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You Don’t Have to Be Einstein to See the Value in Genius Brands

The market for Genius Brands’ (NASDAQ:GNUS) kid-friendly entertainment has always existed, but the onset of the novel coronavirus has put this market into sharper focus. Knowing that bored kids stuck at home will create a moneymaking opportunity, investors bid up the GNUS stock price too far, too fast.

a kid laying on a floor playing with a tablet instead of toy cars that sit next to him
Source: patat /

After the pop came the inevitable drop, but that might not be a function of the company’s fiscal health. Rather, an argument can be made that GNUS stock is trading at a much more reasonable price point now.

When the stock was peaking, I recall that some folks on social media were speculating that Genius Brands’s cartoons would become more popular than those of Walt Disney (NYSE:DIS). So far, however, Genius Brands is no Disney killer.

Yet, recent connections with a couple of very well-known retail outlets indicates that Genius Brands is gaining considerable traction. If the price is down and the company is making strides, there could actually be a strong value proposition today in Genius Brands’ stock.

A Closer Look at GNUS Stock

Usually, stocks adhere to the old rule, “Stairs up, elevator down.” In other words, the decline in a stock price is generally faster than its ascent.

Interestingly, the opposite happened with Genius Brands’ stock this year. It’s quite extraordinary, really, to witness a melt-up that outstrips the subsequent share-price dump.

Believe it or not, as recently as early May, Genius Brands’ shares were trading at a mere 31 cents apiece. The next thing you know, pundits are calling Genius Brands the next Disney or the ate a Netflix (NASDAQ:NFLX) for kids.

Apparently traders thought that Genius Brands was now the greatest thing since sliced bread, as they bid GNUS stock all the way up to $11.73 in June. The angle of the ascent was remarkable, but the bears soon prevailed and the stock price commenced a decline that’s been two and a half months in the making.

As of Aug. 14, Genius Brands’ shares were priced at $1.60. That’s a far cry from the 52-week high, but that’s not necessarily bad news for prospective investors. If you believe that Genius Brands can expand and acquire greater market share, then the stocks’ reduced price could make it intriguing.

The Rainbow Connection

With the company’s motto being “Content with a Purpose,” Genius Brands’ cartoons are meant to be both entertaining and educational. Among Genius Brands’ stable of colorful characters are the ever-peppy denizens of the Rainbow Rangers cartoon.

There’s more than just a cartoon, of course, since merchandising is the real moneymaker here. With this in mind, Genius Brands partnered with  Mattel (NASDAQ:MAT) to produce Rainbow Rangers character toys under Mattel’s Fisher-Price brand.

That, in itself, should be considered a major coup for Genius Brands. However, there’s even more to this story. Specifically, the Rainbow Rangers toys will be sold through Amazon (NASDAQ:AMZN) and Walmart (NYSE:WMT).

GNUS is Gearing Up

Genius Brands Chairman and CEO Andy Heyward commented on this development with justifiable pride, saying, “The Rainbow Rangers brand has all of the elements to potentially become a breakout hit and a huge business for Genius Brands.”

The GNUS stock price popped 32% when the market received the news of the Mattel-Genius Brands collaboration. Even with that spike, however, GNUS shares have plenty of room to move before they retake their former high point.

Besides, it’s not all about the Rainbow Rangers as a press release disclosed that even beyond that cartoon franchise, “Genius Brands is gearing up for the August retail launch… [of] hundreds of other product SKUs coming to retail over the next 12 months.”

The Bottom Line

There’s no need to fear that the pop-and-drop in Genius Brands’ stock will bring lower prices. The partnership with Mattel to push the Rainbow Rangers and potentially other cartoon brands is, to put it bluntly, pure genius.

As of this writing, David Moadel did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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