A premier streaming technology and entertainment company, Cinedigm Corp. (CIDM) in New York City serves as a distributor and aggregator of independent movie, television, and other short-form content in the United States, Canada, and New Zealand. The company reported a 466% increase in total subscribers to its video streaming services in its recent third-quarter earnings release.

However, the stock has plunged 47.2% in price over the past three months and 19% over the past month. In addition, closing Friday's trading session at $0.85, the stock is currently trading 71.2% below its 52-week high of $2.95, which it hit on Oct. 20, 2021.

While CIDM delivers a good combination of rapid growth and disruptive product offerings, the growing competition in the non-fungible tokens (NFT) space and uncertainties related to its prospects could be concerning.

Here is what could shape CIDM's performance in the near term:

Positive Development

This month, CIDM and Exeest, a global film and television marketplace company, launched Matchpoint Debut, a new distribution and sales platform for independent filmmakers and content creators. Matchpoint Debut is a platform that allows filmmakers to quickly release their films throughout the entire streaming ecosystem while monetizing their work. Exeest’s patent-pending content distribution technology will enable CIDM's content submission and review process, while CIDM's Matchpoint Dispatch will fully automate asset input, content preparation, content packaging, and digital distribution.

Industry Challenges

NFTs are digital assets that represent numerous separate tangible and intangible items, such as collectible sports cards, virtual real estate, etc. However, confusion in marketing, the whims of affluent collectors, and the potential of fraudulent players add to investors' risks. In addition, considering the uncertainties related to the long-term prospects of digital collectibles, numerous institutional investors and market experts are understandably wary. Although CIDM has been investing heavily to increase the pace of NFT releases, the high uncertainty around the future of digital collectibles may stymie its growth.

Mixed Profitability

CIDM's 59.7% gross profit margin is 16.7% higher than its 51.2% industry average. Also, its 0.5% asset turnover ratio is 9.2% higher than its 0.45% industry average. However, its trailing-12-months net income margin, ROA and ROC are negative 4.6%, 2.2%, and 6.4%, respectively. Also, its $1.52 million trailing-12-months cash from operations is 99.5% lower than the $300.81 million industry average.

Mixed Financials

CIDM's revenue increased 41.5% year-over-year to $14.08 million for the third quarter, ended Dec. 31, 2021. Its adjusted EBITDA grew 47.8% from its year-ago value to $1.34 million. However, its operating expenses grew 32.2% from the prior-year quarter to $14.85 million. And its operating loss came in at $764,000. In addition, the company reported a $474,000 net loss.

POWR Ratings Reflect Uncertainty

CIDM has an overall C rating, which equates to a Neutral in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. CIDM has an F grade for Stability and a C for Growth. The stock’s 1.65 beta is in sync with its Stability grade. In addition, the company's mixed financial and profitability are consistent with the Growth grade.

Of the eight stocks in the F-rated Entertainment – Movies/Studios industry, CIDM is ranked #2.

Beyond what I have stated above, one can view CIDM ratings for Quality, Value, Momentum, and Sentiment here.

Bottom Line

While the company is making solid progress across its business operations through various differentiated strategies, the stock has declined significantly in price over the past few months. In addition, the stock is currently trading below its 50-day and 200-day moving average of $1.04 and $1.60, respectively, reflecting a downtrend. Furthermore, its mixed financials and industry-wide challenges could further aggravate its price decline. So, we think investors should wait before scooping up its shares.

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