The Fundamentals Are Starting to Matter for Genius Brands

Based on the social media phenomenon of meme trading, Genius Brands (NASDAQ:GNUS) stock seems to have the right stuff.

An image of two young girls looking at a tablet and smiling while an adult reads in the background.
Source: Syda Productions/

For one thing, shares are very cheap by any normal standard but not too cheap to make extreme speculators nervous. Second, Genius Brands, an entertainment firm specializing in content for kids is tied to a relevant business, which on paper supports the narrative for GNUS stock.

As Research Reports World pointed out, the kids animation show and drama market achieved a revenue haul of nearly $5.3 billion in 2019. Industry experts project that four years from now, the sector will command a valuation of $7.14 billion, a compound annual growth rate of 5.2% between 2021 and 2025. Clearly, plenty of opportunity exists, which fundamentally helps GNUS stock.

At the same time, this might be a glass half-full or half-empty situation, depending on your perspective. On one hand, Genius Brands’ revenue last year measured only $2.48 million, a result easily overshadowed by the company’s larger, well-known competitors.

On the flip side, since Genius isn’t that impressive on a nominal basis, it won’t take much for the entertainment firm to make a splash for itself – and more importantly, for stakeholders of GNUS stock. What I mean is, otherwise unremarkable victories could mean the world for Genius based on the principle of small numbers.

Indeed, that’s been the modus operandi of speculating on GNUS stock: wait for a news item and hope that shares will pop. It doesn’t really matter whether the news is legitimately optimistic or not, so long as the general investing public thinks so.

Granted, this strategy (if you want to call it that) has worked out occasionally in the past. But can it deliver the goods again?

The Ride Might Be Over Soon for GNUS Stock

Just recently, Genius Brands’ PR team provided the framework for what could be another leg higher for GNUS stock. The company’s animated series Rainbow Rangers – apparently a big draw among young children – is “growing its viewership dramatically across multiple media worldwide.”

From the corporate statement, this includes the company’s anchor platform Kartoon Channel!, along with streaming and broadcast services from Netflix (NASDAQ:NFLX), Amazon (NASDAQ:AMZN), AT&T (NYSE:T)-owned HBO, Nickelodeon Latin America and CCTV, China’s largest broadcaster.

For full disclosure, I own AT&T stock and I have made multiple appearances on CCTV’s CGTN America.

Following the announcement, GNUS stock did move higher, eventually closing out the Aug. 2 session up 2.6% from the prior day. Could this be the start of yet another wild ride in GNUS stock?

Perhaps if the news came out last year amid the anything-goes phase in the markets, I might be inclined to believe in the bullish implications. However, I’m really stuck on Genius Brands’ financial performance or lack thereof.

For the first quarter of 2021, the company generated revenue of $1.06 million, which was up more than 3x its year-ago quarter tally but down sequentially (against Q4 2020) 19%. After roughly three quarters’ worth of a hostage audience market – where novel coronavirus mitigation measures forced everyone to work and study from home – the hope is that Genius could build on this once-in-a-century opportunity. Now, it doesn’t seem that way.

To be sure, the implications of this announcement suggests that it will reflect in either the upcoming Q2 or Q3 report. Yet it’s also possible that investors will take a been-there, done-that attitude toward GNUS stock, which wouldn’t sit well. After all, it wouldn’t be the first time that GNUS speculators were misled by seemingly positive PR.

Can Social Media Save Genius Brands?

While I’m skeptical about Genius Brands, I’m not going to declare an outright bearishness statement. Look, the past year-and-a-half has been lifechanging, both in positive and negative manners. Certainly, this speculative market has humbled me more times than I care to admit.

Given that social media traders have raised companies from the brink of death, yes, it’s absolutely possible that GNUS stock can skyrocket. But I also think from an outsider observer’s perspective, the fundamentals will matter. And perhaps they’re mattering right now.

From Netflix to Disney (NYSE:DIS) to Apple (NASDAQ:AAPL), the heavyweights are moving into the kids content space, making an already competitive arena that much tighter. Sure, Genius Brands can carve out a niche. Anything is possible.

But is it probable? My money will be looking elsewhere.

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On the date of publication, Josh Enomoto held a LONG position in T. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

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.

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