Summary of Operations
PLBY Group is a company whose operations focus on “pleasure and leisure,” mainly for adults. It owns and operates the famous Playboy brand, pioneered by Hugh Hefner. PLBY reports its operations in three segments: Licensing, Direct-to-Consumer, and Digital Subscriptions and Content. DTC accounts for a majority of revenues.
The company spent much of the last decade restructuring itself and making acquisitions or undergoing mergers. In 2021, it operated at a loss and had negative cash flows.
Strategy
The DTC segment is focused on consumers aged 18 to 34 with its Sexual Wellness and Apparel products. Licensing segment is looking to penetrate foreign markets like India and China. Moreover, the company believes its brands will not only generate income through licensing but will also provide marketing value. Through digital operations, PLBY seeks to acquire long-term customers who will provide steady revenues at low cost. Where possible, the company acquires similar and adjacent businesses to grow and support these efforts.
Growth and the Future
I have doubts about growth. The licensing segment is strong because the Playboy brand is strong, and that is the extent of its moat. Where other legacy media companies successfully transitioned from print to digital at the critical moment, Playboy failed, and it’s hard to bounce back from that. PornHub, OnlyFans, and even the Bing search engine (Microsoft) are more dominant in the porn market than Playboy is. There will always be some demand for their bunny-logo merchandise, but there’s a ceiling on that.
Management, however, is much more optimistic, per their most recent earnings call. They believe they are primed for growth through DTC and that their acquisitions/ platforms provide access to a large pool customers and revenues. They believe they can occupy a role between Instagram and OnlyFans by being a primarily adult platform but not as focused on hardcore material as OF. Similarly, they believe there is room to grow their brick-and-mortar retail stores.
For now, though, its operating cash flows are negative, so this stock is a candidate for a turnaround and worth some patient observation.
Valuation
Until this company turns around, I will not attempt a valuation.
Growth Assumptions: N/A
Intrinsic Value Per Share: $N/A
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