April 5th, 2022 | 12:16 CEST
Baidu, mm2 Asia, GameStop, AMC - Entertainment shares: After Corona, time to party!
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Born in Munich, he first studied economics and graduated in business administration at the Ludwig-Maximilians-University in 1995. As he was involved with the stock market at a very early stage, he now has more than 30 years of experience in the capital markets.
Baidu - Another lockdown in China
A recent look at China shows the return of the Coronavirus. Authorities recorded more than 13,000 new infections last Sunday - the highest number since the peak of the first wave two years ago. Shanghai is, therefore, in a strict lockdown. Meanwhile, the renewed Corona panic has also impacted the economy, including German companies that produce locally. 51% of them reported "a complete disruption or serious impact on their logistics and warehousing" in a snap survey conducted by the German Chamber of Foreign Trade (AHK) in China. 46% reported as much disruption to their supply chains.
What hurts the old economy often leads to higher cycle rates in the online world. Baidu is currently making a name for itself again. With its new platform, "Land of Hope," the tech giant launched a new AI app, joining the current Metaverse bandwagon. The new app is supposed to be able to take 100,000 conference participants on board at the same time and caused quite a stir at its launch. Baidu is catching up with rivals Tencent and NetEase with its new Metaverse capabilities, while Chinese state media are warning against hype around the concept. The concept gained wider attention recently when social media giant Facebook rebranded itself as Meta.
Baidu stock has been lumped in with the general performance of Chinese stocks in its recent sell-off. Given its good positioning and low valuation, it is worth taking a closer look at the search engine professional at its current level of EUR 127.
mm2 Asia Ltd. - Entertainment returns
The situation is somewhat different in the city-state of Singapore, an up-and-coming region and major Asian city with a Western flavor. Clean, safe and highly-priced compared to the rest of Asia, it offers a life of the highest standard. With a vaccination rate of 85% and an incidence currently at 700, the vaccine is becoming more widely available, and the return to normal social life is picking up speed. People there went through high restrictions during the Corona months and are now looking forward to the upcoming openings. Singapore had been closed to foreigners for two years, with only a very few countries recently allowing people back in. Now, in April, the country is opening up to all those who have been vaccinated.
A local entertainment specialist will be able to profit significantly from the openings because cinema, theater, concerts and events are now possible again. The company in question is mm2 Asia, headquartered in Singapore. mm2 Aisa is a producer of films and TV, and online content. As a producer, they offer services that cover the entire film production process. These include budgeting, production, advertising and distribution, and sponsorship. In addition to Singapore, mm2 is also represented in Malaysia, Hong Kong, Taiwan and the People's Republic of China through strategic partners.
Due to its stable core business, the entertainment company has come through the pandemic relatively well. Through acquisitions and start-ups in the cinema sector, mm2 is now better positioned than its local competitors. In addition to the restarting of cinema operations, the event production and concert promotion areas also have enormous upside potential. For the first half of 2022, they achieved revenue momentum of plus 132% to SGD 46.3 million, and despite high investments, the net loss was halved compared to the previous year. The mm2 stock is clearly on the way up, with an increase of 50% in the last two months. In addition to Singapore, the share can also be conveniently purchased in Frankfurt.
GameStop and AMC - The return of the meme shares
The resurgent entertainment sector in the USA also enjoys special attention. In 2021, this stock market segment was very much dominated by the meme stocks GameStop and AMC Entertainment, which briefly increased tenfold in certain periods and then slumped again by up to 80%. The shares had previously been pushed in Internet forums, which even led to slippages by major hedge funds in the US.
The GameStop share also fell off the general grid in March, surging 140%. The meme darling of the Reddit crowd wants to do a stock split that will lower the note for a share by about 70%. To do so, GameStop will have to ask shareholders for approval at its upcoming annual meeting, but that should be just a formality. Stock splits are very popular in the US, and often the stocks in question increase in price just because of this formal act, without being able to report an operational improvement.
AMC Entertainment surprised with a 22% investment in gold and silver mining company Hycroft Mining. A bit unusual in diversification; after all, investments usually occur in the traditional sector. So why would a cinema operator be interested in an explorer? CEO Adam Aron explained that his company is in a position to help Hycroft Mining (HYMC) deal with liquidity issues. The deal attracted a lot of publicity in the forums and catapulted the explorer up by 600%. The main profiteer is AMC itself because their shares also rose by 100%, and they have further profit potential on their balance sheet through 23.4 million warrants in HYMC. That is how you make a splash.
Meme stocks are always good for odd rises and falls, depending on how the community votes and trades. There is little transparency about the players, and the herd instinct moves prices in arbitrary directions. From a German investor's point of view, this is probably all in the realm of a "casino" setting.
The Corona pandemic is slowly subsiding, so entertainment stocks once again have better prospects. Valuations in the sector are not cheap but very much momentum-driven. Baidu is a standard stock, and meme stocks are highly speculative. mm2 Asia is well-positioned and growing strongly.
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