RE:RE:Seeking alpha. Thanks for sharing this article. It's an interesting read because the author uses many of the same assumptions that I made when doing my due diligence on this stock, especially in terms of estimating the size of sports markets and the potential for further penetration.
In my back of the envelope calculations, I assumed 2% to 5% penetration of the estimated viewing audiences for major sports like football, hockey and basketball, and assumed that Neulion would be able to negotiate a servicing fee of roughly 5% of the revenue that these professional organizations charge for a subscription to their services. Based on that growth trajectory, and the continual addition of new sports offerings such as tennis, cricket, golf, soccer etc. (albeit at lower subscription rates), I came up with a projected stock price of $2.50 by the end of 2016, based on an estimated 20x p/e ratio. That's roughly $150% stock growth in 24 months (and it was over 200% increase from when I initially started my accumulation of Neulion shares).... so for me, Neulion is a long-term play, and I just ride the ups and downs, with my eye on where this company might be in 2016.
Risks to this thesis:
- A major competitor comes along and steals Neulion's thunder. We've already seen rumblings that BCE is pissed off with Rogers for allegedly syphoning away cable customers with the offering of NHL's Gamecentre online streaming services... will the US networks take a similar strategy against the NFL if they perceive a threat to their revenues from greater online streaming... time will tell (but given how Napster beat down the music industry and Amazon beat down the publishing industry... my hunch is that these precedents will favour the Neulion streaming options, despite the protests from large cable monopolies). We shall see.
- A second risk, also outlined in the alpha article, is that organizations like the NFL, NBA or NHL develop their own in-house streaming service, similar to how MLB (baseball) has done, thus cutting out the middle-man (Neulion). This risk is mitigated by the fact that streaming technology is not a core-strength of professional sports organizations, and similar to how many Fortune 500 corporations "oursource" their technology to service providers like Oracle, SAP, Cisco, by the same token, there is a reasonable expectation that professional sports organizations will continue to outsource their 'streaming technology' to professional streamer service providers like Neulion. Again, we shall see.
Thanks again for the article... it was an interesting read.
GLTA