Please ensure Javascript is enabled for purposes of website accessibility

Why Cinedigm Shares Closed 10.6% Higher on Wednesday

By Anders Bylund – Sep 1, 2021 at 5:32PM

Key Points

  • The company showed some signs of life in July’s belated fourth-quarter update.
  • Tomorrow’s earnings report looks like a guaranteed market-mover, but the direction of the move is less obvious.

Motley Fool Issues Rare “All In” Buy Alert

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Investors are getting excited about the media technology company's upcoming earnings report.

What happened

Shares of Cinedigm (CIDM 3.30%) closed Wednesday 10.6% higher, and the trading volume was more than double the average over the last three months. The company had no particular news of its own today, but Cinedigm is scheduled to report first-quarter 2022 results on Thursday evening. That's usually not a market-moving idea, but Cinedigm's position is a bit unusual.

So what

Cinedigm used to be a digital content distributor with a tight focus on the cinema industry. That changed when movie theaters started fighting for their proverbial lives in recent years, and Cinedigm's revenue chart made a sharp turn southward. Sales have been in free fall since 2016, and the company started to burn cash during the coronavirus lockdowns of 2020.

CIDM Revenue (TTM) Chart

CIDM revenue (TTM) data by YCharts. TTM = trailing 12 months.

Determined to step back from the brink of utter disaster, longtime CEO Chris McGurk started a radical strategy shift last year. Although the company still serves up content packages to movie theaters, the main focus these days has moved over to the living room. The new and improved Cinedigm is all about serving up easily digestible content flows to your favorite video-streaming platforms, and that's a business idea with some serious upside.

For example, the long-running revenue dip finally ended in July as Cinedigm's fourth-quarter sales came in 7% above the year-ago reading.

Bullish investors are hoping for another positive experience in tomorrow's first-quarter report, and their preparations for that event are driving share prices higher.

A hand points a remote at a distant and blurred TV set.

Image source: Getty Images.

Now what

A generally strong day for digital media stocks also gave Cinedigm a hand on Wednesday. One of the company's most important customers is media-streaming platform provider Roku, whose stock gained 4.5% on Wednesday due to shifting sands in the digital advertising sector. That's good news for Cinedigm because the company publishes several channels on the Roku platform through its Matchpoint technology framework.

"Cinedigm is well positioned in this changing media and entertainment landscape," McGurk said in the fourth-quarter earnings call. "Our [software as a service]-based distribution platform, Matchpoint, completely automates film and TV distribution while creating and curating new channels for streaming platforms. This technological advantage makes us the go-to partner for brands, content companies, and cable channels seeking new streaming distribution platforms."

It's not hard to see why investors are going a little bit crazy over this promising strategy shift. Cinedigm has a lot to prove on Thursday, but the upside could be enormous in the long run if the focus on streaming services continues to pay off. Just don't bet the farm on Cinedigm right now because future success is not guaranteed.

Anders Bylund owns shares of Roku. The Motley Fool owns shares of and recommends Roku. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Cinedigm Stock Quote
$0.47 (3.30%) $0.01
Roku Stock Quote
$56.08 (-0.76%) $0.43

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.