With significant stock dilution in the summer of 2020, Genius Brands $GNUS peaked at $10.73 to around $1.00. This means below $0.90 it likely is a buy if you look at the long-term chart.
If we should be greedy when others are fearful and load up on a high-volume stock with significant new investors watching, Genius Brands has some good 3-5 year prospects. They have $54 million in cash and a talented roster of executives to help move the company forward.
While business fundamentals are terrible, with kids content you have to think YouTube will eventually become more regulated. Genius Brands has the kind of future streaming content for 2-11 year olds to make a good case as a growing startup that could mature in the 2020s.
The Kartoon Channel will take years to mature and its ecosystem of content needs a lot of upgrades. But Genius Brands has an executive team that has a proven track record in a stay at home environment that puts kids content in a much more premium role during the pandemic of 2019-2021.
Genius Brands $GNUS is the very definition of a penny stock: a deeply unprofitable company with the number of shares outstanding increasing from 233 million to 400 million. However they have erased their debt while putting out somewhat deceptive press releases for naive investors. Still the long-term prospects of the company are probably good given the lucrative niche of their business model.
The stock was $0.21 in December of 2019, but it’s unlikely it will go below $0.70 any time soon. This is because the stock has incredible fanfare, volume and Robinhood back support. The stock can still be very volatile and surges to $3 or even $5 are relatively easy for such a stock in the limelight of millions of kids globally staying home from school due to Covid-19.
The Kartoon Channel app did not look amazing and launched on June 15th just before the end of Q2. However streaming content for kids will have an increasing total addressable market (TAM). If Google and YouTube falls under anti-trust investigations, this is one of the companies that can profit a lot from new regulations.
Q2 2020 revenue increased 20% to $560,679 but the optimists on this business model will tell you that’s just tip of the iceberg. Ads revenue on such a platform could sky rocket in the early 2020s. I think the company could be profitable by 2023.
The volume factor for $GNUS also puts it in very rare company having a bit of Hollywood bling. While it certainly broke the back of many new investors, not everyone bought this stock during its peak above $5. Now that it’s only $1 it provides a speculative Cinderella story in the making.
But $GNUS is also a very dangerous stock for Robinhood investors who are more gamified to be impulsive buyers (a bit akin to gambling). Historically the chart suggests that Genius Brands has spent more than a decade destroying investor capital. This has to be said, this company has not been a real winner and won’t likely be one any time soon.
Ad revenue is obviously part of the bull case for this company. Advertising sales jumped over 300% YoY to $70,347. It’s still a very small number for a company with a market cap of $221 million. Without significant boosts in scale and quality content and an elevation of the product, Genius Brands might not have a bright future.
If you believe the story of the stock as a potential “Netflix for Kids”, you will see a $1 dollar stock as an attractive option. This is because of the potential scale of its launch across Google Play, iOS, Roku, and other popular streaming platforms. The problem is of course the content is not that great in 2020. It’s a lackluster offering. Any seven or nine year old will easily tell you, when you are competing against Disney and YouTube you are the little guy.
Is $GNUS a buy? Yes, but not at $1.00, you’ll want to wait for it to go below the one dollar figure before stepping into this controversial play. EBITDA and Price/Sales at this point is crazy, but you have to be a bit crazy to invest in penny stock startups this unprofitable in the first place.
Just don’t wager your future and be realistic. When you are buying a penny stock, just remember these companies are more likely to lose than to win. Genius Brands is a struggling startup even after all these years, but presents a unique enticing picture of its future prospects.