5 companies that could be bankrupt in 5 years
Technology is racing forward. Can these stocks keep up?
By Alex Shek, Benzinga Staff Writer
New technologies can disrupt long-standing industries and cast aside companies standing in the way.
These five companies may find themselves on the wrong side of the disruption. The unfortunate result? Without major changes to their business models, they may be bankrupt within five years.
GameStop (GME): With the advent of Facebook games and major gaming consoles' online game distribution, the need for physical copies of video games seems to be fading.
Why would gamers travel to a GameStop store for a new game when they could download it from the comfort of their own homes? Sure, demand for old-school games may persist, but will it be enough to keep this game retailer afloat?
Shares of GameStop closed Thursday at $21.07, within range of their price during the depths of the financial crisis. Unlike Best Buy (BBY), GameStop is currently profitable, with earnings per share of $2.43. It also offers a dividend yield of approximately 2.87%. But how long will this success last? The company is set to report first-quarter earnings on May 17.
Coinstar (CSTR): The owner of the Redbox movie kiosks is likely concerned about the segment's online competitors. With video-streaming services from Netflix (NFLX) and Hulu, who needs to trudge to a Redbox location to rent movies? Coinstar's original change-conversion service could still remain relevant, but can Coinstar survive on its namesake service alone? The company's latest attempt to team up with Verizon (VZ) and challenge Netflix's online streaming business may be its last hope for long-term viability.
Shares of Coinstar closed Thursday at $61.72, placing its market value near $2 billion. The company has full-year earnings per share of $4.80. Its first-quarter profit of $1.39 per share outshined analyst estimates by 5 cents, or close to 4%. Short sellers might think little of the stock's 35% runup this year, as around 25% of the company's float is shorted. Perhaps these short sellers are focusing on the potentially dire long-term outlook of Coinstar.
Barnes & Noble (BKS): Borders' bankruptcy last year drew attention to the increasing vulnerability of brick-and-mortar book sellers. Products like Amazon's (AMZN) Kindle, Barnes & Noble's own Nook, Apple's (AAPL) iPad and smartphones can display e-books downloaded online. Once readers have more time to adjust to these technologies, brick-and-mortar book stores will likely see their profits decline even further.
When it no longer makes sense to run a chain of physical book stores, Barnes & Noble will likely be left with its Nook business and online book sales. Unfortunately for Barnes & Noble, the Nook may not be enough to keep the company afloat, but could be an attractive asset for large technology companies to purchase.
Barnes & Noble shares have spiked around 39% since April 30, after it announced it would partner with Microsoft (MSFT) to further its e-reading business. This spike was likely quite painful for short sellers, whose positions represent close to a whopping 71% of floating shares. The stock has responded positively, but will this partnership be enough to save the money-losing Barnes & Noble? (Microsoft owns and publishes Top Stocks, an MSN Money site.)
Sirius XM Radio (SIRI): Car-stereo systems are increasingly integrated with online services such as Pandora (P) and Last.fm. These online services, unlike satellite radio, allow listeners to customize radio stations to play their favorite music. Sirius' commercial-free model with more station choices did represent an improvement over traditional radio, but if the company remains complacent, online music streaming companies could leave it in the dust.
Shares of Sirius XM Radio are trading approximately 19.5% higher this year compared with an 8% gain for the S&P 500 Index. Sirius reported first-quarter earnings of 2 cents a share on May 1, in line with analyst expectations. This brings the company's full-year earnings to 7 cents a share, placing its price-to-earnings multiple near 31. The company has a PEG ratio near 1.5 and a short interest close to 8% of floating shares. Perhaps Sirius' long term bear case is what has driven company insiders to sell around 20% of their aggregate stake over the past six months.
RadioShack (RSH): This electronics retailer may have cornered itself into the niche market of obscure cords and adapters. Online retailers such as Amazon offer a markedly greater selection than RadioShack, and even offer many of the same products at drastically lower prices. So, if you need a cord for your stereo system, but can't wait for shipping, RadioShack may be your best bet. Otherwise, online retailers or even brick-and-mortar retailers like Best Buy may be better options.
The company currently has full-year earnings of 27 cents a share, but how long can its positive earnings last? The stock is down more than 50% for the year, giving the company a market value of around half a billion dollars. Analysts expect earnings of 31 cents a share this year and 39 cents a share in 2013, but are these estimates realistic? RadioShack's earnings have negatively surprised analysts by margins greater than 35% for three of the past four quarters.
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When SIRI first introduced Howard Stern onto their system, I thought "the end is near". He was given WAY too much money for his content. He eventually sued SIRI for more money this past year and I believe lost the suit.
I watched his TV show a few times back when and they were really not for the average person to watch. They were downright gross. As of today, the CEO of SIRI is not the person to take this company to the next level. SIRI will be taken over by Liberty soon enough and then it may have a chance. Until then, I think, it will linger a slow death.
Ws6 Trans Am, where would GM be today if it weren't for the taxpayers? Currently the US Government owns 500 million shares of GM. To recover their money GM stock would need to be valued at $53.98 per share. At $22 per share that means the taxpayer has a loss of $16 billion. The 4th quarter profits were down significantly even with the problems faced by Asia car makers. Another problem facing GM is their pension fund which is underfunded by $24.5 billion will be a major problem in a couple of years. The 8 year financing for new vehicles is one thing that is helping sales; however, that will have a downside in a couple of years as car owners become more underwater on car loans. If GM is doing so well why was the IPO at $34 and 17 months later the stock is at $22? A 35 percent drop in value. And this is after having all debt removed by legalized stealing through the bankruptcy courts. As an investor I don't see good things for GM in the next 5 years. I have only invested in GM one time since the IPO and that was in February 2011. At the time I shorted GM at $35 and covered the short at $24 in August of 2011 for a nice 31% profit.
The bottom line is, for the US Taxpayers, I hope you are correct in your forecast; however, I can not see anything that will make me want to invest in GM's future.
As a consumer I like coinstar and not SIRI. I had been a subscriber to Blockbuster monthly DVD rental plan until they closed all stores in my area. I considered Netflix but then decided it was better to rent when I wanted rather then pay a regular monthly fee. So far I save about 75% over the monthly cost by using Red Box. As for SIRI, their fatal flaw for me was their policy to charge a separate fee for car, home and computer. I now use my IPODin the car and itunes on the computer. I use monthly savings to add to my CD collection. So far I have about 20 days of music on my 80 Gig IPOD and don't miss Sat radio at all. As for weather these two companies will survive 5 years, who knows ? Several years ago Blackberry was king. If you are looking for a company that has it's days numbered consider RIMM !
someone (diditonce) are you a total moron? GM has over $30 BILLION in cash and just posted over $6 Billion in yearly profits. Where on gods green earth do you get this crazy idea GM will be bankrupt in 5 years? I sold Chevrolets and now sell Buicks and GMCs and let me tell you GM isn't discounting the cars like they used to. GM employees get $250 allowance on the Equinox, Terrain, Sonic, Cruze, and Verano. When the new Impala hits showrooms in 2014 it will be another $250 car and the new Malibu should be $500. GM cannot build enough Equinox or Terrains right now which is why a 3rd assembly plant is going to be building them. The new trucks will hit in the market in 2013 and they are going to BLOW AWAY the F series and Ram trucks. The big SUVs (Tahoe, Yukon, Suburban) are being redesigned for 2014 and oddly enough at $3.80 for gas we are still selling them with no problems. GM has the Chevy Spark due out, redesigned malibu, redesigned impala, new Buick Encore, Cadillac XTS and ATS, E-Assist Terrain and Equinox due out in 2014 which will be the first crossover to get 37 MPG highway, redesigned trucks and redesigned large SUVs, PLUS the redesigned 7 or 8 passenger crossovers in the Enclave, Traverse, and Acadia in 2013.
GM is going nowhere!
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