This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Wall Street Buys Netflix, Savvy Investors Prefer Coinstar

NEW YORK ( TheStreet) -- Fund manager David Einhorn made headlines for a few days when he called Apple (AAPL - Get Report) "misunderstood."

Next, Einhorn will cry that he -- or Apple -- is broke.

Plenty of misunderstood stocks exist. Some are bid higher because longs lack the capacity or refuse to see the obvious. Netflix (NFLX - Get Report) goes down as 2011's best example of this. And then there are stocks that confound investors because they do not fully understand key aspects of the company's story. Apple fits neither category; in fact, it's probably one of the most straightforward propositions the market has to offer. Heck, it's up about 134% over the last two years.

Investors misunderstand Coinstar (CSTR) as much as they misunderstand Netflix.

While I have never been much of a Coinstar bull, its management, despite a guidance misstep here and there, appears to have a steadier handle on its business than Reed Hastings has on Netflix. For whatever reason, investors have bid up a stock floated by a company with an unworkable, scatterbrain business model, rather than one that moves forward prudently.

Netflix, for all intents and purposes, abandoned its DVD business prematurely. It took the emphasis off a highly profitable segment that generated desperately needed cash to focus on what Hastings considers the future: streaming. While few would argue with that vision, you cannot push it before its ready. Sometimes, you just have to let the future come to you. DVDs have not yet died; in fact, they have quite a bit of life left in them.

I think Coinstar realizes this, though it's difficult to tell. Coinstar executives do not routinely update investors with Facebook (FB) postings and YouTube videos. They prefer official avenues, such as public Securities and Exchange Commission filings.

Coinstar clearly benefited from Netflix's well-publicized problems, with its stock climbing about 49% year-to-date. Despite that gain, investors have yet to value it anywhere near where they valued Netflix at the height of its absurdity. Even today, with Netflix posting losses, it sports a loftier stock price relative to Coinstar.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AAPL $123.25 -0.80%
NFLX $414.77 -0.83%
VZ $48.56 0.29%
FB $83.30 0.35%
GOOG $548.34 -1.23%

Markets

DOW 17,712.66 +34.43 0.19%
S&P 500 2,061.02 +4.87 0.24%
NASDAQ 4,891.2190 +27.8570 0.57%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs