In columns last year about Genius Brands (NASDAQ:GNUS) stock, I wrote that the company had a great deal of potential, but advised investors to wait for sharp pullbacks before buying.
You’ll recall that Genius brands started as a video on demand company known for its Baby Genius and Kid Genius programming. Over the last five years the company has broadened its reach into children’s shows, striking deals with major distribution companies.
After a near-delisting almost a year ago, Genius Brands bounced back.
The company has taken important steps towards realizing its potential, but as the market has become generally more cautious on growth stocks with high valuations, I still recommend investors wait.
A Closer Look at GNUS Stock
Genius is poised to launch its Stan Lee’s Superhero Kindergarten on April 23. Based on characters created by the late, great Stan Lee and starring Arnold Schwarzenegger, the show sounds very promising.
Genius CEO Andy Heyward said that a sneak peek of the show in January drove an increase in all key metrics for the company’s Kartoon Channel which broadcast it.
Genius has moved quickly to exploit the Roblox (NYSE:RBLX) movement. It will launch a show in June featuring some of the top influencers on Roblox.
Meanwhile, a new show starring former NBA star Shaquille O’Neal, Shaq’s Garage, could very well attract many young NBA fans and their parents.
Talent Development and Valuation
Genius continues to hire top writing talent, most recently by recruiting the Oscar-nominated writer for Pixar’s Toy Story as the head writer and executive producer for Shaq’s Garage.
Also importantly, Genius Brands has been acquiring very strong content, including Scooby-Doo and the Wubbulous World of Dr. Seuss from The Jim Henson Company.
Samsung agreed to include Genius’ Kartoon Channel on its smart TVs at no cost to Genius, boding very well for Genius’ ability to make similar deals with other huge TV makers and providing strong validation of its content.
There are a few reasons to be bullish on GNUS stock based on the company’s financials.
Last year’s gross profits came in at $358,000, and its operating income loss was a not-too excessive $17.9 million.
Another problem is that the shares have become a favorite of Reddit’s r/WallStreetBets crowd, suggesting that the shares could easily plummet if their social media star fades.
Finally, GNUS stock ranks rather poorly on most of Investor’s Business Daily’s main metrics, scoring a 58 out of 100 on earnings per share, an Accumulation/Distribution grade of C and a Composite rating of 45.
The stock does have a Relative Strength rating of 95 out of 100, but that, in my opinion, primarily is due to the affection that it has received on r/WallStreetBets and excessive euphoria over its Roboblox show.
The Bottom Line on GNUS Stock
Genius Brands could eventually become a viable competitor to Disney’s (NYSE:DIS) Disney+., but at its current levels, GNUS stock is likely to pull back meaningfully at some point soon, giving investors a chance to buy its shares much more cheaply.
Further, the risk/reward ratio of GNUS stock looks negative at this point.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article.
