Famed short seller Jim Chanos thinks Coinstar is going away
Coinstar still runs its namesake kiosks but nowadays, the company is reliant on it Redbox subsidiary for most of its revenue.
Famed short seller Jim Chanos named Coinstar as a short target early in 2012. Chanos reasoning was relatively simple: The market for renting movies was shifting from digital discs to direct downloads. As Redbox’s competitors bit the dust — Blockbuster and other video rental stores — the company would generate great profits, for a time.
But eventually, the market for movie discs would completely vanish, rendering Redbox’s operation worthless. To some extent, Coinstar seems to have made peace with this future, expanding into other forms of vending machines like mechanized coffee makers.
If Coinstar can create other machines, it might be able to survive. But if it continues to rely on Redbox, it appears doomed.
Pandora Media Inc (NYSE:P)is a new company but competition is intense
Readers may be shocked to find Pandora on this list. It’s a relatively new company, and it only went public a few years ago. Unfortunately, the company faces significant competition from a wide variety of sources, and in many ways, it’s already been surpassed in terms of quality.
Pandora Media Inc (NYSE:P)’s extensive competition includes private companies like Slacker Radio and Last.fm. On the public front, it competes with giants like Microsoft (Xbox Music), while both Google and Apple are rumored to be creating their own versions of an Internet radio. But Pandora’s biggest challenger might be the Swedish upstart Spotify.
On paper, Spotify is clearly a superior service: rather than just allow users to listen to radio stations, Spotify lets listeners pick specific individual artists and songs. So why hasn’t Spotify wiped the floor with Pandora yet? Spotify’s problem is that its free version is only available on desktop computers. To use Spotify’s service on a mobile device, consumers must cough up a monthly fee.
For now, Pandora Media Inc (NYSE:P) might be safe. But if Spotify can get its free service on mobile devices, watch out.
What should investors do?
Investors holding shares of these companies should realize that they are betting on corporations with highly suspect futures. Given the trends in technology, the companies on this list might not survive another five years. That isn’t to say that shares in these companies are destined to fall to $0 — a going-private transaction or takeover could net shareholders some value. But these stocks are dangerous; no investor should make them cornerstones of their portfolio.
The article New Technologies are Threatening These 5 Stocks originally appeared on Fool.com and is written by Salvatore “Sam” Mattera.
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