Why GNUS is a Buy in August and September
It’s hard to forget how Genius Brands $GNUS shot up to $11.73 after being in the $0.30 range in the spring. However with a huge sell off the hype has come and gone and now this stock is becoming a buy again.
It’s still early days for the brand and it’s finally debt free. On the best of days it’s seen as a potential “Netflix for Kids”, where it attempts to be a global brand management company that creates and licenses multimedia entertainment content for children.
Even the bears are saying its risks outweigh its potential rewards right now, and I agree. $GNUS has had a roller coaster summer with a lot of hyped PR, empty promises and a showboating CEO that hasn’t delivered much. A lot of investors lost money on Genius Brands, but for those of us who have been loyal we are bag holders.
Genius Brands Needs to Stop Bragging
Genius Brands endlessly boasts about how great they are. It’s tiresome, but the price point is starting to look attractive again as it nears the $1.00 mark. Does the company make money? Far far from it. But with many schools not going back to normal, the brand has a window to make it big and accelerate the digital transformation of their space.
If there is anything the Genius Brands management team is good at it’s hiring quality people with a proven track record which will be good for the stock. Whether this all-star cast is over the hill is quite another story. Kartoon Channel went live on June 25th.
They had tens of thousands of viewers sign up for the programming service which is available in over 90% of U.S. TV households, in over 100 million homes and on over 200 million mobile devices. Oddly, during this period the stock has been going down steadily and is now in the $1.50 range.
Historically a $1.35 would be a buy rating for this stock. Their cash position is substantially better now after the hype-train gave them a lot of free money. We have to pay attention, however, as recent connections with a couple of very well-known retail outlets indicates that Genius Brands is gaining considerable traction.
The ability of this stock to run up on good news is proven. There are legions of fans and Robinhood investors ready to take a gamble on a company that makes the lives of our kids brighter.
Kartoon Channel Still has a Lot to Prove
Is the Kartoon Channel app great? Far from it but it at least has the possibility to scale. Amidst migrating the iOS interface to all of their other platforms, including Android and Roku, there’s some untapped potential reach. A stark warning however has to be given: Genius Brands has consistently failed to turn hype into sustainable value for shareholders. It’s been a disaster for thousands of small investors.
Most recently, Genius Brands announced the debut of its Rainbow Rangers toys at Walmart and Amazon. After creating anticipation about a potential partnership, the actual news fell flat. There have been a lot of issues over the past weeks that have driven $GNUS investors half crazy.
Since June 3rd and the $7.93 price point, the stock has driven straight down for many weeks. However it’s now reaching the region of fair price value. Whether that’s $1.20 or $0.85, it’s difficult to say.
Genius Brands can only do so much. It’s a patience game. They curate the content, so parents know it will always be safe for their kids. And they strive to put as much enriched content as possible on the air, from which children can actually learn as they watch and are entertained.
No violence, no improper language, no negative stereotypes. I can see Millennials and GenZ investing in this stock en mass again.
The chart is starting to look a bit more realistic for long-term investors. If they parade Stan Lee’s name one more time though I’m going to be disappointed. The stock has melted down and the hype destruction has been considerable for this poorly managed stock.
The industry is crowded and the stock is still a gamble, but it’s now a fair gamble. Genius Brands at least does have a strong balance sheet and many talented storytellers on its workforce and the timing is good with schools going hybrid, virtual and more digital during the pandemic.