Is Genius Brands Going to Ride Shaq to $10 and Beyond?

Genius Brands International (NASDAQ:GNUS) announced on March 16 that the Oscar-nominated writer for Pixar’s Toy Story would serve as the head writer and executive producer for the new children’s series, Shaq’s Garage, which is scheduled to appear in the fall on the Kartoon Channel. Other recent announcements have pushed GNUS stock higher in recent weeks. 

GNUS stock Shaquille O'Neal attends ESPN Gala: '30 For 30: This Magic Moment' Screening during the 2016 Tribeca Film Festival at SVA Theatre on April 14, 2016 in New York City.
Source: Ron Adar / Shutterstock.com

Is the developer of children’s content going to ride Shaquille O’Neill to $10 and beyond? I’ll look at both sides of the argument.

Shaq Will Boost GNUS Stock

O’Neill is one of the more successful former NBA basketball stars. He tends to invest in businesses that he thinks will make a difference in people’s lives. Like many people, he learned the hard way that due diligence is essential for any investment you consider making. 

So, the fact that O’Neill is willing to work with Genius Brands to deliver an all-new animated show for kids says something about the content creator’s future potential. 

The question is whether Genus Brands can duplicate this over and over again. Disney (NYSE:DIS) did. Look at it today, a $347 billion company that’s been able to create an entire streaming network, Disney+, from all its various content silos, including Marvel, Pixar and Star Wars.

While Genius Brands has a long way to go to rival Disney, an association with one of the best basketball players to play in the NBA can’t hurt. It also can’t hurt that it’s producing content with Tankee, a kids gaming network, that revolves around Roblox (NYSE:RBLX) influencers. 

I recently recommended investors put Roblox on their watchlist. Despite a frothy valuation, this is the kind of stock that Shaq would buy, in my opinion, because it can make a difference for both the content creators and the Roblox users who are playing its games.

The fact that Genius Brands has the good sense to associate with quality brands says a lot about management and its ability to make wise decisions. 

With the GNUS stock price below $3, I don’t think there’s any question it’s an attractive speculative play. 

The News Will Quickly Be Forgotten  

Unless you work in the animated cartoon business, I highly doubt you spend much time reading up on the industry. It’s very niche. The Shaq deal will quickly be swept under the carpet, along with all the other deals Genius Brands has announced over the past year. 

Genius Brands has a three-legged business model

  • A growing portfolio of brands that includes 11 properties.
  • Its consumer products and distribution network.
  • The Kartoon Channel, which is available in more than 100 million U.S. households.

There is no question that the business model if executed properly, can work. However, it’s my experience that this area has seen some spectacular blowups over the years.

Jakks Pacific (NASDAQ:JAKK) was almost delisted in 2019. Wildbrain (OTCMKTS:WLDBF), which used to be known as DHX Media, and owns 41% of the Peanuts franchise, has worked hard to return to its former glory. Both companies’ ultimate ending is still to be written. 

When I last wrote about Genius Brands in July 2020, the company faced legal issues, and its stock had fallen from a 52-week June high of $11.73. At the time, trading below $2, I didn’t think GNUS stock made a whole lot of sense.   

A big problem for me was it didn’t have much revenue. In 2019, it earned $5.91 million. Through the first nine months of fiscal 2020, it had revenues of $1.17 million, down from $5.15 million a year earlier. 

Despite a lot of announcements in 2021, it has very little to show for its efforts.

The Bottom Line

No question riding a TV and sports personality such as Shaquille O’Neil is a no-brainer. You’d be silly not to entertain such a partnership. However, for this investment to move from highly speculative to possible ten-bagger, Genius Brands has to produce some near-term revenue.

Will it happen? I couldn’t tell you.

What I do know is that GNUS stock is not the only $2 stock you can buy at this point. I’d take some time exploring other possibilities until Genius Brands proves it can generate revenue beyond $1 .17 million or nine months.

The story might have changed over the past eight months, but the financials surely haven’t. For this reason, I wouldn’t touch it with a 10-foot pole.  

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.


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