What happened

One day after the company's earnings release led to a steep drop in Cinedigm's (NASDAQ:CIDM) stock, the shares popped higher by as much as 14% as Wall Street opened for another day of trading on Feb. 24. Talk about a seesaw, but that's how things work sometimes at the corner of Broad and Wall in downtown Manhattan.

So what

One of the key issues to consider with Cinedigm's stock volatility is that the shares are trading for less than $2. That means that even small absolute price moves can translate into very large percentage changes. And after a sizable drop on Feb. 23, it isn't surprising to see at least a bit of a recovery here. So investors probably shouldn't read too much into the swift reversal.

A man and a woman on a seesaw.

Image source: Getty Images.

That said, Cinedigm did report some interesting news. The company, which is trying to shift from working with physical movie theaters toward providing online digital content services, added over 300 hours of new content. The company has been building niche content catalogs in areas like anime, horror, and detective stories. The hope is that Cinedigm can live at the fringes of the large media companies that dominate the streaming space by catering to customers with very particular tastes. While the acquisition of new content certainly is not bad news, it doesn't change the fact that the company's transition remains a work in progress. Notably, its historical business serving movie theaters continues to face material headwinds thanks to the coronavirus pandemic. This issue has had the bigger impact on the company's performance lately.   

Now what

Cinedigm's story is actually kind of interesting. It's the type of company you might watch just to see what happens. However, most should think carefully before investing here. To suggest that the streaming space is competitive would be an understatement, and Cinedigm is, at best, a minnow trying to compete with whales.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.