Millennials don’t invest as much in the financial markets for fear of losing money. Some investment analysts consider them a fiscally conservative generation. They are saving money and focused on paying debts but are only keen on investing if they know or understand the business.
Fortunately, one Canadian company is a suitable investment option for millennials. Stingray Group (TSX:RAY.A), a leading global music, media, and technology force, provides curated direct-to-consumer and business-to-business services. Its premium services include audio television channels, radio stations, subscription video on demand content, 4K UHD television channels, karaoke products, digital signage, in-store music, and music apps.
If you invest today, the stock price is relatively cheap. At $4.31 per share, you can partake in the lucrative 6.96% dividend yield. Because of the most recent quarterly results and business developments, market analysts are bullish. Their 12-month average price target is $7.92. Apart from the 83.75% potential price appreciation, you’ll receive quarterly dividends.
Financial performance
In the first quarter (Q1) of fiscal 2024 (three months that ended June 30, 2023), revenues and net income rose 1.1% and 50.2% year over year to $78.99 million and $14.11 million. Notably, cash flow from operating activities and adjusted free cash flow rose 48.4% and 17.9% to $24.26 million and $18.45 million versus Q1 fiscal 2023.
Stingray’s president, co-founder, and chief executive officer (CEO), Eric Boyko, said, “In the first quarter of 2024, we delivered robust adjusted EBITDA [earnings before interest, taxes, depreciation, and amortization] of $28.3 million, representing 35.8% of sales, thanks to cost-saving initiatives implemented over the past year.” He was particularly pleased with the retail media advertising campaigns because the advertising business picked up despite the temporary slowdown in revenue growth.
However, on August 8, 2023, Stingray suspended all advertising products on Facebook and Instagram in Canada. Boyko said the company supports a diverse and vibrant media landscape but can’t tolerate Meta Platform’s decision to block news from Canadian news media publishers.
Another financial highlight is the $47.2 million Broadcasting and Commercial Music business revenue, a 2.3% increase from a year ago. While Radio revenues dipped 0.6% year over year to $31.8 million, Stingray outperformed in the industry.
Growth catalysts
The $298.9 million distributor of audio and music video brands maintains strong fundamentals by establishing partnerships and signing sales agreements. Boyko reveals that the goal is to offer a single, large-scale network of retailers for advertisers seeking national reach to promote their brands.
Stingray’s sales agreement with Mood Media’s Vibenomics advertising division expands its retail audio ad network in the United States. The deal with Loblaw Media should double advertising revenue to $100 million in the next one to three years.
The expansion of Stingray’s retail audio advertising network has continued since the Q3 2023 earnings release. Peavey Mart, a leading Canadian retail and agricultural supply chain is the latest addition. It has over 90 hardware stores, and the coverage has widened beyond pharmacies and groceries.
In September 2023, Stingray announced a new distribution agreement with TCL. The partner is one of the world’s best-selling and leading consumer electronics companies. On November 1, a new partnership with Air Transat, a leading travel brand, was formed.
Long growth runway
The investment thesis for Stingray right now is its long growth runway. While the stock price could spike and dip because of elevated market volatility, the dividends could compensate. Stingray has yet to miss a quarterly dividend payment since August 2015.
