I continue to be intrigued with Genius Brands’ (NASDAQ:GNUS) and not only because insider buying of GNUS stock bodes well for the shares’ longer-term outlook.
The company’s’ strong management and creative talent, along with the mostly positive reviews of its content and its powerful intellectual property, give the company a great deal of potential.
Still, given the stock’s sky-high valuation and the fact that the Street appears to be unimpressed with the company, I would wait for the shares to fall another 50% before buying it.
A Closer Look at GNUS Stock
In the last year, two company insiders ( CEO Andy Heyward and Director Michael Klein) have bought a significant number of the shares. Klein bought 25,000 shares at $2.83, and Heyward acquired 1 million of the shares for 76 cents each last October. He also bought about 12 million of them for 21 cents each through options in June, although he also sold 460,574 on June 19 for $2.94 per share.
Arnold Schwarzenegger, who’s starring in and co-producing Genius’ Stan Lee’s Superhero Kindergarten show,decided to receive warrants to purchase GNUs stock “as an advance” of the shares of profits from the series that he’s slated to earn.
Unfortunately, though, the company did not specify the price of the warrants or the number of shares that they can buy. But the fact that Schwarzenegger is willing to publicly endorse the stock and invest in it is still meaningful.
Institutional investors, however, had been much less enthused as of the end of the second quarter. All but two of them, as of the end of June, owned less than $1 million of GNUS stock. Furthe,r in the last month ,the shares have tumbled 35%.
Also disappointing was the fact that the company’s Q2 revenue came in at just $560,000.
The Team Behind GNUS Stock
Genius’ CEO Andy Heyward, had a hand in developing and writing for classic cartoon brands like Scooby Doo, co-created Inspector Gadget and produced shows like GI Joe, and Alvin and the Chipmunks. Genius’ Executive Chairman Margaret Loesch was CEO of Fox Kids Network and Chief Creative Officer, David Neuman, ran Walt Disney (NYSE:DIS) Television and Touchstone Television.
Genius also recently made a deal with leading comic book publisher Archie Comics to create comic books based on those characters. The move is likely to result in the characters starting to generate a loyal following among big cartoon fans.
In addition to Stan Lee Universe, Genius recently acquired the rights to a cartoon series featuring Pac-Man and another based on Sonic the Hedgehog.
Mostly Positive Reviews
Although the reviews of Genius’ Kartoon Channel app on Amazon (NASDAQ:AMZN) are not as overwhelmingly positive as they were when I wrote my last column, 70% still rate the app five stars and another 7% give it a four- star rating.
Further, as was the case previously, many of the positive reviews are full of superlative praise for the app. For example, one reviewer wrote, “Love the variety and the fact that I don’t have to worry about what my kids are watching.”
The reviews on Google Play appear to be much more overwhelmingly positive, as more than 4,000 users gave it a rating of 4.8 stars.
After scrolling through the first five or six pages of reviews, I can report that nearly all of them gave the Kartoon Channel five stars.
In addition to Amazon and Google Play, the channel; is also available on Apple’s (NASDAQ:AAPL) App store and on many streaming channels, including ” Dish, Amazon Prime, Apple TV, Sling TV and…Xfinity on Demand,” which is owned by Comcast (NASDAQ:CMCSA), according to Marketwatch.
The Bottom Line
There’s a great deal to like about the company, and the insider purchases of the stock are encouraging. But with institutional investors still apparently cold on GNUS stock and the shares still trading with a market capitalization of over $225 million, they are likely to drop sharply before they rebound significantly.
I recommend that speculative, risk-tolerant investors buy a small amount of the shares when they reach 50 cents-60 cents.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Larry has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Among his highly successful contrarian picks have been solar stocks, Roku, and Snap. You can reach him on StockTwits at @larryramer. Larry began writing columns for InvestorPlace in 2015.