It's time to take out the trash again.
Every week, I bring up a stock that I think is cruising for a bruising. As an optimist at heart, I triple the antidote to the venom by coming back with three stocks that I think will beat the market. Fair trade, right?
Who gets tossed out this week? Come on down, Time Warner Cable
57 channels and nothing's on
I gave cable giant Comcast
In a few years, primetime will be anytime, as ad-supported digital delivery customizes the viewing experience. Content creators will cover the bandwidth costs by turning to higher-paying ads that are perfectly targeted to the end user.
You may not buy into my theory, but at least someone does. This is what Time Warner Cable CEO Glenn Britt told analysts during this week's conference call, as retold by SeekingAlpha.com's transcript:
The reality is we are starting to see the beginnings of core cutting where people, typically young people, are saying all I need is broadband. I don't need video and obviously they are already saying they don't need wire line phone.
So the impact of that potentially over time is to reduce the number of customers. I am saying all this because my remarks get misinterpreted. I am not saying these things as a negotiating ploy. I am really saying them to predict that people will choose not to buy subscription video if they can get the same stuff for free. In other words, free wins. If we don't have a customer then the programmers don't get paid for the customer that we don't have anymore.
Contrary to Britt's claim, I do think this is a negotiating ploy. This comment is intended for programmers to keep content hikes in check. However, he forgets that programmers still have the option to monetize a "free wins" tomorrow. Cable providers do not.
Yes, companies like Time Warner Cable and Comcast also have their claws in broadband. They are foolishly trying to cap Web usage, as a ruse to kill digital delivery of chunky video in the crib. It won't work. It can't work.
Once the rest of the country catches on to the swindle, everyone will be clamoring for free -- or near-free -- connectivity. The FCC is already on board.
As I have every week, I don't talk down a stock unless I have three alternatives that I believe will outperform the company getting tossed. I won't repeat the three suggestions from last month's Comcast article, though they are certainly worth repeating. Let's go over three new fill-ins.
(NASDAQ:AKAM)-- Growing demand for fast, secure, and economical data transfers is huge for content-delivery networks. No one is bigger in this space than its pioneer: Akamai. This niche may never be fat-margin nirvana. When even smaller players like Limelight Networks (NASDAQ:LLNW)can eat into Akamai's customer list, you know you're dealing with a market that can be commoditized. However, the explosion of video files being consumed will make the CDN realm grow substantially. Watch Akamai rise with the tide.
(NASDAQ:TIVO)-- I recently took a look at what the DVR champ might look like in a few years. It may be rough. After all, if content is served on demand, there may not be a whole lot of demand for the time-shifting splendor of a DVR. Don't even try to zap through real-time ads. However, TiVo is already the trusted gateway with its intuitive interface and content-browsing prowess. TiVo already knows how to maximize ads by padding them with interactive features. Viewers can order the book being promoted on the show through Amazon.com (NASDAQ:AMZN)or order a pizza when a chain's ad pops up. As the digital revolution evolves, TiVo will continue to play a major role.
(NASDAQ:AAPL)-- It's hard to refuse Apple while it's still trading in the double digits. The company may seem like an online video dud given the lackluster adoption rate of Apple TV, but it's hard to dismiss Apple's role in video as long as it reigns as the portable media player of choice. Whether TV goes online or mobile, Apple is booming on both fronts. How long do you think a company like Apple will command an earnings multiple in the teens? It probably won't be long, so this is your chance.
Other headlines out of the weekly garbage: