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Dec. 17, 2019, 7:44 a.m. EST

Today's Value Traps: GameStop, Viacom, and More

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Dec 17, 2019 (Baystreet.ca via COMTEX) -- Value traps are stocks that have ideal valuation multiples but whose underlying business is decaying. There are three stocks value investors should avoid.

GameStop /zigman2/quotes/203755179/lastsale GME +4.28% reported hardware sales falling 46% in the third quarter. Consumers are waiting for the Xbox and PlayStation refresh and are not buying current models. New software sales fell 33%. GameStop is getting marginalized by online gaming sales. EA and Steam both sell games direct to consumers online.

ViacomCBS /zigman2/quotes/200340870/lastsale VIAC +7.52% is the result of a merger between Viacom and CBS. Putting two losing content companies with no strong online streaming play will not create value for investors. Its only play is unoriginal: cutting costs through layoffs.

Regardless of the headcount reduction, the near-term prospects for the merged firm are poor. Buy Netflix /zigman2/quotes/202353025/lastsale NFLX -0.31% , AT&T /zigman2/quotes/203165245/lastsale T +1.12% , or Disney /zigman2/quotes/203410047/lastsale DIS -0.17% stock instead.

Dropbox /zigman2/quotes/205896836/lastsale DBX +3.33% is losing its focus. The file-sharing supplier is getting into collaboration. But Microsoft /zigman2/quotes/207732364/lastsale MSFT +1.00% and Google's Google Docs offer a better, less expensive solution. Dropbox said the resignation of its Chief Customer Officer will cost another $500,000.

This is hardly shareholder-friendly. DBX stock is expensive even after touching new lows recently. At a forward P/E of almost 30 times, the stock is not done correcting. Any bounce should prove short-lived.

Patient investors should wait for DBX stock to fall to $15.50 at the very least before buying.

COMTEX_359522860/2559/2019-12-17T07:43:50

/zigman2/quotes/203755179/lastsale
US : U.S.: NYSE
$ 3.41
+0.14 +4.28%
Volume: 2.88M
April 8, 2020 6:30p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
$210.78 million
Rev. per Employee
$416,709
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/zigman2/quotes/200340870/lastsale
US : U.S.: Nasdaq
$ 15.80
+1.11 +7.52%
Volume: 16.59M
April 8, 2020 4:00p
P/E Ratio
2.72
Dividend Yield
6.08%
Market Cap
$9.02 billion
Rev. per Employee
$867,543
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/zigman2/quotes/202353025/lastsale
US : U.S.: Nasdaq
$ 371.12
-1.16 -0.31%
Volume: 6.91M
April 8, 2020 4:00p
P/E Ratio
89.78
Dividend Yield
N/A
Market Cap
$163.36 billion
Rev. per Employee
$2.22M
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/zigman2/quotes/203165245/lastsale
US : U.S.: NYSE
$ 29.89
+0.33 +1.12%
Volume: 40.79M
April 8, 2020 6:30p
P/E Ratio
15.73
Dividend Yield
6.96%
Market Cap
$215.76 billion
Rev. per Employee
$637,332
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/zigman2/quotes/203410047/lastsale
US : U.S.: NYSE
$ 101.07
-0.17 -0.17%
Volume: 22.56M
April 8, 2020 6:30p
P/E Ratio
16.15
Dividend Yield
1.74%
Market Cap
$182.78 billion
Rev. per Employee
$295,532
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/zigman2/quotes/205896836/lastsale
US : U.S.: Nasdaq
$ 18.29
+0.59 +3.33%
Volume: 4.43M
April 8, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$7.41 billion
Rev. per Employee
$599,096
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/zigman2/quotes/207732364/lastsale
US : U.S.: Nasdaq
$ 165.13
+1.64 +1.00%
Volume: 48.32M
April 8, 2020 4:00p
P/E Ratio
28.75
Dividend Yield
1.24%
Market Cap
$1243.51 billion
Rev. per Employee
$902,473
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