Is Buying GNUS Stock Now A Genius Move?
Investors are paying close attention to one explosive stock this year, Genius Brands International (GNUS Stock Report). The company was cruising along with the surge in the broader stock market on Wednesday, with the S&P 500 closing 1.33% higher on a combination of optimism that the economy is going to bounce back as more businesses open up and potential economic stimulus from Congress.
If you have been following us on StockMarket.com, you may recall our piece on Genius Brands back on May 19 when GNUS stock was only trading at $1.63. You would have made close to 400% return from this stock. So what happened? The company is planning to launch Kartoon Channel, Netflix for children on June 15.
“The hallmark of Kartoon Channel is ‘Smart and Safe.’ All programs are carefully curated to not only be entertaining and enriching, but also to ensure there is no violence, no negative stereotypes, no inappropriate language, and no excessive commercialization. We are extremely focused on providing positive purposeful content that parents can always know will provide safe viewing for their children,” – Andy Heyward, CEO of Genius Brands International
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Genius Brands Is Leading The Rally In Small Cap Stocks, Will That Last?
The company has been at risk of being delisted for an extended period of time. That was before it got an equity deal with existing investors for $9 million. Previously, financial woes had pushed the stock deep into penny territory. After the new equity deal, Genius Brands investors can finally see the light at the end of the tunnel. Their patience has certainly been rewarded. Shares of Genius Brands International nearly doubled on Wednesday, marking 4 straight days of big advances. The gains we are witnessing on GNUS stock is impressive, but it’s also equally important to put them in context. The stock is trading 2,600% higher this year.
On whether the company would be able to turn the tide, investors will have to pay close attention to the reception of Rainbow Rangers show and the performance of Kartoon Channel. The company is not just solely dependent on advertising revenue generated from Kartoon Channel. Genius Brands has actively formed a new partnership with toymaker Mattel (MAT Stock Report) to start the Rainbow Rangers toy line. It would be launching in August at Walmart (WMT Stock Report) in conjunction with the debut of new episodes of Rainbow Rangers show.
Should Investors Buy Into The GNUS Stock Rally?
The FOMO moment is definitely real in Genius Brands’s case. Who could resist it? GNUS stock went up by 26 times in just a matter of a few months. Before jumping in straight to buy GNUS stock, let’s take a moment to reflect. Investors should at least acknowledge that the recent massive surge in the stock over the past two months has much to do with hype. Besides, it could also be based on the optimism that the economy will recover sooner rather than later.
But what we are not entirely sure of is whether such a rally is sustainable or not. The company likes to call itself the ‘Netflix for Kids’ that has no subscription fee. A board member also described Kartoon Channel as an ‘economic vaccine for Covid-19’. Investors should be cautious about such buzzwords. We have to recognise that the recent rally could potentially reverse course really quickly. Of course, we are not saying that Genius Brands is not worth buying. It’s just that we cannot conclude straight away. We don’t know for sure if Kartoon Channel and new episodes of popular shows will bring huge success to the company yet.
That said, if Kartoon Channel is able to gather a huge fan base in the near term, we could potentially see higher ad revenues. That would in turn justify its steep valuation today. On the flip side, there could be less spending on ads if the economy isn’t recovering quickly. If so, we might want to trade GNUS stock with extra caution.