After advising investors to wait for better entry points in Genius Brands (NASDAQ:GNUS) shares for months, I believe that it’s now finally a good time to take a small, bullish position in GNUS stock. This pick of the penny stocks now has a lot of promise.
How? Well, multiple positive forces have begun materializing for GNUS, poising the stock to drive higher over the medium-to-long term. Among these are the success of the company’s new show, Stan Lee’s Superhero Kindergarten, as well as its recently announced partnership with Cinedigm (NASDAQ:CIDM) and the recent plunge in the stock.
In the medium term, the decline of cryptocurrencies could boost these shares, too. Plus, the company could also easily become a takeover target down the line, greatly lifting GNUS stock in the process.
GNUS Stock: Superheroes and the Cinedigm Partnership
As of May 3, Stan Lee’s Superhero Kindergarten — which features the voice acting of Arnold Schwarzenegger — had attracted more than 9 million views since its late April debut.
Moreover, the growth of the show’s audience seems to be positively accelerating and causing Genius’ user base to surge. In a report, the company noted the following stats:
“Network hours watched went up 941% week-over-week to 349,735 hours. Unique users went up 1,841% week-over-week to 1,858,434 uniques. New application installs went up 465.9%.”
There are a couple of positive catalysts helping lift the Genius’s numbers here, but maybe the most obvious is Schwarzenegger’s promotional star power. In fact, the actor recently appeared on both The Kelly Clarkson Show and Jimmy Kimmel Live! to tout the show. Recently Jon Ollwerther, the General Manager of the GNUS channel the show plays on, noted, “Arnold’s continued promotion across his massive fan base has proven powerful.” Of course, the fact Schwarzenegger has become a “significant investor” also incentivizes him to promote the show heavily, too.
In all likelihood, however, the show’s viewership probably wouldn’t be growing so quickly if it was not fundamentally good. That assumption is supported by the creators’ record as well. For example, director John Landis has been at the helm of many hit comedies. Likewise, head writer Steven Banks previously wrote for the extremely popular SpongeBob SquarePants, among other titles.
However, the quality of its content is not the only reason to like GNUS stock. Additionally, Cinedigm — a content developer which also provides equipment and services to media and entertainment companies — has agreed to allow Genius to stream many appealing Cinedigm titles. Plus, Genius will likely make more deals like this as its ad revenue rises from the increasing content. Basically, this deal is setting up a strong virtuous cycle for Genius Brands.
Positive Macrotrends and a Potential Takeover
At this point, though, there are also two macrotrends working in favor of GNUS stock.
The first is the fact that many schools around the U.S. remain closed, doubtlessly leaving parents unsure as how to occupy their children’s time. With its entertaining and free educational content, Kartoon Channel! is a good candidate to partially fill that void, particularly for many families that have cut the cable cord.
Secondly, with cryptocurrencies heading downward, many young investors who were previously ploughing their disposable income into that sector may be looking for alternatives in the medium term. We already know that Genius is on Reddit’s radar, so GNUS stock could benefit from a move away from crypto. (That said, if cryptos crash in the longer term, a high percentage of young investors could decide (or be forced) to abandon investing altogether. That would be negative for Reddit stocks like Genius.)
Finally, with many media companies, moviemakers and theaters reeling right now, there are plenty of names likely looking to quickly enter the streaming sector. That means Genius Brands could easily become a takeover target down the road.
The Bottom Line on GNUS Stock
Since it’s high point on Mar. 24, GNUS stock has tumbled over 56%. Today, it sports a market capitalization of just $409 million.
However, given the powerful potential of Kartoon Channel! and a handful of other positive catalysts, the shares are very attractive at these levels. If you’re willing to take on this penny stock, it could be worth a shot.
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On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Larry Ramer 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. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.