In a modern rags-to-riches-to-rags
story, video rental company Blockbuster (NYSE:BBI) filed for Chapter 11
bankruptcy protection today. Blockbuster has been teetering on the brink of
ruin for years as lower cost operator Netflix was able to leverage its online
space to undercut Blockbuster’s business.
When you don’t have to pay rent to maintain bricks and mortar presence, you
obviously have a competitive advantage. Netflix has clearly made the best of
its business model. Blockbuster is a casualty.
However, Netflix isn’t the only company that’s making a lot of money with a
low-cost video rental service. The $162 a share price for Netflix stock might
you think it had no competition. And price-to-earnings ratio of 66 might make
it seem like there’s no limit to the profits from Netflix’s subscriber
But make no mistake, Netflix does have competition. And the competition has
fewer employees, no subscription fees, less expensive rentals, more customers
and a stock price that’s 66% cheaper than Netflix.
Netflix has the bells and whistles, and the overvalued stock. You can
discover the low cost competitor whose stock price has 42% upside today.