Practically every CEO and loyalist long has a built-in excuse for their stock's most recent woes. Passing things off on the economy and macro events works for many equities. Several stocks, however, may bounce when the market turns up, but I don't expect them to participate, to any meaningful extent, in a sustained recovery.
Research in Motion (RIMM): When AT&T (NYSE:T) delivers my BlackBerry Curve tomorrow, I will be, on some level, supporting RIM. In fact, this marks my second go-round as a BlackBerry owner. Long story short, here's the deal:
Back in November, I accidentally dropped my old BlackBerry in an airplane toilet on a red eye from LAX to Atlanta (true story). When I arrived at my destination in South Carolina, I bought a cheap AT&T "Go Phone" that Nokia (NYSE:NOK) produces for twenty bucks. Happy to no longer spend idle time twiddling my QWERTY, I kept this phone. Over the weekend, it died.
Because I am due for an upgrade with AT&T, I had a slew of free phones to choose from if I agree to extend my mobile service contract by two years. And, because I do miss being able to take a picture or finding out something semi-important when I am on the go, I opted for another smartphone. The BlackBerry was the most attractive free bet for somebody like me who plans on using the phone very little. It apparently retails for $380. I paid nothing other than tax and an activation charge.
The whole transaction cost me $38, which is more than you'll ever pay for a share of RIMM again. The market crash is the worst thing that could have happened to a stock like RIMM. It's akin to an airline or delivery company adding a fuel-related surcharge. When gas prices come down, oddly, that charge never seems to go away.
Along similar lines, macro events might have pushed RIMM to as low as $21.60 on Monday, but, when the dust settles, investors will look at the company and its stock and wonder if they should take away the discount. Given the vast uncertainty surrounding the company, little reason exists as to why they should.
Netflix (NASDAQ:NFLX): Talk about an implosion. Check out NFLX's chart, courtesy of FreeStockCharts.com:
(Click to enlarge)
Note to Netflix loyalist longs: The "shorts" are not "getting killed" anymore. Blame it on the macro level all you want, Netflix is in disarray. And the market crash only is only helping bring the company's stock down to earth at a more appropriate pace. Netflix is not Apple (NASDAQ:AAPL).
When the market rebounds, expect AAPL to lead the rally. Innovators like Apple will not only get us out of the mess the market's in, but they will also, ultimately, get us out of the macro-level mess. The rest of the world should thank California for leading the way, otherwise the country would be in even worse shape (and people in Middle America would be really bored!). But, I digress...
Last time I checked, Sony (NYSE:SNE) movies are still not available for streaming at Netflix. So much for a temporary removal. At last glance, Netflix still abruptly changed its entire business model for a whole slew of contradictory non-reasons. Smoke and mirrors only last so long - ask the executive branch of the U.S. government. The party's over at Netflix.
Mark it down. The next several quarters will provide a RIMM-like implosion for Netflix, chock full of earnings misses and uncertain guidance. The numbers have not added up for quite some time. And, now, under the false assumption that subscribers will abandon DVDs for streaming or streaming/DVD combo plans, numbers will no longer be able to lie.
With a mass exodus likely to occur, subscription growth hits a wall. Netflix, through a secondary offering or a fire sale of its DVD business, makes one last failed attempt at survival. And this all assumes that the results of the Hulu bidding war do not knock Netflix out of the game before it even has a chance to act.
2011 is starting to look a lot like 2008. And Netflix is starting to look a lot like Webvan. Too much, too fast. Money wasted. The rich left standing and the bagholders, well, just got left holding the bag.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.