This Day On The Street
Continue to site
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

Leap Out of LeapFrog Stock Before You Get Cooked

NEW YORK (TheStreet) -- LeapFrog (LF) is a fantastic company, but you should avoid its stock, which has become an earnings trap. The situation is so dire that I may sell short the stock depending on the price action after the company reports earnings on May 5.

At first glance, the stock might appear attractive. After all, this company has a well-known brand name, makes quality, feel-good products for children and provides fantastic service. The stock has a low trailing price-to-earnings ratio and no debt. What's not to love?

LF Chart

The company's primary revenue driver is a child's tablet that is facing greater price competition from Amazon's (AMZN) Kindle, Google (GOOG) Android-based tablets, and a coming wave of Microsoft (MSFT) tablets. Apple (AAPL) dominates the premium tablet market, and LeapFrog is stuck in the middle.

Child-proof Android-based tablets are on sale at Walmart's (WMT) Sam's Club for less than $140. If Apple enters the children's tablet market, it's game over for LeapFrog. Even if Apple isn't successful, a press release with a Cupertino, Calif. datline is likely to cause LeapFrog shares to fall 20% or more within days.

The functionality and speed of tablets at every price point continues to improve, creating an arms race that is unwinnable for LeapFrog. Adding to the challenge is a growing army of app developers focused on creating the best and lowest-priced content they can. As of LeapFrog's latest annual filing, less than 50 app developers create content for a total of about 1,200-1,300 titles available for the cmopany's various offerings.

1 of 3

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
Only $9.95
14-Days Free
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
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
LF $0.00 0.00%
AAPL $94.06 0.34%
FB $117.57 -0.01%
GOOG $696.75 0.54%
TSLA $236.51 -1.80%


Chart of I:DJI
DOW 17,756.45 -134.71 -0.75%
S&P 500 2,081.43 +16.13 0.78%
NASDAQ 4,817.5940 +42.2360 0.88%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs