quarter on its YouTube platform, a sign of the quality of content created by WOW!, says Goff.
“We continue to see WOW! adding significant shareholder value about the outperformance at Frederator and with building momentum on its animation production, where Netflix’s renewal for a third season of Castlevania in the last quarter represented an additional step in the evolution of the program as a cornerstone new IP property. We see the advancing scale at Frederator building a global franchise that will allow WOW! to procure content for multi-platform viewing on a low cost, low risk basis. We continue to believe management will successfully launch new initiatives, build out its existing franchises, and partner in a shareholder value creating, capital efficient scenario,” Goff says.
For 2019, Goff sees WOW! getting into the black, with revenue of $101.9 million and Adjusted EBITDA of $3.7 million. The analyst’s $2.00 target stems from a valuation involving 9.0x his terminal-year EBITDA multiple and a 20 per cent discount rate.
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