I don’t blame anyone for taking one look at the Cinedigm (NASDAQ:CIDM) stock chart, and writing off the entertainment company as a long-term loser. After all, coming into 2020, CIDM stock had lost 98% of its value from its 2014 peaks.

But the growth narrative surrounding Cinedigm has entirely changed in 2020. For the better. And Cinedigm stock has reacted appropriately. By rising about 165% year-to-date – even against the backdrop of a global pandemic.

That’s impressive.

And things are only going to get more impressive for this formerly stale entertainment company. The company is leveraging a successful and rapid pivot into the over-the-top (OTT) media channel to turn into one of the market’s best turnaround stories.

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As this turnaround story continues with vigorous momentum over the next few years, CIDM stock will keep surging higher.

Here’s a deeper look.

A Big Bet on OTT

In 2020, Cinedigm has gone from one of the market’s most boring stocks that you should avoid at all costs to one of its most exciting stocks that could be a strong buy.

Broadly, Cinedigm is an entertainment company that, over the past several years, has struggled to differentiate itself in the increasingly crowded media market. But, in 2019, Cinedigm management made a huge bet: They decided to put all their eggs in the OTT basket, and spend all their time and resources turning the company’s content library – which includes over 32,000 movies and TV shows – into a portfolio of streaming channels.

That bet has paid off in a big way in 2020.

Cinedigm’s newly launched streaming channels – including Comedy Dynamics (a channel dedicated to stand-up comedy specials), The Bob Ross Channel (a channel dedicated to legendary landscape painter Bob Ross), Docurama (a specialized documentary streaming channel), CONtv (a streaming channel dedicate to all things Comic Con related) and more – have dramatically expanded its distribution across the OTT landscape in 2020.

Specifically, in January, Comedy Dynamics landed on Samsung TVs, which is a big deal since Samsung is the No. 1 TV maker in North America.

In late May, multiple Cinedigm streaming channels – including Comedy Dynamics, CONtv and Docurama – landed on Amazon‘s (NASDAQ:AMZN) IMDB TV.

A few weeks later, in early June, many of those same Cinedigm channels scored distribution through Vewd, the world’s largest Smart TV OTT software provider with an install base of more than 300 million Samsung, Sony, Philips and TiVo TVs.

In other words, in 2020, Cinedigm’s portfolio of niche streaming channels has gone from being available nowhere to being available everywhere.

Impressive Results With More to Come

The company’s growth trajectory has followed the content distribution trajectory.

Cinedigm exited 2019 with 5.6 million OTT viewers. That number rose by 73% to 9.7 million viewers in March. It rose another 36% to 13.2 million viewers in May.

Management expects increased distribution to spark 100% growth in viewers over the next 18 months.

The growth won’t stop there.

You’d be right to acknowledge that Cinedigm’s streaming channels aren’t mass-appeal offerings. They are niche. But those niches are bigger than you think.

With respect to CONtv, over 100,000 people attend San Diego Comic Con every year, while similar-cartoon programming linear network Cartoon Channel’s best shows average north of 700,000 viewers. Bob Ross’ YouTube videos consistently have millions of views, and often 5+ million views. Netflix (NASDAQ:NFLX) said that 75 million of its subscribers watched comedy specials in 2019. Netflix also said that 64 million people watched the 2020 documentary Tiger King.

In other words, there is ample and significant demand for animated content, documentaries, stand-up comedy and Bob Ross.

Thanks to broad distribution agreements, Cinedigm has a visible and compelling opportunity to capitalize on that significant demand in the growing OTT channel over the next several years.

Cinedigm Stock has Big Upside Potential

CIDM stock is already up more than 150% in 2020. Against that backdrop, you could argue that a 136% rise in OTT viewers year-to-date is already priced into CIDM stock. But that argument is short-sighted. Cinedigm is far from done growing.

Considering that the number of global OTT viewers is expected to surpass 450 million by 2022 and will likely march toward 1 billion in the 2020s, Cinedigm has a lot of room to grow its 13.2 million viewer-base. I think it’s quite likely that Cinedigm’s OTT viewer-base grows to 50 million viewers by 2025.

At the same time, the $71 billion spent on linear TV ads in 2018 will continue to make its way into the OTT channel, in which advertising today measures less than $4 billion. That’s a big deal for Cinedigm, because its streaming channels are mostly ad-supported.

Thus, not only will Cinedigm’s user base swell over the next few years, but so will the amount of ad revenue Cinedigm collects from each user. Roku (NASDAQ:ROKU) – another ad-supported OTT platform – presently operates at ARPU rates north of $20. I think Cinedigm could net $10 ARPU rates by 2025.

Thus, 50 million viewers on $10 ARPU rates implies $500 million in OTT revenue. A market-average 2-times sales multiple on that implies a potential future market cap of $1 billion. And that’s assuming a market-average sales multiple, when most OTT stocks – like Netflix and Roku – trade at much higher sales multiples.

Bottom Line on CIDM Stock

Cinedigm is one of the market’s most exciting turnaround stories today. The company is going from stale, linear programming entertainment company with bleak growth prospects to a hyper-growth, OTT media player with significant long-term growth potential.

As the company continues on this turnaround over the next several months and years, red-hot CIDM stock will stay red-hot.

Long-term, this is a potential multi-bagger.

So I say buy now and hold.