Gaia Delivers Strong Earnings Beat; Analyst Sees 70% Upside Ahead


Alternative media company Gaia (GAIA), which offers everything from yoga videos to meditation series, has delivered impressive second quarter earning results, exceeding both top and bottom-line estimates.

Specifically, Q2 GAAP EPS of -$0.13 beat Street estimates by $0.01 while revenue of $16.15M beat by $0.34M- and represented strong year-over-year growth of 22.7%. That was thanks to growth in paying members and an increase in average revenue per member. Paying members increased to 663,400 as of June 30, 2020 with net member additions for the quarter of 58,300.

Gross profit in the second quarter increased 24% to $14.1M compared to $11.4M in the year-ago quarter. Gross margin was also up at 87.1% versus 86.4% last year, with total operating expenses up 4% to $16.3M, primarily due to a one-off $0.7M share-based expense related to the acquisition Gaia completed in June 2019.

Customer acquisition costs as a percentage of revenue were 52% for the second quarter, an improvement from 57% in the year-ago quarter. As of June 30, 2020, Gaia had $8.5M in cash- with the company adding that it intends to generate positive net income and free cash flow in the third quarter.

“The results for the second quarter represent 18 months of disciplined execution to drive operating efficiencies across the business while balancing growth initiatives and spend discipline,” said Paul Tarell, Gaia’s CFO.

“We have continued to benefit from higher member growth due to the success of our exclusive content, smart marketing spend and improved retention, which has allowed Gaia to transition to positive earnings and free cash flows starting in July” he added.

Following the results B Riley FBR analyst Eric Wold reiterated his buy rating on GAIA with a price target of $17 (70% upside potential). Shares in Gaia are up 25% year-to-date.

According to Wold, Gaia “benefited from a stay-at-home mentality during the COVID-19 pandemic that drove stronger subscriber counts along with a healthier paid subscriber base, increased content engagement and reduced churn levels.”

He notes that management reaffirmed guidance for positive FCF in 3Q20—which he believes can be sustainable and drive improvements from the trough cash balance that would have been experienced in 2Q20.

“We continue to believe this improved cash flow outlook should help drive a noticeable re-rating for the shares and are increasing our 2020/2021 estimates along with reiterating our Buy rating and $17 PT” the analyst concluded. (See GAIA stock analysis on TipRanks)

Overall the stock shows a cautiously optimistic Moderate Buy analyst consensus alongside an average analyst price target of $15 (50% upside potential).

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