KEY POINTS OF DISCUSSION
- AD MODEL IS SO POORLY MONETIZED THAT: P’s ad-supported model hasn't produce any real operating leverage/cash flow to date, and is now more expensive to run post Web IV. P’s 2Q results reinforce our long-standing view that revenue growth is tied to its salesforce growth, meaning the ad model may never get off the ground.
- VERY LITTLE SUB CONVERSION GOES A LONG WAY: The sub model is far more lucrative from both a revenue and margin perspective. The stark difference b/w the two models means the expanded sub launch is a massive growth opportunity, particularly in the initial years, maybe more depending on how aggressively P commits to it.
- P = CALL OPTION: Basically a hedged bet: mgmt either executes on its sub expansion (new deals + revenue) or is forced to entertain acquisition offers if can’t do so, which should buoy the stock at a minimum. The former offers more upside, but the stock should end up much higher either way by this time next year, if not sooner.
Attendance on this call is limited. Ping for more information.
