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Genius Brands International Inc (OTCMKTS:GNUS) Making A Comeback

Genius Brands International Inc (OTCMKTS:GNUS) Making A Comeback
Written by
Alex Carlson
Published on
April 7, 2016
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Shares of Genius Brands International Inc (OTCMKTS:GNUS) are making a comeback after hitting 52-week lows in February and testing those levels in March. Last week's shareholder letter has gotten investors excited about the stock again and shares could be on the verge of a breakout.

GNUS Daily Chart

Headquartered in Beverly Hills, GNUS is a publicly-traded global brand management company that creates and licenses multimedia content for toddlers to tweens. Led by award-winning creators and producers, GNUS creates "content and products with a purpose," providing enrichment as well as entertainment. The company distributes its content worldwide in all formats, as well as a broad range of consumer products based on its characters.

The company's portfolio includes award-winning Baby Genius, recently re-launched with new entertainment and over 40 new products; adventure comedy Thomas Edison's Secret Lab®, available on public broadcast stations and GBI's Kid Genius channel on Comcast's Xfinity on Demand reaching 21 million households; animated movie Stan Lee's Mighty 7, the first project from Stan Lee Comics, a joint venture with Stan Lee's POW! Entertainment and featuring an all-star voice cast led by the legendary Stan Lee; and Warren Buffett's Secret Millionaires Club, created with and starring iconic investor Warren Buffett. The company is also producing a new animated preschool series based on Llama Llama, the New York Times bestselling children's book franchise; and the music-driven tween adventure series SpacePOP.

GNUS' wholly-owned subsidiary A Squared Entertainment is a brand management and licensing company that represents third-party properties across a broad range of categories in territories around the world. The company currently represents From Frank, a humor greeting card and product line, and Celessence Technologies, the world's leading microencapsulation company.

What was most interesting about the shareholder letter was how CEO Andy Heyward talked about Marvel Entertainment being sold to Disney for $4.2 billion dollars. In many respects, what he's doing with GNUS is the same as what Marvel did. Build a portfolio of characters and then sell for top dollar. This leads us to believe that Heyward is already plotting his exit strategy.In the update, there were a few key highlights. GNUS is sitting on nearly $6 million in cash. More cash than the company has had at any time in its history, and the cash position should continue to grow through 2016. The company has close to an additional $6 million dollars in minimum guarantees and license fees of fully negotiated contracts for production and merchandise licensing. CEO Andy Heyward said:

"Last quarter, I stated that we expect to be cash flow positive in 2016. That has occurred, and we see no reason why it will not continue throughout the year. Our balance sheet is stronger than ever, and our film catalogue continues to grow, adding critical incremental mass and value. We have zero debt, zero litigation. MOST IMPORTANTLY, the trends and percentages presented, are indicative of the "hockey-stick" like growth we can see in this industry where revenues and profits can grow exponentially in success, as I cited above."

He further added:

"Some years ago, I sold my last company to the Walt Disney Company (CAP Cities/ABC). I'm familiar with the value of compounding animated characters, and I'm familiar with the value of distribution systems for those characters. By this time next year, though we will not be selling the company for $4.24 billion dollars as Marvel, I suspect we will hardly recognize Genius Brands, by the amount of its growth. That growth has already begun, and I'm proud to share with you the early results of it released today."

Currently trading with a market cap of $311 million, GNUS has a lot of irons in the fire. The company has a ten-year distribution deal with Sony Pictures Home Entertainment. There's also the Kid Genius Channel on Comcast. Children's programming channels have proven over and over again to be valuable commodities when you look at the Disney Channel, Cartoon Network, and Nickelodeon. Matter of fact, the dean of kid networks presidents, Margaret Loesch is on the Genius board of directors. Overall, we like what we're seeing from GNUS and expecting much more to come from the company.

We will be updating Insider Financial as soon as we know more. For continuing coverage on GNUS, sign up for our free newsletter today and get our next hot stock pick!

Disclosure: We have no position in GNUS and have not been compensated for this article.

Image Source: Genius Brands International Inc

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