What happened
Shares of Curiosity Stream (CURI 0.37%) fell 15.7% in September 2021, according to data from S&P Global Market Intelligence. The online publisher of documentaries and tutorial videos actually had nothing but good news to share last month, but the stock was still dragged down by a market-wide retreat from stocks with a high-risk profile.
So what
CuriosityStream falls in the category of risky stocks due to its lack of bottom-line profits and laser-like focus on promoting revenue growth in the long run. The company posted a net loss of $1.77 per share over the last four quarters alongside $48.7 million of negative free cash flows. Top-line revenues raced 27% higher in the second quarter, compared to the year-ago period, but management is reinvesting every spare penny of incoming cash into additional growth-promoting ideas.
In early September, for example, CuriosityStream invested $6 million in the creator-owned streaming video service Nebula. The two companies have been working together for years. With a 12% ownership stake in Nebula, CuriosityStream stands to benefit as the smaller edutainment publisher evolves.
Two weeks later, heavyweight analyst firm JPMorgan started coverage of CuriosityStream with a bullish view. Analyst Zilu Pan gave the stock an overweight rating and a price target of $15 per share, pointing to a 36% upside from the share prices at the time. Pan called CuriosityStream an "attractive" bet on digital video services, positioned to tap into the expected long-term growth across the streaming-media market.
The market shrugged off both of these positive events in a hurry. Who has time for unprofitable growth stocks during a period of surging COVID-19 cases and financial jousting in Congress? Thus, the stock continued to fall.
Image source: Getty Images.
Now what
I should note that CuriosityStream entered September on the heels of a positive August. The losses of last month essentially erased the gains of the previous period, leaving share prices roughly where they were at the end of a painful July.
That's market volatility in a nutshell. CuriosityStream is building a long-term success story here, focusing on a strong business foundation even if that results in a few quarters (or even years) of disappointing bottom-line profits. The story has been told many times, with a wide range of final outcomes. Growth stocks are risky, and their big dreams don't always pan out, but the handful of big winners at the other end more than make up for the less successful also-rans.
I can't tell for sure where on that spectrum CuriosityStream will fall in the long run, but I'm definitely keeping a close eye on this promising growth stock. Starting a small, speculative position in this intriguing stock is not a crazy idea.
