Songs Of Desperation?
AnnaLisa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Singers are the hottest celebrity partners lately. The list of companies sidling up to Beyonce, Adam Levine of Maroon 5, Jennifer Hudson, Nicki Minaj, Alicia Keys, Will. I. Am (Black-Eyed Peas), and more is surprising. The list includes Intel, PepsiCo, Weight Watchers, Microsoft, and Netflix (NASDAQ: NFLX). While I don't begrudge these performers a cushy gig giving them a respite from touring during the iTunes era, I have to wonder what their corporate partners are getting out of it.
Keys To The Rescue
The two most surprising lineups are Alicia Keys fronting for BlackBerry (NASDAQ: BBRY) as global creative director and Sears Holdings (NASDAQ: SHLD) taking on Adam Levine and Nicki Minaj as designers of clothing lines for KMart. People Magazine may be the next investment bible if this trend continues. Are these songs, or signs, of desperation or canny business moves?
A year ago Keys described herself as an iPhone junkie and tweeted from her iPhone five days before the big launch. What...hypocrisy in celebrity endorsement? Shocked, I'm shocked.
In a live blog from the BlackBerry10 presser in NYC on January 30 on the BlackBerry 10 models, writers wondered what will the "Girl On Fire" do for BlackBerry? The company states in a press release," Keys revealed BlackBerry’s new “Keep Moving” Project, which engages BlackBerry users in exclusive and compelling experiences ... Renowned film director Robert Rodriguez and author Neil Gaiman will join Keys as the first three “BlackBerry Partners” leveraging the power of the new platform to create original content and special user engagements." Whatever that means.
Will she be able to expand the 70,000 apps available for the new 10 models to the 400,000 plus on Android and iPhone? Will she be able to keep BlackBerry's 30 million enterprise customers on the line as more and more companies allow employees to use their own phones? These two factors, apps and business customer losses, are the biggest problems BlackBerry faces.
David Pogue of the New York Times gave a 60 second review of the new Z10 phone and concluded, "If you gotta bet the company on one phone the Z10 is really impressive." Is it a safe bet? Find out in mid-March when the new phones become available pricing between $150-200. Q10 phones likely aren't coming out before May according to AP reports.
The stock has had a huge move almost tripling since its 52 week low of $6.22 in September. Although BlackBerry has $5.31 cash per share, it also has negative EPS (-$1.67), negative return on equity (-8.67%) and negative operating margin (-2.85%). With such a big run and more questions than answers, investors may want to hold off. Frankly, I think Keys will be "jonesing" for her iPhone before long.
Singing For Their Supper
Does KMart still tread water with lines of clothing coming from Adam Levine and Nicki Minaj? Sears Holdings has made some out of the box moves lately adding Paul DePodesta of "Moneyball" fame to its Board of Directors. Pinning its hopes on two clothing lines is at least an attempt to make the chain relevant but actually bringing in shoppers is another thing. It will offer the two lines in-store and on ShopYourWay.com, the online site and also interact with customers with ongoing updates about the two singers.
Sears Holdings, owner of the Sears and KMart chains, has negative EPS of -$26.84, more than half the share price with a 43.90% short interest. Total cash at $6.22 million is dwarfed by total debt at $4 billion. The return on equity is a dismal -48.62%. Sears Holdings reports again on February 28.
Bruce Berkowitz' view of Sears Holdings is that selling it off piece by piece as real estate would result in unlocking value. To that end it's his second largest holding with 16,934,080 shares owned by his Fairholme Capital Management for 13.4% of its portfolio. His call is for a breakup value in the mid $100s.
All Hail The Queen
Netflix has inked a content deal with Queen Latifah for first look multi-year rights to her movie production company output. Her Flavor Unit Entertainment was responsible for such hits as Bringing Down the House and Beauty Shop.
The stock has been on a tear since its last earnings release up 69% getting another upgrade on February 4 from BMO Capital to Market Perform and a price target of $165 expecting better subscriber numbers through 2014. But remember its latest 13 cent profit reported was well below the year ago number of $0.73.
Netflix and Amazon are running neck and neck in a content race with Amazon recently obtaining the rights to new episodes of Downton Abbey for their Prime streaming service. Quite the coup! Amazon has also announced it will create five original kids' shows. Amazon may have the higher P/E but Netflix with a P/E in the 500s is pretty pricey too.
Sure, it's nice that Netflix signed a deal with the Queen but Amazon has more going for it overall than Netflix. However, Netflix is gaining momentum and market sentiment and is probably a buy on any significant pullback.
BlackBerry is such a dicey proposition that I can't recommend it even if they could sign Elvis, Jimi, and Janis to be global directors. The company's launches are too far away and they just don't "have the apps for that." Maybe Sears is worth $160 on a breakup basis but that's not a very viable investment thesis. As for Netflix, I would prefer Amazon but of these three, Netflix seems to be the one with any promise going forward.
leglamp has no position in any stocks mentioned. The Motley Fool recommends Netflix. The Motley Fool owns shares of Netflix. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!