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In a time when too many kids are exposed to inappropriate media content, Grom Social Enterprises (NASDAQ:GROM) provides a safe haven. If you believe there’s a future for wholesome children’s programming, then you might want to consider GROM stock.
Source: Postmodern Studio / Shutterstock
Not that anyone should “load the boat” on this stock, mind you. As we’ll see, share-price volatility has been an issue, and it might continue to be problematic.
So, appropriate position sizing is of paramount importance when it comes to GROM stock. That being said, there’s room for price appreciation as the company’s up-sizing its programming output.
With that in mind, let’s start off with a review of the stock’s price action in 2021. It has been a wild ride, so prepare for fast action and plenty of twists and turns.
GROM Stock at a Glance
Not long ago, InvestorPlace contributor Samuel O’Brient observed that there were “zero shares available to short” with GROM stock, and that the “dark pool short volume ratio is higher than 46%.”
Clearly, we’re looking at a prime short-squeeze target here. Therefore, it shouldn’t be too surprising if Reddit traders are interested in this stock.
GROM stock usually stays below $5, but 2021 — the year of meme-stock mania — has offered several huge price spikes.
To be more specific, the stock briefly hit $12 in April, $19 in May and $10 in June. So, that’s the volatility I was alluding to.
As of mid-October, GROM stock was back down to $3 and change. Another surge could happen at any moment, though of course there’s no guarantee that Reddit users will stage a short squeeze.
Sensible investors should, instead of obsessing over meme-stock trends, focus on businesses that can grow and generate revenues.
Could Grom Social Enterprises fit into that category?
Animating and Protecting
Thankfully, there is evidence that Grom is on the right track, fiscally speaking.
The company’s business model is more diversified than you might expect. Grom Social Enterprises is not only an entertainment platform, but also a technology and social media company.
Importantly, Grom is the only COPPA-compliant social media app for kids under 13 that allows video recording and sharing. Furthermore, the company owns Top Draw Animation, which has worked on a wide range of children’s content.
Besides offering family friendly programming and child-safe social media, Grom Social Enterprises is known for providing web filtering tools for added protection against harmful content.
It appears that the company is generating robust revenues from two segments in particular.
First, for the 6 months ending on June 30, 2021, the company recorded $2,990,213 in animation-segment revenues from contracts with customers. Also, during that same time period, Grom totaled $272,748 of web filtering revenue from contracts with customers.
That’s not too shabby for a small company.
Feeding the Demand
Beyond the company’s ability to collect revenues, it’s essential to know that Grom Social Enterprises is expanding its offerings of family appropriate content.
As evidence of this, Top Draw Animation, Grom’s wholly owned subsidiary, just commenced production on approximately $1 million in new projects through its Philippines-based studio.
It’s another feather in the cap for Top Draw, which specializes in producing animated series, movies, specials and short-form content. Currently, the company’s studio employs over 400 artists.
Moreover, Top Draw Animation has a 37,000-square-foot art studio, and has accumulated a portfolio of television animation totaling more than 2,000 half-hours.
As Top Draw Animation President Russell Hicks suggested, his company definitely has the human capital available to fulfill $1 million worth of new projects. “We currently have hundreds of animation experts and artists focused on feeding the growing demand for animated entertainment,” Hicks asserted.
The Takeaway
Will there be a short squeeze in GROM stock? It’s possible, but difficult to predict.
However, you don’t have to buy the shares in hopes of a short squeeze. Instead, you can learn about the company and its multiple income streams.
As the data reveals, Grom Social Enterprises is generating robust revenues for a relatively small company. Plus, Top Draw Animation is ready and willing to fulfill its orders.
So, feel free to consider a small position in GROM stock. As long as there’s a demand for family friendly content, your investment should have room to grow.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
