Having a three-digit stock price is impressive. If anything, it's an
indication that a company probably has been consistently rewarding its
shareholders. Look at examples like Priceline (NASDAQ: PCLN ), Apple (NASDAQ:
AAPL ) and AutoZone (NYSE: AZO ). But during the past few months, various
high-fliers have crashed through the $100 floor. Some include OpenTable (NASDAQ:
OPEN ), Green Mountain Coffee Roasters (NASDAQ: GMCR ) and LinkedIn (NYSE: LNKD
). Who might be next? Well, let's take a look at three: Netflix Netflix
(NASDAQ: NFLX ) has been a great innovator in video streaming service. But
lately, the management has acted like its old rival, Blockbuster. Why did
Netflix think it could hike prices 60% on its subscribers? What was the logic?
True, it is a way to transition its business away from the DVD-delivery segment.
Yet it looks like the move has mostly just angered customers. And competitive
pressures are getting more intense. Just look at the name value of some of
Netflixs rivals: Microsoft (NASDAQ: MSFT ). Apple. Amazon (NASDAQ: AMZN ). Even
Blockbuster is making a play for the streaming market via Dish Network (NASDAQ:
DISH ). So while Netflix is trading at a relatively cheap 28 times earnings,
there still could be more downside until there is support in the stock price.
Baidu Baidu (NASDAQ: BIDU ) currently is trading around $104. Yet its valuation
still is high, with the price-to-earnings ratio of 47. True, Baidu has a
tremendous online footprint in China and has been adding more services. But if
the country is experiencing a real slowdown, it's inevitable the company will
suffer from cutbacks in ad spending. It's an easy thing to pull back on.
Chipotle OK, Chipotle s (NYSE: CMG ) stock price currently is at $305. Then
again, it was not long ago that Netflix was trading around this level, and look
at it now NFLX is around $111. In other words, in the wild world of momentum
investing, a stock can break down quickly. As for Chipotle, the company is
selling at a nose-bleed multiple of 50 times earnings. And the margins already
are coming under pressure because of rising commodities prices. But more
importantly, as the economy continues to slow down in the U.S., how will people
continue to justify buying $8 burritos? They wont. Tom Taulli is the author of
"All About Short Selling" and "All About Commodities." You can also find
him at Twitter account @ttaulli. He does not own a position in any of the stocks
named here.
No comments:
Post a Comment