Is Grom Social (USA Stocks:GROM) about to rebound?
 | By Aina Ster | Macroaxis Story |
Every cloud has a silver lining, and Grom Social Enterprises (NASDAQ: GROM) might just be on the verge of finding theirs. Despite a challenging year, there are indicators that suggest a potential bullish reversal for the company in the Communication Services sector. GROM's stock has been on a rollercoaster ride, with a 52-week high of 195 and a low of 1.155. However, the company's valuation real value stands at 3.98, significantly higher than its current price book of 0.0458. This discrepancy could indicate an undervalued stock, ready for a bullish reversal. The company's net income from continuing operations shows a loss of 16.8M, and a net interest income loss of 3.3M. Despite these losses, the Wall Street target price and the analyst target price estimated value both stand at 12, suggesting a strong buy consensus among analysts. This could be a sign of confidence in the company's potential for a turnaround. The naive expected forecast value for GROM is 1.11, indicating a possible upside price of 10.67. This, coupled with a beta of 0.981, suggests the stock has slightly less volatility than the market, which could be appealing to risk-averse investors. In conclusion, while Grom Social Enterprises has faced financial challenges, the technical indicators point towards a potential bullish reversal. As always, investors should conduct their own due diligence before making investment decisions. While some traders may be overly engrossed in dissecting the entertainment sector, it's sensible to evaluate Grom Social Enterprises in the context of current market trends. For short-term focused investors, Grom Social may not be the ideal choice at this moment. However, for those with a long-term perspective, this could present a good opportunity to invest. Over the past few months, the returns on the market and those on Grom Social have shown some correlation. The company's stable basic indicators may also suggest potential long-term losses for Grom insiders. Grom Social Enterprises is set to announce its earnings tomorrow. The forthcoming quarterly report is scheduled for November 6, 2023.
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Reviewed by Gabriel Shpitalnik
Grom Social Enterprises has an average rating of 'Strong Buy' from one analyst. Is this consensus based on technical analysis? As we know, typical technical analysis employs price momentum, patterns, and trends by examining historical prices. The goal is to identify signals based on the market sentiment of Grom Social Enterprises' investors and their perception of the company's future value. Let's delve into a few aspects of Grom's technical analysis.
The company has a Profit Margin (PM) of -2.73%, which may suggest that it is not effectively implementing its current pricing strategies or is unable to manage all of its operational costs. This is significantly below average. Similarly, it has an Operating Margin (OM) of -2.43%, indicating that for every $100 in sales, it incurs a net operating loss of $2.43.
Main Takeaways
Grom Social Enterprises (NASDAQ: GROM) has recently been showing some promising signs of a potential bullish reversal. The company's stock opened at $1.28 and saw a high of $1.34, demonstrating a price percent change of 3.91%. This upward movement in price, combined with a significant trading volume of 51.7K shares, suggests increased investor interest and a potential shift in market sentiment towards the stock. However, it's crucial to note that Grom Social Enterprises reported a net income loss of $16.8M from continuing operations, which may have contributed to the recent downward pressure on the stock. Despite this, the company's potential upside of 12.7% indicates room for growth and may attract investors looking for a high-risk, high-reward play. In terms of risk, the stock's mean deviation of 5.88 and standard deviation of 9.43 suggest a high level of volatility. This could mean larger price swings, which, while potentially profitable for short-term traders, may not be suitable for more risk-averse investors. In conclusion, while Grom Social Enterprises shows signs of a possible bullish reversal, investors should carefully consider the company's financial health and inherent market risk before deciding to invest.
Using predictive technical analysis, we can analyze different prices and returns patterns and diagnose historical swings to determine the real value of Grom Social Enterprises. In general, sophisticated investors focus on analyzing Grom Social stock price patterns and their correlations with different microeconomic environment and drivers. They apply predictive analytics to build Grom Social's daily price indicators and compare them against related drivers such as momentum indicators and various other types of predictive indicators. Using this methodology combined with a more conventional technical analysis and fundamental analysis, we attempt to find the most accurate representation of Grom Social's intrinsic value. In addition to deriving basic predictive indicators for Grom Social, many experienced traders also check how macroeconomic factors affect Grom Social price patterns. Please read more on our technical analysis page or use our predictive modules below to complement your research.
Sophisticated investors, who have witnessed many market ups and downs, anticipate that the market will even out over time. This tendency of Grom Social's price to converge to an average value over time is called mean reversion. However, historically, high market prices usually discourage investors that believe in mean reversion to invest, while low prices are viewed as an opportunity to buy.
Watch out for price decline
Please consider monitoring Grom Social on a daily basis if you are holding a position in it. Grom Social is trading at a penny-stock level, and the possibility of delisting is much higher compared to other pink sheets. However, just because the pink sheet is trading under one dollar, does not mean it will be marked for deletion. Most exchanges require public instruments, such as Grom Social stock to be traded above the $1 level to remain listed. If Grom Social pink sheet price falls below $1 for 30 consecutive trading days, the exchange can delist it. Once the company reaches this point, they will be sent an initial price violation notice directly from an exchange.
How important is Grom Social's Liquidity
Grom Social financial leverage refers to using borrowed capital as a funding source to finance Grom Social Enterprises ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Grom Social financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to Grom Social's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Grom Social's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the breakdown between Grom Social's total debt and its cash.
A Deeper look at Grom
The entity has a beta of -0.297. Grom Social returns are very sensitive to returns on the market. As the market goes up or down, Grom Social is expected to follow. The beta indicator helps investors understand whether Grom Social moves in the same direction as the rest of the market, and how volatile (i.e., risky) it is compared to the market (i.e., selected benchmark). In other words, if Grom deviates very little from the market, it does not add much risk to the portfolio, but it also doesn't increase the expected returns. The big decline in price over the last few months for Grom Socialmay raise some interest from insiders. The stock closed today at a share price of 1.33 on 51,677 in trading volume. The company directors and management failed to add value to investors and position the firm supply of money to exploit market volatility in October. However, diversifying your holdings with Grom Social Enterprises or similar stocks can still protect your portfolios during high-volatility market scenarios.The stock standard deviation of daily returns for 90 days investing horizon is currently 9.56. The very high volatility is mostly attributed to the latest market swings and not very good earnings reports from some of the Grom Social Enterprises partners. "As goes January, so goes the year," is a Wall Street adage that may hold some truth for Grom Social Enterprises (NASDAQ: GROM). The company's stock has been under significant pressure, with a 52-week low of 1.155. However, the stock's 50-day moving average of 2.265 suggests a potential bullish reversal. The company's potential upside of 12.7, coupled with a Wall Street target price of 12, further reinforces this possibility. Despite the company's net income loss of 16.8M and a high probability of bankruptcy at 96.00%, the current technicals indicate that GROM may be on the cusp of a turnaround. However, investors should tread carefully given the company's total risk alpha of -1.13, indicating a higher level of risk compared to the market. The stock's beta of 0.98 also suggests it is nearly as volatile as the market. .
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