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 business.
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.
Click here to get proprietary research on this company that’s now set its sights on Netflix.
09-24-2010 8:22 AM