There were plenty of winners and losers this week, including a merger of two fast-growing real estate website operators and a theme park operator taking another hit. Here’s a rundown of the week’s smartest moves and biggest blunders.
Tesla Motors (TSLA) — Winner
The country’s coolest automaker — and one of the hottest stocks over the past two years — continues to grow in popularity. The maker of luxury plug-in electric cars posted a better than expected adjusted profit in its latest quarter, with revenue nearly doubling.
Tesla is on track to deliver 35,000 of its Model S sedans this year. It also announced on Thursday that it expects to produce 60,000 cars next year as the Model X crossover joins its lineup. Tesla’s rich multiples aren’t for the squeamish, but the company seems to be revolutionizing the automotive industry. One can only imagine how things will be when it starts rolling out its more reasonably priced Model III car in three years.
SeaWorld (SEAS) — Loser
SeaWorld can’t seem to catch a break, even when misfortune results in denial. SeaWorld and Southwest Airlines (LUV) are ending their marketing partnership after 26 years. The relationship had Southwest promoting the marine life theme park operator on some of its planes and SeaWorld offering Southwest-branded relaxation and charging stations.
Anti-SeaWorld protestors had demonstrated at Southwest’s headquarters earlier this year, and more than 32,000 people had signed an online petition at change.org urging the air carrier to end its association with SeaWorld. However, this already unfortunate story makes the cut this week because of SeaWorld’s explanation on why the two companies will part ways when the latest contract is up at the end of the year.
“With an increasing international visitor base, SeaWorld is looking to focus on new and growing markets in Latin America and Asia, among others,” SeaWorld explains in a joint statement with Southwest, almost as if it’s saying that it has outgrown the airline as a sponsor. It’s also easy to pick a bone with the truth of the comment itself. Total attendance has been falling at SeaWorld since early last year. Do we really believe that its international visitor base is growing?
Zillow (Z) — Winner
Shares of Zillow moved higher late last week when reports suggested that Zillow was about to acquire smaller rival Trulia (TRLA). The rally continued on Monday after the news became official.
Companies making major acquisitions don’t typically move higher on the news. They are usually buying other companies at market premiums. However, the market seems to appreciate the potential of the leading real estate website snapping up another fast-growing rival.
There will be cost savings, naturally, as redundancies get eliminated. However, Zillow and Trulia were starting to spend a lot of money just to stand out. Now that they will be combined — and antitrust regulators are likely to approve the transaction — Zillow and Trulia can do a better job of standing out without having to outspend or play down its rival.
The Market — Loser
The Dow and SP 500 seemed to be on their way to posting their sixth consecutive monthly gain in July before equity prices cascaded on Thursday. The market slide on the final trading day of the month is credited to a few rough earnings reports and fears that the Fed will increase interest rates sooner rather than later in light of encouraging economic news.
The market can be ironic that way, but it makes sense the more you think about it. Earnings multiples have justified lofty valuations because fixed income rates are so low. However, with the Fed ready to respond to any whiffs of recovery-triggered inflation it’s easy to see why borrowing costs may start to inch higher. Now let’s see what August brings. There’s a new winning streak for the market indices to kick off.
Electronic Arts (EA) — Winner
In one of the boldest moves by a software developer to launch a digital subscription platform, EA introduced EA Access. The new service will set gamers back $4.99 a month, offering them unlimited access to slightly older games that initially include “FIFA 14,” “Madden NFL 25” and “Battlefield 4.”
This is only being made available to owners of Microsoft’s (MSFT) Xbox One. Sony (SNE) would go on to say that EA Access is not a good value, but that just sounds like sour grapes for a console that’s trying to get its own PlayStation subscription model to work.
Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Tesla Motors and Zillow. The Motley Fool owns shares of Tesla Motors and Zillow. Try any of our newsletter services free for 30 days.