Hemisphere Media Group (HMTV) has a bright growth outlook that's currently clashing with the trends in its stock price. The Spanish language TV broadcaster is targeting higher sales in 2021 while warning that content spending will remain elevated.
In this video from "Beat & Raise," broadcast on Dec. 3, Fool contributors Jason Hall and Demitri Kalogeropoulos discuss the entertainment specialist's outlook, along with a few reasons to like the stock today.
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Jason Hall: I'm really interested. Hemisphere Media is a company I've been wanting to learn more about for a while and I just keep putting it off. Now I'm just going to let you teach me.
Demitri Kalogeropoulos: Sure. Well. You might have good timing because it's one of the many stocks on sale right now. Hemisphere Media Group, the ticker symbols, HMTV, they are basically the only pure-play US media company that targets the Hispanic Spanish language speaking in Latin American markets. They've got a view cable. They've got, let's say five US Hispanic cable channels and they've got a couple on Latin America too. They've got a leading broadcast network in Puerto Rico and they just launched a streaming service in the US going that route that we've seen a lot of companies like Disney and Netflix go in the past and they've got a partial ownership in the television network in Columbia.
That's the 10 second review and then let me go ahead and share this slide with their quarter. They did report a few weeks ago. This is on November fifth. It's a very tiny company. Their sales were just 51 million. The market cap is somewhere in that 300 million range, but it was all good news basically in this earnings report to the sales were up 24 percent from 2019. They did book a loss, but that's adjusted earnings were right in line with what management was hoping to see. I review their conference call on everything, management was really happy with their greetings, good viewership trends. They were particularly excited about Puerto Rico.
The market there booming at the moment for advertising and, they cited a lot of that was because of the vaccine rate and lower COVID outbreak numbers and just increased economic activity. All that track really well with their business. Their digital strategy is the Pantaya is on track. They crossed one million subscribers in the quarter, which they're really happy about. Their outlook is solid because of those operating trends. They've got a lot of good viewership that they're happy about and they've got a pipeline of new content they're going to be releasing similar to what you hear Netflix talk about.
That's the main thing. They need to be able to make these bets on content and then monetize them and they're still hoping for at least around three million subscribers for that Pantaya digital business by 2025. You do see the stock on the chart here collapsing there in the last two or three weeks. That didn't happen, right in the immediate wake of the earnings report. What happened was the week after that, the company announced plans to do a secondary offering to raise some cash and maybe the stock market did not like that for some reason and their stock dropped something like 15 or 18 percent in response to that news and then a day later, management put out a press release.
They canceled the offering and they said they didn't make sense at the lower price value. Which there might be a story behind that, but I can get any more information about that. Management said they're not in any kind of cash crunch. They've got plenty of financing available on. They have cash production. That's not an issue there, but as you know from a company like Netflix or Disney, it takes a lot of cash.
Particularly you're getting into the subscription business and it takes time to monetize a lot of these bets. I guess that's the main concern if you had one about this businesses is that it could take a while before those earnings start, before these content that start paying off. There might be a period of cash issues over the next few quarters or a year or two.
Hall: I mean, I think it could be multiple years as they build out that content library and invest in it.
