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Fall 2014

Facebook’s Untapped Potential for Long-term Growth

With Facebook’s stock price flirting with all-time highs these past few weeks, investors are naturally inclined to ask the question: when will the gains stop?  Not anytime soon.  Just last quarter, Facebook’s number of average monthly users climbed to a spectacular 1.32 billion and revenues went up 61%.  On top of that, all evidence points toward similar advances to be seen in its Q3 earnings report due out next week.  A majority of Facebook’s ad revenues came from mobile users, who are more likely to purchase any products or services advertised than their traditional PC-using counterparts.  With new mobile video ads being tested and constantly improving ad targeting algorithms, Facebook’s ad revenue is more than likely to keep growing.  However, these recent developments are only the tip of the iceberg: Facebook is holding onto many unutilized acquisitions and has not even tapped into several of its revenue drivers.  With much potential for future long-term growth, Facebook makes the perfect company for investors to follow over the next decade.


Fall 2014

PetSmart: Not the Smartest Company to Invest In?

PetSmart, Inc. is the largest retailer that specializes in pet products and services.  The company has approximately 1,352 pet stores in the United States, Canada, and Puerto Rico.  Not only does the retailer sell pet care products, it also offers dog and cat boarding facilities, online pet care information, dog training, pet grooming, dog day care services, and pet adoption services.  Through PetSmart Charities, the company saved the lives of over 5.7 million pets since 1994 and donated $34 million in 2013.  Although PetSmart is with no doubt a very generous retailer, is its business generous towards its stock holders?

Today, Deutsche Bank upgraded PetSmart, Inc. from sell to hold, increasing the price target to $74 from $60.  The firm has stated that PetSmart’s stock has underperformed so far and has several catalysts that could support shares, but the company is still fundamentally challenged.  The retail stores seem to have a little trouble competing with new online retailers.  Despite PetSmart, Inc. having improved earnings per share by 10% from last year, the company is still underperforming compared to the industry average.  Private equity firms are expected to bid on the company.  This could help develop new strategies for the company, which will allow for continued growth in spite of increased competition.


Fall 2014

New Disney Movies Lead to Increased Revenue

The Walt Disney Company has been earning more per share this year than it ever had before.  Just last quarter, the company earned a record high $1.28 per share, which beat analyst expectations by $0.11 per share.  Additionally, the fourth earnings report released just today showed that total revenue has risen to $12.39 billion from just $11.57 billion last quarter.  As a result, Disney’s stock price is up 4.5% from three months ago.

Investors attribute Disney’s strong financial growth to its pipeline of new products to be released over several years.  In late September, the entertainment company premiered an hour long animated Star Wars movie online to build up hype for its upcoming Star Wars movie, which is scheduled to hit theatres in December 2015.  Also, Disney added Star Wars themes to its amusements parks and plans to sell more Star Wars toys.  The Star Wars franchise is likely to generate a lot of revenue, but Disney has plenty of other brands to profit from.  For example, the movie Frozen, which was released last year, is still making the company tons of money through huge sales of related consumer products.

With so many products to generate money from and a huge budget to build marketing hype, The Walt Disney Company is very likely to see continued growth for many years to come.


Fall 2014

Time Warner on the Rise with Streaming HBO Service

Time Warner Inc. has just experienced one of its best yet: revenue rose 3% to $6.24 billion, beating what Wall Street had estimated for the company’s third quarter earnings.  Consequently, shares went up 3% ($2.22) today.  Taking into account that last year’s full year earnings were $3.51, it appears that Time Warner’s stock price is rising rapidly in light of new company strategies.  Successful TV shows and a new subscription video-on-demand service boosted revenues last quarter.  Several of Time Warner’s subsidiaries announced that they were implementing cost-cutting initiatives, such as decreasing their global workforce.  The company also rejected an $80 billion takeover offer from Twenty-First Century Fox Inc., driving up the stock price even further.

Last month, Time Warner stated that HBO will launch a standalone online streaming service next year.  This will make many of their hit shows available to a much wider customer base, many of whom refuse to pay for traditional cable subscriptions.  The majority people who watch HBO shows watch them on-demand as opposed to watching them when they first air on cable.  Therefore, the new streaming service will appeal greatly to a wide range of new consumers.

By constantly airing successful TV shows, cutting costs, and appealing to a larger group of customers, Time Warner Inc. is more likely than not to drive its shares up dramatically over the next few years.


Fall 2014

Sony Corporation: Can the company make a turnaround?

Sony Corporation has been suffering huge losses for quite some time now.  Sony has lost tens of billions of dollars these past five years and just last quarter, the company lost a whopping $1.2 billion.  Sony has had much trouble competing with other hardware vendors in selling PCs, TV sets, and other multimedia devices.  It even had to drop out of the PC industry completely.  However, the company is now focusing on its mobile division, which has finally shown some promising signs of profit.  With Apple Inc. leading global cell phone sales and Samsung Group dominating the Android OS market, Sony will have a hard time establishing itself in the industry.  On top of that, Sony’s mobile lineup suffers from in-house fragmentation, which means that there are so many different models of Sony Xperia devices that none really gain any recognition amongst the customers.

Sony’s biggest source of revenue growth this year came from sales of its new Playstation 4.  Despite this fact, the company is still projected to lose $468 million for the financial year.  Additionally, Microsoft Corporation surpassed Sony with sales of its own Xbox One just last September, indicating that Sony’s revenue-boosting Playstation sales are coming to an end.  With few hopeful sources of revenue and diminishing video game console sales, it is too early to say whether Sony Corporation will make it out of this slump or become just another antiquated and irrelevant company.


Fall 2014

Coca-Cola Releases Yet Another Low Calorie Drink, Stock Price Predicted to Rise

In a report from Nomura last Wednesday, Coca-Cola Co. maintained its “buy” rating and was given a price target increase from $51.50 to $54.  As a result, the company’s stock price rose considerably, up to $41.94 today compared to $40.73 just last week.  Nomura analysts stated that the strategic initiatives announced two weeks ago was the primary reason for their positive report.  They believe that these new strategies will outweigh the drawbacks that Coca-Cola Co. will experience as part of the beverage industry, which has been seeing declines in revenue over the past few years.

Today, Coca-Coca Co. released a new reduced calorie drink, Coca-Cola Life.  Following the announcement, Coca-Cola shares fluctuated a little bit but are currently up 0.31%.  The new drink is different from the company’s other low calorie beverages, Diet Coke and Coke Zero.  Both Diet Coke and Coke Zero use the artificial sweetener aspartame, which has shown damaging to both physical and mental health.  Coca-Cola Life, however, uses real cane sugar and stevia leaf extract to achieve its sweet taste.  In light of rising health concerns, Coca-Cola Life will surely draw the attention of consumers who want a natural low calorie alternative to their favorite carbonated drink.  In the future, Coca-Cola Co. plans to release an at-home soda machine, directly competing with SodaStream for its rapidly expanding customer base.  With better financial strategies and new product releases that appeal to the current generation of more health-aware individuals, Coca-Cola Co. shares are likely to rise in the long term.


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