Strong results for Netflix in 2nd quarter
Subscribers up 3% 10 10.6 million while subscriber acquisition cost continues to decline
Company continues to expand into Internet streaming which should be a growth, sales, and margin driver
Company has a very good cash balance and no debt which is good in these economic times – well positioned for growth
There issue is they are in a very competitive marketplace that is subject to rapid technological change – there causing Blockbuster nightmares as Blockbuster moves to close stores to cut expenses as they also try and move to more streaming and mail delivery
Even though it looks to be slow going for the next year as more and more get into streaming – I-tunes, DirecTV, Dish TV, and all cable companies as well as You Tube seriously studying streaming market.
Starbucks – Nasdaq-sbux approx 20.24 reco sell
This company is synonymous with specialty coffee but was negatively affected by a slowing economy and over expansion – but since the founder has taken over the reins to the company he has drastically reduced expansion and trying to evolve beyond coffee.
Over the next year their comps or same store sales are expected to move into positive territory as their worldwide comps have gone from -8 to -5 in the first two quarters
But they have been hampered by intense competition from McDonald’s and Dunkin Donuts have they have both moved into the specialty coffee market in a big way
Even though closing units and slowing growth domestically they have tremendous growth opportunity internationally as they move into countries like China and India – both with fast growing middle classes
Top line growth will remain difficult in the restaurant industry as unemployment remains high through the next 12-18 months.
Activision Blizzard inc. – ATVI – approx. 11.75 reco sell
AB is an international publisher of interactive entertainment software products – co was formed in July 2008 when Activision merged with Vivendi games. Activision was the leading developer of games on game consoles, hand help platforms and personal computers while Vivendi was a global developer of interactive entertainment and the leader in the multi player online role-playing games.
They own many of the top game names like Call of Duty, Guitar, Hero, X-men, Tony Hawk, World of Warcraft, StarCraft, and Diablo.
Increasing revenues will be tough in the short term due to less console sales and the growth in the game resale market as consumers become more budget conscious also this industry is also subject to rapid technological change and success is usually due to a small number of highly successful titles.
The positive is both their gross and operating margins should increase as they reduce operating expenses due to the merger and the end of merger related expenses.
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