Should you buy Buzzfeed stock? (Apr 2023)
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If you are looking for a depressing stock chart, then BuzzFeed would do great. Since its public debut through a SPAC (special purpose acquisition company), its share price is down more than 90%.
Unlike its competitors, BuzzFeed is focusing most of its content on Gen Z and Millennial audiences by creating content in short forms. The management puts a lot of attention to metrics that relate to the # of Reels and Shorts views, as well as the output of short form vertical videos on TikTok, Instagram, and YouTube.
Other than its flagship BuzzFeed brand, the company owns the food brand Tasty, HuffPost (which was acquired in February 2021), as well as Complex Networks (acquired in December 2021).
Although all of this might sound great, if we take a closer look at the financials, it seems that BuzzFeed is struggling to meet ends.
Its revenue keeps growing ($321m in 2020 $437m in 2022), but the operating profit (excluding impairment expense as a one-off) decreased from positive $12m to negative $80 million. This represents a negative operating margin of -18%!
What has changed over these few years?
One of the main reasons for this decline is the drop in their gross margin, from 56% to 40%. The gross profit that the company is generating is not sufficient to cover the Sales and Marketing and the General and Administrative expenses.
#investing #stocks #stockstowatch #finance
If you are looking for a depressing stock chart, then BuzzFeed would do great. Since its public debut through a SPAC (special purpose acquisition company), its share price is down more than 90%.
Unlike its competitors, BuzzFeed is focusing most of its content on Gen Z and Millennial audiences by creating content in short forms. The management puts a lot of attention to metrics that relate to the # of Reels and Shorts views, as well as the output of short form vertical videos on TikTok, Instagram, and YouTube.
Other than its flagship BuzzFeed brand, the company owns the food brand Tasty, HuffPost (which was acquired in February 2021), as well as Complex Networks (acquired in December 2021).
Although all of this might sound great, if we take a closer look at the financials, it seems that BuzzFeed is struggling to meet ends.
Its revenue keeps growing ($321m in 2020 $437m in 2022), but the operating profit (excluding impairment expense as a one-off) decreased from positive $12m to negative $80 million. This represents a negative operating margin of -18%!
What has changed over these few years?
One of the main reasons for this decline is the drop in their gross margin, from 56% to 40%. The gross profit that the company is generating is not sufficient to cover the Sales and Marketing and the General and Administrative expenses.
#investing #stocks #stockstowatch #finance
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NewsTranscript
00:00 Buzzfeed said last week that it's closing its news division and laying off workers.
00:04 A quick look at the stock chart shows the company is not doing well.
00:07 Shares have fallen more than 90% since its public debut through a SPAC.
00:11 That share price gives the company a market cap of $74.2 million. With $152 million of
00:17 long term debt, the enterprise value is roughly $171 million. Trailing 12 month revenue is $437
00:23 million so the company is valued at less than half annual sales. But the company is unprofitable,
00:28 with negative net income and negative free cash flow. Bear in mind also that the company said
00:33 in its SPAC presentation it would be hitting over $650 million in revenue by now. That's just
00:39 another reason not to believe in the financial projections of most companies, especially SPACs.
00:44 Unlike its competitors, Buzzfeed now focuses most of its content on Gen Z and millennials.
00:50 By creating content in short form, management pays a lot of attention to the output of short
00:55 form vertical videos on TikTok, Instagram and YouTube. The company also owns the food brand
01:01 Tasty, HuffPost and Complex Networks. And the company has 3 different sources of revenue.
01:07 Advertising makes up 46% of the total, content 38% and commerce and other 16% of the total.
01:14 This all sounds good but if we take a closer look at the financials,
01:18 the company is struggling to make ends meet. Its revenue has grown from $321 million in 2020
01:24 to $437 million last year but its operating profit has decreased from positive $12 million
01:30 to negative $80 million. One of the main reasons for this is a big decline in gross margin,
01:35 from 56% to 40%. Put simply, gross profits are currently not sufficient to cover operating
01:41 expenses. The Buzzfeed news division may have won a Pulitzer prize but it was expensive to run.
01:46 Founder Jonah Peretti said last week that he over invested in it. He now believes there simply may
01:52 not be a sustainable business model for high quality online news. And the company now has
01:57 $152 million in debt which is not a pleasant position to be in. The truth is Buzzfeed built
02:02 its brand around clickbait list style articles designed to go viral. High end journalism would
02:08 have had a better chance of surviving under a separate sister brand with no connection to
02:12 Buzzfeed. All that said, Buzzfeed's stock now trades under a dollar and its too cheap to short.
02:19 Investors should leave the stock alone and wait for signs of a turnaround.
02:23 But these are my personal opinions not financial advice and I have no position in Buzzfeed's stock.
02:28 For more detailed investing ideas visit our website overlookedalpha.com