StreamCo represents a compelling long opportunity at current levels, trading at 8x EV/Sales versus streaming peers at 10x despite superior growth and margin trajectory. The company is entering a multi-year margin expansion phase driven by three underappreciated catalysts:

1. Content Excellence: Significant improvements in content slate quality have reduced churn by 180bps YoY to best-in-class 3.2%, while driving net subscriber additions 40% above guidance
2. ARPU Expansion: Premium tier mix shift and ad-tier outperformance driving 12% YoY ARPU growth to $13.85, with further upside as ad-tier economics approach parity with subscription-only tiers
3. International Scale: 15-market international expansion launching December 2025 enters profitability 2 quarters ahead of consensus expectations, adding 10M TAM

Our bottoms-up subscriber model shows path to 85M global subscribers by FY26 (versus street at 78M), with blended ARPU reaching $14.20 (versus street at $13.50). This drives free cash flow inflection in Q1'26, approximately 6 months earlier than market expects, triggering a multiple re-rating from current 25x to 30x FCF.

💡 Key Insight

Street models remain anchored to historical 4-5% churn assumptions, missing the structural improvement driven by content quality and engagement. Our proprietary content performance tracking indicates this improvement is sustainable, not cyclical.

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StreamCo is a premium streaming platform with 68M global subscribers (55M domestic, 13M international) offering ad-free, ad-supported, and premium tiers. The company operates a mixed content model combining licensed third-party content with an expanding original content slate.

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Revenue is derived from three primary sources:

• Subscription Revenue (78%): Monthly subscription fees ranging from $6.99 (ad-tier) to $15.99 (premium). Blended ARPU of $13.85
• Advertising Revenue (18%): Ad-supported tier with RPM of $45, significantly above initial $35-40 expectations
• Other Revenue (4%): Merchandising, licensing, and partnership revenue

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StreamCo occupies the premium positioning between mass-market platforms (Netflix, Disney+) and niche services. Key competitive advantages include:

• Curated content approach with higher quality-per-title than competitors
• Superior technology platform enabling better personalization and discovery
• Flexible pricing architecture allowing experimentation with bundling and partnerships
• Strong brand affinity with core 25-45 demographic (NPS: 68 vs industry avg 52)

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Thesis Pillar #1: Content-Driven Retention Inflection

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StreamCo's content strategy shift 18 months ago toward fewer, higher-quality original series is now yielding measurable results. The company reduced total title count by 25% while increasing spend-per-title by 40%, focusing on tentpole franchises with multi-season potential.

This strategic pivot has driven:

• Churn improvement: From 5.0% in Q3'24 to 3.2% in Q3'25, representing 180bps improvement and best-in-class retention
• Engagement growth: Average viewing hours per subscriber up 18% YoY to 52 hours/month
• Content ROI: Cost per incremental subscriber declined 30% as organic growth from word-of-mouth reduces marketing dependency
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📊 Supporting Data

Our analysis of 24 major streaming platforms shows a clear correlation between content spend concentration (measured by Gini coefficient) and churn rates. StreamCo's move toward concentrated, high-quality spend places it in the optimal zone, suggesting structural rather than cyclical improvement.

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Thesis Pillar #2: ARPU Expansion Through Mix Shift

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Premium tier penetration increasing faster than expected, driving blended ARPU expansion:

• Premium tier (4K, 4 screens, exclusive content) now represents 28% of base vs 22% a year ago
• Ad-tier economics performing 35% better than modeled, with RPM of $45 vs expected $33
• Household account-sharing crackdown converting to paid subs at 60% rate (vs 40% assumption)

Combined effect: Blended ARPU growing 12% YoY despite 18% of subscriber base on lower-priced ad tier. We model continued ARPU expansion to $14.20 by FY26 as premium mix reaches 32% and ad-tier RPM compounds at 8% annually.

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Thesis Pillar #3: International Profitability Acceleration

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December 2025 launch of 15 new international markets (Latin America focus) represents significant upside to consensus models:

• TAM Expansion: Adding 10M addressable subscribers within 18 months
• Content Leverage: Incremental content spend only 15% of revenue due to licensing existing library
• Profitability Timeline: Break-even expected Q2'26 vs street modeling Q4'26, due to partnership model reducing infrastructure costs
• ARPU Premium: International ARPU tracking $12 vs domestic $14, but 40% gross margin vs 35% domestic due to lower content amortization

MetricCurrentFY25EFY26EStreet FY26EVarianceGlobal Subscribers (M)68758578+9%Blended ARPU ($)13.8514.0514.2013.50+5%Churn Rate (%)3.2%3.0%2.9%4.2%-31%Content as % Revenue42%40%38%41%-7%FCF ($M)(45)125285180+58%

🎯 Primary KPIs (Track Weekly/Monthly)

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Subscriber Metrics

• Net Subscriber Adds: Currently 2.5M/qtr vs guidance 1.8M. Monitor for sustained 2M+ quarterly adds. Red flag if drops below 1.5M.
• Churn Rate: Currently 3.2%, target path to sub-3% by FY26. Monitor weekly cohort data. Exit trigger: 2 consecutive quarters above 4.0%.
• Reactivation Rate: 22% of churned users returning within 6 months, up from 18%. Indicates content strength.
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ARPU & Monetization

• Blended ARPU: Track monthly, currently $13.85, target $14.20 by Q4'26. Decompose by tier for mix shift analysis.
• Premium Tier Penetration: Currently 28%, targeting 32% by FY26. Monitor upgrade conversion funnel weekly.
• Ad-Tier RPM: Currently $45, expecting 8% annual growth. Monitor fill rates (currently 92%) and CPM trends.
• Account Sharing Conversion: 60% of flagged accounts converting to paid. Monitor enforcement pace and conversion rate.
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Engagement & Content Performance

• Viewing Hours per Subscriber: Currently 52 hours/month (+18% YoY). Target 55+ by FY26. Leading indicator of churn.
• Content Completion Rate: 68% for original series vs 52% for licensed. Track per-title performance.
• Launch Performance: Latest tentpole: 40M hours week-1. Established 30M+ threshold for "hit" classification.
• Social Engagement: Track Twitter mentions, Reddit discussions, Google Trends as leading indicators of organic growth.
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International Metrics (Post-Launch)

• International Subs: Currently 13M, target 23M by end FY26. Monitor market-by-market penetration vs TAM.
• International ARPU: Target $12 blended. Monitor FX impact and local pricing power.
• International Contribution Margin: Break-even Q2'26 target. Monitor content costs and infrastructure efficiency.

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⚡ Near-Term Catalysts (0-6 Months)

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1. Q4'25 Earnings Report (November 15, 2025)

Expected Impact: Positive surprise on subscriber adds and ARPU

• We model 2.3M net adds vs street 1.9M (based on content slate strength + seasonality)
• ARPU guidance raise to $14.05+ for FY25
• FY26 guidance initiation: expect 82M subs vs street 78M
• Potential stock impact: +8-12% on beat/raise scenario
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2. International Market Launch (December 2025)

Expected Impact: Multiple expansion as international profitability de-risked

• 15 new markets (Brazil, Mexico, Argentina, Colombia + 11 others)
• Initial subscriber target: 2-3M within first quarter
• Partnership model announcement should highlight capital efficiency
• Positive reviews from early markets drive re-rating of international opportunity
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3. Tentpole Content Launch Q1'26 (January-March 2026)

Expected Impact: Subscriber acceleration validates content strategy

• Flagship franchise sequel expected to drive 3M+ net adds in Q1
• Social media pre-launch buzz tracking 40% above previous tentpole
• Demonstrates sustainable content engine, not one-time hits
• Provides confidence in FY26 guidance and reduces perceived execution risk
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⚡ Medium-Term Catalysts (6-12 Months)

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4. FCF Inflection Point (Q1'26 Earnings, April 2026)

Expected Impact: Valuation multiple re-rating from growth to cash flow story

• First quarter of positive FCF: $65-75M vs street expecting breakeven
• Triggers shift from EV/Sales to FCF multiple framework
• Streaming comps trade 20-30x FCF; STRM currently implies ~40x on our FY26E, suggesting significant compression opportunity
• Management may initiate share buyback, signaling confidence
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5. Potential M&A Activity (Ongoing)

Expected Impact: Strategic

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