Another Investor Wants Say on GameStop Restructuring; Shares Up 20% in Pre-Market Trading

Everyone wants a seat on a resurgence bandwagon. After Sony and Microsoft disclosed winter release dates and pricing for next generation PlayStation 5 and Xbox Series X and Series S video game consoles, interest in retail chain GameStop and how it’s run is booming — at least afterhours.

RC Ventures Sept. 21 increased its stake in GameStop to 9.9% from 9.6%, and said it had met with the retailer’s CEO George Sherman and senior management. No doubt Ryan Cohen (“RC”) wants a seat at the table entering the winter holiday retail season. And when Hestia Capital Partners and Permit Capital Enterprise Fund, who own about 7.3% of the video game retailer’s outstanding shares, joined the GameStop board in June, Cohen’s desire makes sense.

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And the market apparently agrees, sending GameStop shares up more than 20% in aftermarket trading to $10.54 per share. That followed a general retail decline yesterday that saw the chain’s shares close down 7.6% at $8.75 per share.

Regardless, GameStop shares are up 100% over the past two months with the chain realizing $200 million in cost restructuring in 2020 — notable achievements in a market jittery as it sees GameStop as a relic of the past when consumers were going to physical stores to buy, sell, and trade video games.

Purnha Investment Research contends investors and consumers may be ignoring the power of GameStop’s brand in the gaming space. It says that after years of restructuring, the GME stock is trading at valuations cheaper than other restructuring plays in the retail space.

“What the market has yet to acknowledge is that all is still not lost,” Purnha wrote in a Sept. 22 note.

Indeed, the firm notes that GameStop has been able to fulfill 70% of all online purchases picked up at local stores — even within an hour or two. With the new consoles have a disk drive, they continue to cater to a gamer playing both physical and digital software — at least for the next several years.

“Retail stores play a strategically important role for console manufacturers — be it for brand building, maintaining the relationship with hardcore users and collectors, educating customers, or sale of accessories,” Purnha wrote.

Netflix Stock Up 83% Over Past 12 Months

Netflix keeps firing on all cylinders; the latest Wall Street salvo coming from RBC Capital Markets, which tagged the subscription streaming video behemoth with an “outperform” stock rating.

Citing an internal survey from the U.S., U.K. and India suggesting satisfied subscribers and low churn levels, RBC says Netflix shares can grow 13% to $620 per share, up from the current $549 share price valuation. The news sent Netflix shares up 3.8% in midmorning trading. Netflix ended its most-recent fiscal period with 190 million subscribers.

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Netflix, Roku Close Near Record Highs on Wall Street

Wall Street continues its love affair with over-the-top video, sending shares of Netflix and Roku near record highs at market close on Aug. 26. Netflix ended trading at $547.53 per share, which was less than 0.003% off the record close of $548.73 set last month.

Roku closed at $164.28, which was just 3.3% off the streaming media device manufacturer’s all-time high of $169. 86.

Both stocks, which collaboratively created the SVOD market in 2008, slipped in early trading the next day, Aug. 27. As of 9:15 a.m. PT, Netflix was back down to $529.70, while Roku was at $161.

The gains came after both stocks received kudos this week from Wall Street firms, including Citigroup Research and Piper Sanders — the latter suggesting Netflix bested all streaming video services among survey respondents/subscribers once the COVID-19 crisis is over. In addition, individual analysts on Seeking Alpha praised the companies for their resilience during the COVID-19 pandemic.

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“Roku will be able to translate solid operational improvements into accelerating revenue growth and probably improving profit margins too,” Andres Cardenal wrote on Aug. 14 in a note underlying why he thinks the stock is undervalued.

Separately,  Vishesh Raisinghani considers Roku the “ultimate winner” of the streaming wars driven by surging user base and average-revenue-per-user (ARPU) doubling within the next few years.

“[Roku] isn’t perceived as a threat or a competitor by any of the content creators … [and is] “small enough to minimally annoy device manufacturers such as Amazon or Google,” Raisinghani wrote.

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Meanwhile, Beulah Meriam K, writing on Seeking Alpha, said Netflix’s ongoing content gains trump ARPU and sub growth. The analyst contends the promotion of Ted Sarandos to co-CEO underscored the company’s faith in original content separating itself from the competition.

“The first sign that ‘content is, indeed, king’ is the fact that Sarandos has been [promoted],” Meriam K wrote on Aug. 18. “Few [competitors] focus on the content side of things; and, at the end of the day, isn’t that the real growth engine? It’s fine to look at the effects once in a while but, without getting to the underlying cause, it’s merely mathematical probability and error-prone projections.”

Roku Firing on All Cylinders During Pandemic

With the coronavirus pandemic throwing conventional entertainment consumption on its ear, streaming video device pioneer Roku has emerged a star on Wall Street as increasing numbers of consumers migrate to over-the-top video.

Roku, together with Netflix more than 12 years ago, helped create the subscription streaming VOD market. It now markets a line of Chinese-made smart televisions, in addition to a branded operating system for third-party consumer electronics. The San Jose, Calif.-based company operates an ad-supported VOD platform, The Roku Channel, and boasts more than 40 million platform subscribers.

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In its most-recent fiscal period, Roku saw revenue surge 41% to $43 million, with streaming hours skyrocketing 65% to 14.6 billion. Average revenue per subscribers rose 18% to $24.92 — underscoring the fact a lot of people use Roku to access third-party streaming services such as Netflix, Disney+, Amazon Prime Video and Hulu.

Last Friday, Roku joined Apple and Google in distributing the Sept. 4 premium VOD (dubbed “Premier Access” by Disney) debut of the much-delayed live-action film adaptation of Mulan.

Citigroup Research analyst Jason Bazinet, in an Aug. 26 note, believes Roku will increase its platform sub base to 125 million subs by 2022, with revenue per active account growing from $23 in 2019 to $32  in the next two years.

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“In the U.S., we think there are just two firms: Netflix and Roku,” Bazinet wrote. “Their business models couldn’t be more different. But, the fate of the equity we suspect is similar. Both turn on sub growth and rising value per sub.”

Indeed, with increased numbers of consumers housebound due to the pandemic, the stay-at-home market has proven a boon for Roku with platform and player revenue up 46% and 35%, respectively, since last year.

But Roku is hedging much of its future on AVOD, contending that the traditional linear TV business model will migrate to connected televisions it either manufactures and/or empowers.

According to Magna Global, U.S. TV ad spending is expected to decline 24% and domestic digital ad spending is projected to drop 5%. Roku claims its monetized video ad impressions grew about 50% in the most-recent fiscal quarter — with first-time ad buyers up 40% year-on-year. The retention rate among advertisers spending $1 million or more in the first half of 2019 was 92%.

“Our performance advertising business, a newer category catering to direct response advertisers, grew 346% year-over-year, aided in part by marketers re-evaluating their social media spending,” CEO Anthony Wood and CFO Steve Louden wrote in the shareholder letter.

In June, Roku launched “OneView Ad Platform,” a proprietary shopper data partnership with supermarket giant Kroger that targets and measures advertising using retail purchase data.

“When we look at the major tech players, there doesn’t seem to be dominant IPTV strategy,” Bazinet wrote. “Alphabet [parent of Google/YouTube) and Roku cover the entire waterfront: they sell IPTV hardware, push their TV OS and hope to monetize IP video with their app that sits inside the OS.

“Other players such as Amazon, Apple and Netflix are more focused on a narrower slice of IPTV opportunities.”

 

The ‘Hits’ Keep Coming for Apple TV+

NEWS ANALYSIS — Since its launch a week before Disney+ last year, Apple TV+ has struggled to achieve support in the media and among online observers. Despite its corporate parent’s record market valuation ($2.1 trillion!) this week, Apple TV+ is often viewed as an underwhelming missed opportunity.

Apple TV+ is seen as having the worst-quality content (60%), the least amount of variety (64%) and the most unfriendly user interface (64%), according to a recent Flixed.io survey of 1,300 respondents. By comparison, respondents hailed Netflix for the best content quality (89%), content variety (88%), user interface (85%), and viewing recommendations (69%).

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Surprisingly, half of streamers use at least three or more paid video platforms, averaging three hours or more watching content at least five days per week. More people prefer cable TV than Disney+ and Apple TV+ combined. With only 57% of users finding it easy to explore new content, Apple TV+ users spend the most time deciding what to watch on average (16 minutes).

Bernstein analyst Toni Sacconaghi estimates that fewer than 10 million people have signed up for the free 12-month Apple TV+ subscription in the company’s most-recent fiscal quarter. He characterized the tally as “surprisingly low” for a brand as well-known as Apple, which hasn’t officially released any OTT video subscriber data.

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Research firm Antenna said Apple realized a 10% spike in new subs from March 14 to 16 as the coronavirus spread in the United States. The firm said the increase was the lowest of any major streaming service.

Apple reportedly will spend $6 billion on original content in 2020, buttressing a slate that currently includes “Dickinson,” “See,” “Ghostwriter,” “For All Mankind,” “Helpsters,” “Hala” and “Little America,” among others.

“[Apple is] still not in [OTT video] with both feet,” media executive Barry Diller told a podcast. “They’ve put some capital in, but relatively little [for Apple]. They’re not making a major effort.”

Wedbush Securities analyst Michael Pachter contends that despite a major marketing effort around Apple TV+, the finished product thus far has been underwhelming.

“Apple TV+ only had a handful of shows at launch and no catalog,” Pachter wrote in a post.

Wall Street Remains Bullish on Netflix

Wall Street’s love affair with Netflix continues. Research firm Piper Sandler found the subscription streaming video pioneer resonates strongly with subscribers regardless of pandemic or other societal issues.

Citing an internal survey, Piper found respondents said they plan to keep their Netflix subscriptions whenever the coronavirus pandemic ends. Netflix has seen record subscriber growth throughout the COVID-19 crisis, adding as many subs in six months as it did all last year.

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“Netflix has furthered its position as the go-to streaming option,” Piper wrote in a note, adding the aforementioned sub gains underscore Netflix’s long-held belief that consumers are migrating from linear TV to over-the-top video.

A key finding includes the fact most survey respondents indicated they would not be opposed to a price hike going forward — a reversal from a previous survey. Piper expects Netflix to raise its subscription prices in the next 12 to 24 months.

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Wall Street, which loves any attempt at increasing company revenue and operating margins, upped Netflix shares 0.7% in midday trading.

Noted one market observer, “Netflix is a strong brand like Tesla for young people — and they have the best original content [in] both quality and quantity.”

FuboTV Seeks $100 Million via Initial Public Offering

FuboTV, the sports-themed online TV streaming platform offering access to live sports events as well as news and entertainment content, is looking to become a publicly held company through a $100 million initial public offering (IPO).

An IPO or stock market launch is a type of public offering in which shares of a company are sold to institutional investors and usually also retail (individual) investors.

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New York-based FaceBank Co., which owns and operates fuboTV, Aug. 11 filed a registration statement with the U.S. Securities and Exchange Commission (SEC) relating to a proposed follow-on public offering of its common stock.

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FuboTV merged with FaceBank Group in April combining fuboTV’s direct-to-consumer live-TV streaming platform for cord-cutters with FaceBank’s technology-driven IP in sports, movies and live performances. Launched in 2015, fuboTV delivers content through streaming devices, including connected TVs, mobile phones, tablets and computers. The company generated $169 million in revenue for the 12 months ended March 31.

Disney Stock Down After Furloughs, Analysts Downgrade

After news Disney is furloughing 100,000 employees — half its workforce — because of business shutdowns due to the coronavirus pandemic, Wall Street April 20 at the opening dropped the media giant’s stock more than 3%.

Disney, which is telling affected staff to seek state and federal financial assistance, said the furloughs would save the company $500 million monthly while it continues to pay employee healthcare and related benefits.

Wall Street analysts responded in force.

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John Hodulik with UBS downgraded the stock to “neutral” from “buy,” cutting his price target to $114 from $162. The analyst contends Disney is facing a long road to recovery, especially in its theme park and cruise businesses — both, he believes, will not be fully operational until Jan. 1, 2021.

“[They] will be impaired for a longer period of time,” Hodulik wrote in a note.

Meanwhile, Credit Suisse dropped its rating to “neutral” from “outperform” due to similar concerns about Disney’s amusement parks business.

Analyst Doug Mitchelson remains positive on Disney long-term, saying liquidity issues appear overblown and eyeing a return to $160 per share from its current $102 price.

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“We expect a full rebound in theme park and Hollywood operations over time,” he wrote with the caveat that the mid-term outlook remains challenged. “We expect Disney will remain in a more narrow trading range given a remarkable lack of operational visibility, expected severe cuts coming to street estimates, and a now more equally balanced mix of positive and negative catalysts.”

ViacomCBS, Charter Close Funding (Debt) Initiatives

With a traditional media revenue businesses turned upside down by the coronavirus, and not wanting to wait for government bailouts, ViacomCBS and Charter Communications are the latest content creator/distributors to seek outside funding (and debt) to sustain operations.

Charter April 17 announced the closing of $3 billion in bonds, which include $1.6 billion of senior secured notes due in 2031, and $1.4 billion of senior secured notes due in 2051.

Separately, ViacomCBS said it would redeem all of its outstanding senior notes due on Feb. 15, 2021, and all of its outstanding senior notes due on March 1, 2021. The separate aggregate amounts of senior notes disclosed April 17 included $300 million and $500 million, respectively.

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The moves come on the heels of major Hollywood players going to Wall Street in search of funding sources. AT&T sought upwards of $5 billion in loans, while Discovery pulled the trigger on $500 million of its credit line. Comcast sold $4 billion in debt while The Walt Disney Co. secured a $5 billion loan from Citibank.

“Right now, it’s all about liquidity,” Neil Begley, SVP of corporate finance group, told The Hollywood Reporter.

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Netflix’s Stock Skyrockets to Record High Following Wall Street Kudos

At a time when media and entertainment companies struggle to sustain operations due to the coronavirus pandemic, SVOD juggernaut Netflix appears to be riding high, getting repeated praise on Wall Street. The result is an escalating stock price and valuation that topped The Walt Disney Company at the close of trading on April 15.

Netflix shares closed at a record high of $426.75 per share, topping the previous high of $418.97 per share on July 9, 2018.

Why all the investor love? Netflix’s business model appears to be marginally affected thus far by the coronavirus pandemic. While its content production remains shuttered along with the rest of Hollywood, Netflix was one of the first media companies to create a relief fund ($100 million) to assist production personnel and related staff on its original content sidelined without pay during the shutdown.

Analysts contend Netflix subscriber growth has been robust as millions of people (especially in Europe) have been forced to quarantine in their homes. Subscriber growth estimates range from more than 7.5 million to 9.5 million worldwide.

Netflix has also scored big with viewers for its new reality-based true crime documentary miniseries “Tiger King,” about the life of bizarre zookeeper Joe Exotic.

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“We believe the unfortunate COVID-19 situation is cementing Netflix’s global dominance partly driven by the incremental content spend that is enabled by their massive and growing subscriber base,” Jeffrey Wlodarczak, analyst with  Pivotal Research Group, wrote in an April 15 note.

Even longtime Netflix bear Michael Pachter with Wedbush Securities in Los Angeles is giving the streamer a short leash, raising his stock price to $194 per share from $173. But Pachter warns Netflix’s place in the sun during a storm could be short.

He argues Netflix’s long-running excessive cash burn will eventually haunt the service and production shutdowns due to the pandemic could result in higher subscriber churn when the original content portfolio runs dry.

Netflix reports first-quarter (ended March 31) fiscal results on April 21.

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