Investing

6 Big Companies With Completely Broken Business Models

Whether the bears or the bulls dominate market, some companies just never seem to get their business models right. Many investors love dividends, and many love endless growth. But what happens when all that massive growth and market share grab comes at too steep of a price. All companies supposedly are obliged to make money eventually.

24/7 Wall St. has identified six public companies with business models that are absolutely broken. Almost all of them are losing money. They have either taken the endless pursuit of losses, or they have models that just cannot be profitable. Some may not be fixable, even if management were to be replaced entirely.

This list of companies with broken business models contains companies with unclear paths. It is very unlikely that these companies will see their stocks disappear any time soon, but either they will keep losing money or they will have to change the entire way they do business, from management down to the daily operations. In some cases here, even activist investors have been burned to the point that new activists may simply stay away on a risk-reward basis.

Included in the review of each business model is a market value (market capitalization), what is happening with the finances, and valuations or lack thereof. Companies that are deemed to be profitable but just running under lower profitability than their potential largely have been excluded. Again, these are companies with totally broken business models today.

Analysts and most investors also generally are not expecting any great recovery in these names. In all these cases, the shares are down massively from their highs over the past year. One other standout issue for investors is that these companies all still have market values of over $1 billion.


Chesapeake Energy
> Market value: $2.7 billion
> 1-year stock performance: −70%

While Chesapeake Energy Corp. (NYSE: CHK) may be the top dog of the independent natural gas players in America, unfortunately that isn’t saying much. Natural gas is so cheap that it is hard to make money from it. Without even bringing up the late Aubrey McClendon references, what does a $14.8 billion loss for 2015 tell you? Analysts expect a return to profits on an adjusted basis after posting another expected loss in 2016. Unfortunately, that seems predicated on higher natural resource prices. What if prices remain low due to oversupply and weak to steady demand?