Oh, hello again, blockchain mania.
Just when it seemed like there was a lull in the blockchain craze (major cryptocurrencies were falling earlier this week and blockchain stocks had largely stayed out of the limelight), we get perhaps the most high-profile blockchain stock breakout yet.
Remember Kodak (NYSE:KODK)? That 130-year-old camera company that got kicked to the curb when the digital revolution took hold of the camera market years ago. Well, they are launching a new blockchain platform for digital photography called KodakOne, and KodakOne will have its own cryptocurrency, KodakCoin.
In a not so unfamiliar move for so-called blockchain stocks, Kodak stock more than doubled on Tuesday (the day of the announcement). It’s up another 70% on Wednesday as of this writing. Investors are buying up KODK stock because they think this 130-year-old camera company who hasn’t been relevant for a long time will somehow be a blockchain winner.
If that sounds silly, it’s because it is silly.
This rally shouldn’t be chased. Maybe there is upside in the near-term for Kodak stock as blockchain mania continues. But in a medium- to long-term window, Kodak stock will drop again. Here’s why.
No Need to Jump Into the Blockchain Craze Now
I just put out a piece last week on blockchain stocks (read here). My thesis is pretty straightforward.
When it comes to blockchain stocks, its best to be patient. Blockchain is a genius technology with tremendous value and huge implications. It will likely have an impact on our society over the next 20 years that is similar to the impact the internet had on our society over the past 20 years. But there is no need to buy in right now.
Blockchain mania looks a lot like the dot-com bubble. The blockchain space is getting overly crowded with companies that shouldn’t even be involved. Inevitably, this meteoric and sensational rise in blockchain-related asset prices will end in a pop at some point.
When that pop happens, all blockchain stocks will get hurt, and most will get killed. It will be a weeding out process. The ones that remain will be the long-term winners, and those are the ones you want to buy.
So, in short, let the mania go manic, let the pop happen, let the weeding happen, let the losers fall out, let the winners emerge and then invest in those guys. Those companies are potentially the next Amazon.com, Inc. (NASDAQ:AMZN) and Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL).
All this logic applies to Kodak stock, which has become a blockchain sensation overnight.
But I think it applies especially to Kodak stock because I just don’t see how this antiquated company emerges a blockchain winner.
Kodak Will Likely Get Kicked to the Curb (Again)
Kodak got kicked to the curb several years ago after the company failed to adopt the digital revolution. Digital cameras started to eat Kodak market share. Then smartphones started to eat Kodak market share. This kept happening until Kodak became essentially irrelevant in the space it once dominated.
Given that history, it makes sense that Kodak is eager to be the among the first companies to jump on the blockchain bandwagon. And Kodak’s application of blockchain technology is actually pretty smart. They are leveraging blockchain technology to create a decentralized, secure system that allows artists to license their work and receive payments.
In my previous post, I highlighted licensing rights and royalty payments as one of the areas wherein blockchain could be most useful, so I’m a big believer that a system like this will be tremendously valuable in the future.
But I don’t believe Kodak will be behind the best version of this system.
It’s tough to believe that a 130-year-old camera company that has never had anything to do with technology will deliver that robust of a blockchain-based offering. It’s much easier to believe that another, more tech-savvy player will come along and provide a better, faster, more efficient solution, and once again, make Kodak irrelevant.
The big names that come to mind here? Apple Inc. (NASDAQ:AAPL). More photos are taken with the iPhone than with any other camera in the world, and all those photos are stored in the Apple ecosystem. As Apple is hyper-focused on building out its Services business, it’s a natural step for Apple to develop a similar blockchain-based system for tracking photography rights and payments.
Then there are the bigger, more relevant camera companies like Canon Inc (ADR) (NYSE:CAJ) or Nikon Corp (ADR) (OTCMKTS:NNOY). They could easily step into this space as well, and they’ve proven to be more tech savvy than Kodak in the past.
In the bigger picture, then, I think its unlikely that Kodak survives what will likely be a blockchain massacre due to overcrowding.
Bottom Line on Kodak Stock
Just like other blockchain stocks, avoid Kodak stock if you are a long-term investor. A 130-year-old camera company will most likely not emerge as a blockchain winner in the long term.
As of this writing, Luke Lango was long AMZN.