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Why Cinedigm Shares Are Soaring Today

What happened

Shares of Cinedigm (NASDAQ: CIDM) rose sharply on Thursday, following a strategic buyout and an extremely bullish analyst report. The stock was 36.1% higher at 1:10 p.m. EST today.

So what

Cinedigm, a producer and distributor of entertainment content with a deep focus on digital cinema and video-streaming channels, acquired independent-film distributor Fandor earlier this week. Just before Christmas, the company also picked up classic film and TV streamer The Film Detective. These two deals added 7,600 movies and more than 10,000 TV series episodes to Cinedigm's library, as well as The Film Detective's two streaming services.

Image source: Getty Images.

Based on these potentially helpful buyouts, Alliance Global Partners analyst Brian Kinstlinger reiterated his buy rating on Cinedigm's stock and raised his target price from $2 to $3 per share. Kinstlinger likes the company's plan to launch two or three new video-streaming channels per quarter in 2021, saying Cinedigm should have a "much stronger" financial foundation by the end of the year.

Now what

Cinedigm has been difficult to love in recent years. The rollout of digital cinema services was largely completed in 2013, leaving the company rudderless for a long time. The recent refocus on video streaming platforms could be the start of a dramatic rebound, but the company has a long row to hoe before reaching a full recovery. The long-term business trends here are downright frightening:

CIDM data by YCharts.

When Kinstlinger talks about Cinedigm's "much stronger" fundamental health, that's in comparison to a terrible baseline. The company posted a $53 million net loss over the last four quarters and just $32 million in top-line sales.

You could buy Cinedigm shares today if you expect the video-streaming strategy to pay off, but that's a highly speculative bet. This is not the first name that comes to mind if you're looking for investment ideas in the media sector.

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Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.


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