I stated last Tuesday that shares of Best Buy (BBY) would look attractive to me at $33. Well, the stock has recently dropped to the $33 level and has entered the buy zone.
The Buy Is Best Buy
Best Buy is currently trading at 10 times this year’s earnings and 9 times next year’s earnings. The stock is down a whopping 25% over the past month alone. The drop has been due to the recent earnings miss and lower foot traffic in its stores.
I cannot say that shares have totally bottomed up but an investor could feel comfortable taking a 25% to 30% position in the stock. That means but 1/4 to 1/3 of the total position that you are planning on buying.
The Sell Is Netflix
This may be sacrilege to some people as Netflix (NFLX) is the darling of analysts, traders, and growth investors. Everyone loves the growth potential of the online movie company with the limitless future. I have been wrong on Netflix in the past and may be wrong again but I am not buying it.
I know that Netflix is a great company and has eaten Blockbuster for lunch but Netflix’s valuation is not sustainable. Netlfix trades at 60 times this year’s earnings and 50 times next year’s earnings. This is a stock that is priced for perfection.
I think that Netflix investors will be in for a shock if the company’s subscriber growth or Wall Street revenue projections fall short. Investors would be wise to start trimming their position or buy some protection in case Wall Street’s darling tumbles.
I agree with your opinion of Netflix – so many players are entering the VOD game – Amazon and Walmart.
I don’t own Netflix, but did own Baidu (I consider both over priced) – sold it at it’s peak a few days back 110 – now the BIDU is trading at 100. One of the few instances, timing actually worked! Not to say it won’t go up, but not worth the pressure!
Shrewd move. Would you get back in if it keeps dropping?
Netflix VOD is a bad product.
VOD is a bad concept altogether.
Those touting Netflix should try downloading to a 42″ HDTV via a 10 mbps download speed (just to set the parameters.) Nothing worse than a buffer in the middle of a movie.
Then there is the letterboxing which removes 1/4 of the screen at the top and at the bottom. No choice to eliminate the letterboxing from VOD.
“Watch Now” – a joke. Unless you are into watching Jaws or the Godfather for the ninth time. Or you want to plop your kids down in front of some mindless television rerun. (Hello TVland?)
Bad product. My free month wasn’t worth it.
Sell Netflix, bad products based on bad concepts are not sustainable.
Haha! Interesting question! Depends on why it is dropping! If it is due to a revolution in china, then no! If it is a natural market correction and Baidu’s business model hasn’t changed, then yes.