- Benchmark analyst Daniel Kurnos maintains Chicken Soup For The Soul Entertainment, Inc CSSE with a Buy and lowers the price target from $25 to $12.
- The re-rating reflects the company's modestly disappointing 4Q results.
- The revenue result was technically in line on a consolidated basis, although there was no official breakout between legacy CSSE and Redbox. Commentary from management, however, suggested a 29% Y/Y increase in Crackle from a combination of expanded distribution touchpoints (now 160 FAST channels), along with the development of their 3P ad sales solution as a provider of direct access and scale for outside parties who cannot reach that marketplace themselves.
- Kurnos suspects legacy CSSE modestly outperformed, with Redbox the underperformer on lower kiosk count and a slower reacceleration of the rental business. It is, consequently, surprising that adjusted EBITDA was below the analyst's and the street forecast by some $3 million, but it is entirely possible to attribute that to transitional noise.
- The more important news, however, was the $11 million raise that produced a more strained call on Friday morning and led to a 40% decline in the share price.
- The guidance for 1Q is slightly ahead of expectations, implying a cash burn in the mid-single digit range and a much better investor forecast.
- However, adjusted EBITDA is also now benefiting from increased stock comp instead of cash to help alleviate the cash burn pressure, technically implying a reduced guidance range given that the prior range was unchanged.
- The increase in movie titles alone should be a tailwind for Redbox, even in an uncertain macro environment. The recent raise suggests an immediate need for capital (there was a cash put). However, Chicken Soup has a highly restricted $50 million ATM open to them while they push for a loan against receivables and still have $18 million on the balance sheet.
- Kurnos suspect another $50 million or more in potential asset sales could further help de-lever the balance sheet.
- The analyst believes the bar is extremely low, and shares would trade materially higher if not for the debt concerns.
- Therefore the price target reflects that CEO Bill Rouhana has a better than 50/50 chance to pull this off.
- Price Action: CSSE shares traded lower by 7.75% at $1.8450 on the last check Monday.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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