Today’s ~2% market declines (primarily caused by China among many other factors) didn’t treat Eros International (Ticker: EROS) badly. When I say didn’t treat it badly, I mean it only fell 2.5%. More than likely, the stock is set for another decline tomorrow; news just broke an hour or two ago that they were sued again. Here’s the article.
On the other hand, EROS has never been more profitable. Recent estimates have put their subscription base for their Netflix like service (EROSNow) at between 35 million to 65 million paying subscribers. While the decline in their accounts receivable may seem bad, keep in mind that their revenue is growing – a lot. This could show a shift in consumer confidence – people are immediately paying for EROSNow, and theatre owners are paying up front for Eros movies.
Eros was able to make waves in India recently when they forced theaters to choose between showing their movie and another popular actor’s movie. Eros seems to have won out with the theaters in India. While there is still some downside in Eros (more significant market declines, the effect the lawsuit will have, any other bad news…), I cannot imagine seeing another company that has declined ~75% in a few months, yet is becoming more and more profitable by the quarter. Eros has shown significant growth internationally, and has multiple winners lined up.
Bottom Line: EROS is a buy; it seems to have support, preventing it from sinking below $6.84, as witnessed in the chart below. The chart also shows that according to the Bollinger Band Width, Eros is at a critical juncture in its stock. If it breaks the bandwidth upward it’s set for a run, if not, it could go into free fall.