Demand for Children’s Media Content is Exploding, and Grom Social Enterprises is Working on Streaming Content with Multiple Potential Revenue Generating Aspects

Energy and Technology, Our Research
March 24, 2022
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Good day everyone,

I want to update you on Grom Social Enterprises, Inc. (NASDAQ: GROM) the social media company providing secure social media for children under thirteen. With the NASDAQ having a rally, and the price of the company shares consolidated, I feel there is a real opportunity for a near term gain in value. GROM did well for our members with our last report and I anticipate a repeat now.

There is a large increase in recent short interest according to Ortex.com

  • Ortex estimates 19% of the current float is sold short
  • 1.45M shares on loan (16.5% of the free float)
  • Cost to borrow 141.67% up 270% in the last 7 days
  • 82.11% Utilization up 53.88% in the last 7 days

Current price $1.07/share

These are the favorable statistics I like at GROM, and I note the revenues, cash, and book value as they relate to Market value:

  • Market cap is only $14.3M
  • Revenues are $6.46M (ttm)
  • Cash position is $10M
  • Tiny share structure (8.75M float)
  • Chart set-up (Looking for another run and sustained rally above the 50 SMA)
  • YOY membership growth of 60%
  • Book value (mrq) $2.07/share
  • Gross profit margin running near 50%
  • Management team continues to add top talent
  • Shares still lag recent levels ($1.82 on Jan. 3rd, $4.59 in Oct. and $1.67 on March 18, just 5 days ago)

I recently read an article posted on Entrepenuer.com with this bold headline: Creating Children’s Content Is the Secret Goldmine of 2022.

We may nor be giving children of a tender age a smartphone, but 80% of U.S. parents say their child aged 5 to 11 uses or interacts with a tablet computer. Parents today are Millennials and Gen Z, both well indoctrinated to the internet and media. The children they are raising are/will be the most tech savvy generation ever.

The result, also prompted by forced pandemic hibernation, has been a new parent child bonding time practice of spending time together on the internet. This trend is bound to grow prompting the headline I mentioned above, and this is where Grom Social lives.

GROM recently engaged the consulting services of veteran entertainment marketing executive Melanie Bartlett to support the business strategy, bolster marketing efforts, and help introduce e-commerce content for the company’s recently launched digital holiday hub Santa.com, as well as Grom Social, the company’s flagship social app for kids under 13.

Last month, the company advised it has secured Montana Poet Laureate M.L. Smoker to write and consult for the Thunderous graphic novel series, debuting in partnership with publisher Dynamite Entertainment in April 2022. Her co-writer on the project is Natalie Peeterse, also a poet and independent publisher.

I already told you about the recent addition of comic performer Maz Jobrani now teaming up with Curiosity Ink Media (CIM) to develop an animated family sitcom. Laugh on Lorb (the working title), is centered on an aspiring teenage comic who is mistakenly abducted by aliens who believe he is Oprah Winfrey. Their objective, of course, is to bring her back to their princess, tap into her infinite wisdom, and bring aspirational living to their planet’s inhabitants.

Top Draw Animation is the part of GROM where the growth in revenue could be generated. TDA is an award-winning producer of top-quality 2D animation for television markets around the world and for leading companies such as Disney Television Animation, DreamWorks Television and Nickelodeon. The company employs over 400 artists in its 37,000 square foot, state-of-the-art studio in Manila, the Philippines. GROM is installing former Nickelodeon President of Content Development and Production, Russell Hicks, who came to GROM with the acquisition of Curiosity Ink Media (CIM) to oversee the TDA operation effective in Q1.

I note in the chart below that last week GROM shares easily blew past their MA20 of $1.04 and the MA50 of $1.38/share. Given the structural support for higher value, I can see the value again crossing the MA50 and potentially reaching the MA200 of $2.66/share near term. The fundamentals I detailed above seem to be in place for that level of gain.

There is nothing I don’t like about GROM, and I believe their business model with multiple verticals, experienced management team, and solid financial metrics could support a higher market value.

Stay tuned for updates coming soon,
The Traders News Group
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