From a cursory look, Genius Brands International (NASDAQ:GNUS) should benefit convincingly from several recent deals and announcements. Instead, GNUS stock has fallen flat, leaving many investors wondering how to approach this equity unit, which garners intense interest on social media platforms.
First, as InvestorPlace contributor Will Ashworth noted, Joel Cohen, an 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.”
Shaquille O’Neill is one of the world’s most popular athletes. It also doesn’t hurt that he has a natural gift for comedy and overall likability. What I didn’t know, however, was that he “tends to invest in businesses that he thinks will make a difference in people’s lives.” Thus, carrying his endorsement spearheaded by a leading entertainment writer bodes well for GNUS stock.
Further, in mid-March, Genius announced that it will broadcast on its streaming platform a new show based off the online gaming platform Roblox (NYSE:RBLX). On paper, this is a home run for Genius as kids these days can’t get enough of the platform, which allows users to create their own games and participate in the creation of other users.
Better yet, the format is family-friendly, with the Roblox system taking great pains to ensure a hate and harassment-free environment. It really speaks to the corporate ethos of Genius Brands and sure enough, GNUS stock responded positively to the news.
But the one announcement that should have brought down the house was the company’s deal with Marvel under the Disney (NYSE:DIS) umbrella. Genius CEO Andy Hayward stated in a November 2020 shareholder newsletter that he was “working with Marvel Studios on an important Stan Lee initiative.”
As it turned out, the end deal wasn’t exactly what shareholders were hoping for.
GNUS Stock Takes a Plunge
That’s not to say that the deal wasn’t significant. Under the terms, Genius will allow Marvel to license specific likeness rights of Stan Lee. You know Lee as the architect of some of the most memorable and iconic comic book characters.
On the positive front, this move is confirmation that Genius is able to monetize its intellectual property. But on the opposite end, investors were clearly looking for something much more groundbreaking. It wasn’t there, which ended up cratering GNUS stock.
Now, the question becomes, is this an opportunity or a falling knife to avoid? Fundamentally, it’s hard not to be skeptical about the future direction of GNUS stock. For instance, in 2020, the company generated revenue of $2.48 million, which is down 58% from the year prior.
I understand the impact from the novel coronavirus pandemic. However, certain companies – particularly streaming services – benefitted from the fallout due to the broader work-from-home initiative. Therefore, you’d expect that Genius Brands would have accrued some sales from the “hostage” audience, so to speak.
What’s also perplexing is that last year, the company reported a “dramatic increase of viewership on Kid Genius Cartoon Channel and Baby Genius TV digital platforms.” This led to Genius merging the two channels under one network brand, Kartoon Channel.
But with nothing much to show for it, investors took a skeptical view on the company. Still, it’s not quite the end of the line for GNUS stock.
As I alluded to earlier, it has a strong social media following and these days, that’s worth its weight in gold. Therefore, you can easily make a quick buck on shares, waiting for the right news item or catalyst to drop. The problem is, it’s difficult to know when or what that might be.
Still a Speculative Wager
The last time I discussed GNUS stock, I mentioned that it was a risky idea. Nevertheless, shares performed outstandingly since then, so my cautionary take was incorrect.
Will I be willing to change my opinion now? Unfortunately, I don’t see a whole lot that would make me feel comfortable with Genius. True, revenue was up 75% year-over-year in the quarter ended Dec. 31, which could represent a turnaround effort. At the same time, it could also mean more promises that end up falling flat.
I suppose as a spin of the wheel with speculation funds, it’s not the worst bet you can take. As for me, I’ll be sitting on the sidelines.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.