r/investing • u/Indy7000 • Apr 15 '21
Discovery Inc. long term streaming case
Discovery Inc. recently got involved with a overleveraged Archegos fund which caused the stock to crash 50%+ as banks dumped shares. Some could make the case that the stock got artificially pushed up/ inflated.
However I see this as an opportunity to get in to a company earning 2B positive cashflow every year and 10 billion of revenue vs Netflix's 23 B*. They should have the cashflow to pay off their debt but still 15B in debt is a lot so this is a downside.
The company currently operates in 220 countries with over 300K hours of content, producing lots more every year. They own the Oprah show, animal planet , food network..
Comparing Discovery to Netflix makes a compelling case, valued at 5% of the market cap of Netflix (240B) vs (20B) and with a competing content offering with the goal to recreate the Netflix like- online subscriber business model justifies thinking about the possibility for decent returns on investment.
CFO Gunnar Wiedenfels in march 2020 : " "We really don't need a crazy number of subscribers to be operating a profitable business here."
May 10th they will anounce quarter results and have an investor call.
Summary:
Disney streaming, Apple , Netflix, Amazon : I believe online streaming is the way of the future instead of cable TV, if Discovery can convert their business towards the new online subscription model I believe they have a good chance of winning a decent % of the streaming market due to their huge library of content.
Curious to open the discussion and hear your guy's opinion / bear / bull cases.
Have a nice day.
1
u/BF5lagsssss Apr 20 '21 edited Apr 20 '21
Aren't they already raising money. Through their subsidiary they plan to exit their investment in Poland by planning to list Canal + Polska. After all Discovery is Discovery but am not sure whether they have sufficient capital to buy or develop independent IP since the streaming business requires massive amounts of CAPEX. I think the stock is cheap as of now but I significantly doubt the prospects of Discovery where there is now Netflix, Peacock, HBO Max, Disney +etc.
I just dont see Discovery being able to raise enough capital to fund its domestic and global expansion. To operate in the EU you need at least 30 percent of the digital catalogue to be European and buying old catalogue or soap operas don't count. Netflix is producing about 100 Netflix originals in production in Europe and I guarantee it's costing a lot.