Don't Bet Against Apple and Wal-Mart
Jonathan is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
For those investors looking to profit in hopes that SuperValu (NYSE: SVU), Nokia Corporation (NYSE: NOK) or Research-in-Motion (NASDAQ: BBRY) will recover and the share price for each rebound, just about anything is smarter than betting against Wal-Mart (NYSE: WMT) or Apple (NASDAQ: AAPL).
Survival for Nokia Corporation and Research-in-Motion, both smart phone companies, and SuperValu, a grocery store chain, has nothing to do with corporate governance issues like Chesapeake Energy or Diamond Foods. It means having to sell more goods and services while competing against Apple and Wal-Mart. It has not happened already and it will not be happening anytime soon.
Time is not on the side of SuperValu, Nokia Corporation or Research-in-Motion. On a quarterly basis, both sales growth and earnings-per-share growth are falling for each company. As Warren Buffett has observed, "Time is the friend of the wonderful company, the enemy of the mediocre."
It also helps to be making money to have a future as a publicly traded corporation. SuperValu is losing money with a negative profit margin of 3.02%. Nokia Corporation has a negative profit margin of 9.24%. For Research-in-Motion, the negative profit margin is 0.30%. Expect these to worsen over the next quarters.
By contrast, Apple has a profit margin of 27.13%. On a quarterly basis, sales growth is rising by 58.86% for Apple. Utilizing the same standard, earnings-per-share growth is up 92.28%.
For Wal-Mart, earnings-per-share growth is rising by 12% on a quarterly basis. Sales growth is increasing by 8.47% for the world's largest retailer. This results in a 3.68% profit margin for Wal-Mart.
To recover and for its stock price to rebound, Nokia Corporation has to sell more Windows Phones in the same market segment as the iPhone from Apple. That is the exact same challenge for Research-in-Motion with the Blackberry. Judging by the declines in sales growth, earnings-per-share growth, and the negative profit margins for each, that has been too demanding a task for both Research-in-Motion and Nokia Corporation in the past. This will not become any easier when the iPhone 5 is introduced by Apple in the Fall.
SuperValue has to somehow find a way to sell more groceries than it has been against competition form the supercenters of Wal-Mart. With a debt-to-equity ratio of 98.25, there is not much time to figure out how this is best accomplished. As the share price for SuperValu has fallen almost 70% for 2012 and more than 50% for the last week of trading alone, something has to happen soon.
It is very, very difficult for a stock to recover from the current price levels of Nokia Corporation at about $1.70, SuperValu at about $2.30, and Research-in-Motion at about $6.95. The plunges of each in short periods of time make it even more of a struggle. It is not that a product must be found that consumers want to buy, but also desire more than what is offered by Apple and Wal-Mart, two of the best companies in history that have defined a segment of the marketplace, designated it as its own, and then defended it against rivals better than any other firm.
More than just counter-punching, Nokia Corporation, SuperValue and Research-in-Motion have to find a way to knock out the champ. After the results of the early rounds, it is difficult to envision Apple or Wal-Mart being floored so that the comeback for each succeeds.
jonathanyates13 has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple and SUPERVALU INC. Motley Fool newsletter services recommend Apple and Nokia. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.