Friday, January 17, 2014

Winners & Losers: A Good Week for Wheels, a Bad One for Fads and Games

Auto Dealerships Ahead of December U.S. Vehicle Sales DataJeff Kowalsky/Bloomberg via Getty Images

Companies can make brilliant moves, but there are also times when things don't work out quite as planned. From a costly yet potentially lucrative acquisition by the world's largest search engine to a video game retailer wishing it had a cheat code for sales, here's a rundown of the week's best and worst in the business world. Tesla Motors (TSLA) -- Winner Tesla sells cool yet expensive electric cars, and business is starting to get charged up. Tesla revealed this week that it sold and delivered 6,900 cars during the fourth quarter, far more than it was originally targeting. Tesla had moved just 5,500 Model S sedans during the third quarter, with 1,000 of those going to Europe. That worried investors, because it pointed to the possibility of waning domestic demand for the plug-in speedsters. This encouraging announcement was enough to send the stock 16 percent higher on Tuesday. Tesla was one of last year's hottest stocks, and it's kicking off 2014 with the pedal to the metal. GameStop (GME) -- Loser Last quarter was supposed to be the video game industry's moment to shine. With the Xbox One and PS4 breathing new life into the console business, GameStop seemed to be sitting pretty and well-stocked with the systems that were in high demand this holiday season. Unfortunately, that wasn't enough. Hardware sales did nearly double at GameStop, but new software sales fell by a steeper than expected 22.5 percent. Owners of older systems aren't in a hurry to build up their libraries with games that aren't compatible with the new consoles, and Xbox One and PS4 owners are apparently not snapping up enough games to make up for it. This is bad news for GameStop, because its margins on software are a lot better than on hardware. The end result is that GameStop now expects to earn between $1.85 a share and $1.95 a share in the holiday quarter, well short of the $2.16 a share it earned a year earlier and its previous guidance that called for it to post a profit as high as $2.14 a share. Google (GOOG) -- Winner Google is paying $3.2 billion for Nest Labs. It's a great catch for the search giant. Nest is the leading maker of smart thermostats and smoke detectors that can be programmed remotely via smartphones. They even learn their homeowners' behaviors and program themselves accordingly. Yes, Google is overpaying. Then again, Google also has a ton of money sitting passively on its balance sheet. Buying Nest makes Google a leader in the fast-growing realm of home automation. Perhaps just as importantly, paying up for Nest keeps rivals out. SodaStream (SODA) -- Loser It wasn't just GameStop talking down its holiday quarter on a bad product mix. SodaStream warned that it will barely break even for the quarter. Sales will still grow at a respectable 26 percent clip, but the implication here is that the high-margin sales of soda flavors and CO2 refills aren't faring as well as the sale of low-margin starter kits. SodaStream has repeatedly assuaged investors' concerns that its carbonated beverage maker is a fad, but it'll have to find a new argument if it starts looking like its machines aren't being used enough. General Motors (GM) -- Winner It's safe to say that GM is finally back. The once-troubled automaker that needed a government bailout to get through the dark days of the Great Recession has been posting strong car sales in recent quarters, and now it's sharing the wealth. General Motors is starting to pay dividends again. This will be the first time since 2008 that GM shares pay a dividend, and the initial yield of 2.9 percent makes it competitive with Ford's (F) 3.1 percent yield; Ford boosted its quarterly rate earlier this month.

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