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Blog : Blockbuster Video and Pioneering Penny Stocks
March 19th, 2010
I worked the midnight shift at an auto plant during the summer months while I attended university. I use to rent a lot of videos from my local Blockbuster. It made the early mornings go by quicker after coming home from work.
I remember the poor quality of the tapes and was amazed at how much they charged. I often pondered which would make me richer, owning a Blockbuster or owning a McDonald’s franchise (they were side by side).
Despite the many flops that McDonald’s has strewn across their counters (think Mc D.L.T; McRib, McLean Deluxe, McPizza…) they managed to change with the times and thrive.
The same cannot be said for the one time VHS juggernaut, Blockbuster.
This week Blockbuster warned its overly optimistic penny stock investors that it may have to file for bankruptcy protection in the face of declining sales and rising competition, sending its shares plummeting 30% on Wednesday – hitting a low of $0.25.
Since 2007, Blockbuster has racked up losses totaling more than $1 billion amid fiercer competition from other video-rental services, such as Internet-rental service NetFlix whose shares are trading at more than $70 and kiosk-operator Redbox, which sets up it boxes at grocery stores.
Blockbuster said if its operating results don't improve and if it is unable to refinance or restructure its debt, it "could require us to pursue a restructuring of our indebtedness or file for protection under the U.S. Bankruptcy Code."
Blockbuster is not alone in the video tape and overpriced DVD quagmire. Last month, Movie Gallery Inc., which also owns Hollywood Video, filed for Chapter 11 bankruptcy protection. It is liquidating at least 760 stores.
While there are penny stock investors who look for beaten down companies in transition, in hopes of riding a future wave of prosperity, sometimes it’s more advantageous to look for new penny stock companies that are at the forefront of emerging technologies.
For example, in the "dark ages" of digital photography (the 1990s) getting prints from your digital camera was a major headache with many photos never seeing the light of day.
Today over 50 million people own digital cameras, however, this has not really translated into prints. Photos are currently stored arbitrarily by users – scattered to online sharing sites, computer hard drives, memory cards, and digital photo frames.
While Internet-to-mail printing services like Snapfish have died down, Internet-to-retail services, like CVS’s online photo ordering with in-store pickup, is the fastest-growing printing industry.
It’s expected to close in at 50% of the printing market by 2012, said Alan Bullock, InfoTrends associate director of Internet imaging trends.
PNI Digital Media (PNDMF – OTCBB & PN-TSXV) is a penny stock company at the forefront of digital media solutions. The company’s Digital Media Platform connects consumer ordered digital content, whether from in-store kiosks, online sites or desktop software, with retailers that have on-demand manufacturing capabilities.
The company’s A-list customers include: Costco, Sam’s Club, CVS/Pharmacy, Walmart Canada, Tesco, ASDA (Walmart UK), Hallmark UK, Blacks Photo, Loblaws, Fujifilm, Kodak, Fred Meyer, and Marks & Spencer’s.
In February, PNDMF announced that first quarter revenue climbed 8.3% year-over-year and 14% sequentially to a record $7.8 million. Net profit for the quarter increased 32% to a record $1.2 million, or $0.04 per share.
“PNI achieved the strongest quarter in our company’s history, with record revenue and a 32% increase in profitability,” said Kyle Hall, CEO. “In addition, we lowered our operating expenses year-over-year, demonstrating the strength of our business model as we expanded our profitability at a much greater rate than we grew revenue.”
Investors may pine for the good old days of the joys of fountain tip pens and wax eloquence about the superior quality of vinyl records – but that won’t help you make money in a system that rewards innovation and progress.
New pioneering options are unfolding before our eyes. Which one will you integrate into your penny stock portfolio?