Archive for January 30th, 2008
Filed under: Earnings reports, Forecasts, Products and services, Management, Consumer experience, Competitive strategy, Starbucks (SBUX), Marketing and advertising, McDonald’s (MCD)
 It has definitely been a rocky earnings season thus far, and on Monday, fast food giant McDonalds Corp. (NYSE: MCD) will get its turn to impress Wall Street when it reports its fourth quarter numbers. Shares of the company traded up slightly on Friday in anticipation of the upcoming event. Shares finished the day up 0.19% to $54.10.
So what exactly are analysts expecting to hear from McDonalds for the quarter? Consensus estimates for the company ’s most recent quarter are running at 71 cents per share. During the fourth quarter of 2006 the company had actual earnings of 61 cents per share, so Wall Street is looking for a slightly higher than 16% jump year over year.
One thing that we have the ability to definitely expect to hear more about during the quarterly conference call will be the company’s plan to start offering mochas, lattes, cappuccinos, and espressos at all of its American locations. This is a strong move by the company to break into the coffee market, but has met some resistance from store owners.
 The coffee move was first introduced back in November, and at first, store owners were pretty hesitant, citing the approximate $100,000 cost tag to get stores fitted with all the necessary equipment. As Douglas McIntyre wrote earlier this month, the company thinks that by adding coffee bars and baristas it will eventually be able to add on about $1 billion in annual sales. This is a direct attack on Starbucks (NASDAQ: SBUX) which has been struggling to keep its market share over the past year.
What are the analysts saying? Citi Investment Research analyst Glen Petraglia says that McDonalds remains his top pick in the restaurant sector. Stating that the stock isn’t exactly what he would call “cheap,” Petraglia says that he still feels that the downside is pretty limited on this one.
The last time that the company reported earnings was back on October 19, when it matched Wall Street estimates with 61 cents per share. To find the last time that the company was unable to at least come in in-line with analyst estimates you would have to look all the way back to January 2005, when it missed estimates for its fourth quarter 2004 by one penny.
Will the trend continue for McDonalds, or will we see a repeat of fourth quarter 2004. We’ll find out early Monday morning, and will update you as soon as the numbers come in, as well as gage Wall Street’s reaction to the quarterly numbers.
Let’s close with a one year chart to see how the stock has been performing over the past 52 weeks:
Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the on the web investment advisory service Investor’s Observer
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Filed under: Deals, Management, Marketing and advertising, Entrepreneurs, Small business
Monday-morning quarterbacking. Locker room talk about the best investment you’ve ever made. We all do it to some extent. How many of us would like to hit a true homerun?
Following up on a post I had earlier in the week on some of the changes in the music industry, I encountered an exclusive on Bloomberg this morning. The article, titled “Want to Be a Movie Producer,” plays right into our fantasies about making homeruns with our investments.
The article profiles a new investment firm, called IndieVest, that targets movies. Individuals who pay an annual fee can choose investments from a menu of films to be developed, produced, and distributed by the company.
Investors, wealthy individuals who must meet minimum net worth stipulations, are guaranteed at least 50% of the profits after getting back their initial investment (along with a premium), with 40% going to the makers of the film and the remaining money, of course, to IndieVest.
Who knows, maybe you’ll strike it rich by going long the next Alvin and the Chipmunks?
Zack Miller is the Managing Editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund.
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Filed under: International markets, Forecasts, Products and services, Management, Consumer experience, Competitive strategy, eBay (EBAY), Amazon.com (AMZN), Marketing and advertising
 When we took a look at eBay (NASDAQ: EBAY)’s fourth-quarter earnings last night, we also made note that long-time CEO Meg Whitman would be stepping down, to be replaced by John Donahoe. We wondered what changes Mr. Donahoe would be bringing to his new position, and some of those answers have come quicker than we expected, as Donahoe has already announced a few changes that we have the ability to expect to see.
One thing consistently on the mind of eBay users is the website’s fee structures. Since last year, users have been openly voicing their disappointment with what they consider to be abnormally high selling fees, and it seems like Donahoe will quickly look to address these concerns.
Donahoe said that within a few weeks, we will be seeing a brand new fee structure from eBay. In response to what users are demanding, eBay is planning to lower its upfront listing fees, but at the same time will be raising final selling fees. These final fees are only paid once an item has been successfully sold, and I am sure that users will not like to hear this too much, but they should be happy to hear that the initial listing fees are going to be reduced.
Another massive change for eBay will be the emphasis the site places on fixed-price items. Historically, eBay has mostly been about one simple thing: user-to-user auctions. Now that the company finds itself in some steep competition with rival Amazon.com (NASDAQ: AMZN), the company has decided to put more emphasis on its fixed-price items, bringing a much greater “Amazon-like” experience to eBay.
While the new changes may ring positively for eBay users, it will more than likely lead to lower revenues for the company in the short term. As a result, the company was forced to lower its guidance for the current quarter as well as its full year 2008 outlook, which has resulted in shares falling in today’s session. The stock traded down to a new 52-week low of $25.75 earlier in the session, but has bounced a bit from the lows up to $26.70, which is down 7.6% with about an hour left in the trading session.
Looking down the road, it is anyone’s guess how the new changes will impact eBay’s business. I assume that the lower initial listing fees should result in more listings on the site, but will it be enough to get eBay back to its glory days? Time will tell, and until we get more details on the upcoming fee structure, it’s just way too early to predict what reaction eBay users will have to the new changes.
Other changes that some industry insiders are calling for Donahoe to take into account are structural changes to the company. Will Donahoe look at the possibility of selling off Skype? How about the option of spinning of its popular PayPal business into a separate company? Both of these options are choices that Donahoe will undoubtedly be forced to take into account once he takes over the reins a few months from now.
Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the on the internet investment advisory service Investor’s Observer
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Filed under: Earnings reports, Forecasts, Bad news, From the boards, Press releases, Products and services, Management, Insiders, Consumer experience, Competitive strategy, eBay (EBAY), Amazon.com (AMZN), Marketing and advertising
 Shares of e-commerce giant eBay Inc. (NASDAQ: EBAY) are trading around 7% lower in after hours trading today following its fourth quarter earnings release shortly after the market close.
As I looked at in my earnings preview, the company has been struggling to keep up with the competition in its auction business. Two key components that have injured eBay’s auction business are (1) raising fees that have left some of the company’s long term users looking for other venues to do their business, and (2) massive number of fraudulent items on the site.
The company announced that its fourth quarter numbers were actually superior than Wall Street had expected, with earnings per share of 45 cents per share, easily topping the 41 cents that analysts had been expecting to see.
So why is the stock down in after hours trading? Looking ahead the company forecast earnings below what the market had been expecting to see. The company announced that it now is looking to see between 37 and 39 cents for its first quarter, below the 40 cents that Wall Street was hoping to hear.
One of the biggest pieces of news regarding eBay was the announcement that the company’s CEO, Meg Whitman, would be stepping down from her post at the end of March. Taking over for her will be John Donahoe who is currently running the company’s online auction business.
eBay users over the past few years have definitely had a love/hate relationship with Whitman, and it will be interesting to see just how well liked her successor finds himself. From a users perspective, eBay users are going to be looking for one main thing… lower fees. Don’t be surprised to see fees coming down once Donahoe takes control.
From a shareholder point of view we should probably anticipate to see the new CEO come with the main goal of reducing overall costs. While anticipating to see overall cost reductions, marketing and advertising should be an area where investments are made. The company is in fierce competition with Amazon.com, Inc. (NASDAQ: AMZN) and it needs drastic measures to fend off its most powerful online rival.
Lower fees, heavier advertising… what other recommendations would you’ve for Donahoe as he prepares to take over the reigns in a tiny under 10 weeks from now? Let us know what changes you would like to see. Whether you’re a eBay user, or an eBay investor… what changes would you love to see at eBay?
Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the on the web investment advisory service Investor’s Observer
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Filed under: Products and services, Starbucks (SBUX), Marketing and advertising, McDonald’s (MCD)
As Tom Taulli recently reported on BloggingStocks, Starbucks Corporation (NASDAQ: SBUX) is experimenting with new pricing strategies, including $1 cups of coffee and free refills.
This is pretty cool if you’re a consumer — assuming you don’t mind watching lines at the coffee shops grow exponentially in length.
Even as concerns about Starbucks’s growth have emerged, traffic at the shops have stayed strong. Cup of coffee for $1 will bring in more customers, but will also likely cannibalize sales on the more pricey brews. And free refills should encourage people to linger in Starbucks for hours — while still only spending $1.
Starbucks has been a premium brand for its entire existence, and now appears to be gearing up for what amounts to a price war with the likes of Dunkin’ Donuts and McDonald’s Corporation (NYSE: MCD). Given McDonald’s size and scale, I doubt that that’s a battle Starbucks can win.
In addition, I don’t think it’s a battle it should be fighting. Going from a premium brand to a commodity offering is not a good way to keep returns strong. It might not be a good way to grow sales, but Starbucks’s ideal bet might be to tell McDonald’s, “You can have the budget-conscious consumers — we’re gonna stay high-end and take advantage of our strong brand to charge premium prices.”
As Tom Taulli said, it might be that Starbucks doesn’t really have a choice given the in-roads McDonald’s is making, but if offering $1 coffees is Starbucks’s new strategy, I am not impressed.
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Filed under: Consumer experience, Marketing and advertising, Whole Foods Market (WFMI), Green Stocks
 Whole Foods Market (NASDAQ: WFMI) is banning plastic bags from its 270 locations. The switch to a choice between reusable bags and paper will take effect on Earth Day, April 22.
It’s certainly a bold move and demonstrates a lot of concern for the environment. It will also spruce up Whole Foods’ image as an environmentally-conscious retailer and generate a ton of free publicity for the company, starting with the New York Times story.
Whole Foods has served as a trend-setter for the bigger grocery chains, and this move could inspire stores like Kroger (NYSE: KR) and Safeway (NYSE: SWY) to make similar switches, depending on how it works out.
During its trial runs, Whole Foods found that eliminating plastic only led to a 10% increase in paper bag use, demonstrating that consumers tend to switch to the reusable bags.
That’s good for the environment, and it also cuts costs: Even Wal-Mart (NYSE: WMT) has taken notice by phasing in reusable bags as a third option. The plastic bag seems destined for obsolescence.
The 21st century may be the end of the “Plastics, young man!” era.
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Filed under: Consumer experience, Marketing and advertising, Electronic Arts (ERTS)
While the runaway success of the Nintendo Wii showed that gamers are willing to try a very different kind of gaming system and that non-gamers were willing to try gaming in a more user-friendly format, Electronic Arts (NASDAQ: ERTS) is hoping that they’ll be equally receptive to a new way to receive and pay for their games.
The next installment in the game maker’s Battlefield series will be available for download on the internet — for free. According to the New York Times, “Rather than being sold at retail, the game is meant to generate revenue through advertising and small in-game transactions that grant players to spend a few dollars on new outfits, weapons and other virtual gear.”
Battlefield Heroes will be released this summer. It marks a big departure from the traditional method of delivery for video games. Of course, the question one everyone’s mind is, “Will it work?” Electronic Arts is betting that while most people will play the game for free, a cadre of hardcore gamers will spend money each month on new products. Meanwhile, the expanded audience will boost ad revenue.
This is the first time the company will try this delivery in the western world, and the choice of Battlefield, one of the company’s core franchises, indicates that it is serious.
Electronic Arts as a company has so far failed to capitalize on the industry’s recent strengths, but this innovative step could change that.
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Filed under: International markets, Earnings reports, Forecasts, Products and services, Management, Consumer experience, Competitive strategy, eBay (EBAY), Amazon.com (AMZN), Marketing and advertising
E-commerce giant eBay (NASDAQ: EBAY) will be reporting its fourth-quarter numbers this Wednesday, and analysts are looking for a strong quarter from the company, but then again, the fourth quarter has typically always been strong for the company. What analysts will most likely be more interested in, even more so than fourth-quarter numbers, will be the company’s 2008 outlook.
For the fourth quarter, the company is expected to show earnings of 41 cents per share. For its fourth quarter 2006, the company only showed 31 cents per share, so if it were to report 41 cents for its most current fourth quarter, we’ll be seeing earnings growth of slightly over 32 percent year over year, but will that be enough to bring buyers into EBAY shares?
2008 should prove to be a very pivotal year from eBay, which is struggling to get its auction business back on the right track. One thing that we could see this week is eBay announcing that it will be lowering its “insertion” fees. These are fees that the company charges its users to list items, and would lift the commission that users receive for selling their goods.
eBay users have been calling for the company to lower its fees, and maybe the company is starting to listen. Higher fees are blamed as part of the reason why the company has been in such a tight battle with its main e-commerce competitor, Amazon.com (NASDAQ: AMZN), lately.
A spokesman for eBay said that the company will continue to experiment with its fee structure in order to find the sweet spot that both company and users can be content with. The company realizes that there’s a point of “friction” for its big user base and the company is working to find this point, and work within those boundaries.
While its auction business has been faltering, other components of the company have been growing nicely, including PayPal and Skype. Unfortunately, these aspects of its business offer lower profit margins, so the company has to figure out a way to get its auction business back on the right track.
So basically, when the company reports this Wednesday following the market close, earnings will probably not be the main thing that Wall Street is listening for. Of course, earnings are important, but for this precise moment in time, they will take a back seat to the company’s 2008 forecasts and the company’s plans to regain some lost ground in its auction business.
After the official numbers come in, BloggingStocks will be sure to update you with the figures as well as the market reaction to the quarterly numbers.
Here is a 12-month chart for the struggling EBAY stock to give you a better idea of just how badly the stock could use some good news:
What are your thoughts? Should we expect to see the company show strong numbers for its most current quarter? What about 2008… will we hear positive guidance, or hear news of a tough year to come? What announcements would you most like to hear from the company this week? Let us hear your thoughts!
Enjoy the rest of your long holiday weekend.
Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the on the web investment advisory service Investor’s Observer
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Filed under: Television, Marketing and advertising, News Corp’B’ (NWS)
 Far away from prying TV cameras, News Corp (NYSE: NWS) Chief Executive Rupert Murdoch and NFL honcho Roger Goodell probably hooted and jumped for joy when the New York Giants and New England Patriots made it into the Super Bowl. Maybe they made “ka-ching!” noises or exchanged high-fives with their underlings.
They couldn’t have asked for a superior outcome if they’d scripted it. There are so many compelling story lines, including whether the Patriots will be the first undefeated NFL team in more than 30 years. The New York — as in the top media market — Giants are no slouch for drama either. Who would have thought that Indianapolis Colts quarterback and ubiquitous pitchman Peyton Manning would be watching brother Eli lead the Giants in the sports spectacle to end all sports spectacles.
All this is a huge plus for News Corp’s Fox network. A San Diego-Green Bay game — which would have been great — wouldn’t have drawn the ratings the network needed to meet its guarantees to advertisers. Television commercials are sold based on ratings guarantees. When the programs don’t meet the targets, the networks have to “make good” by giving away commercial time on other programs.
The one problem for Fox might be the Super Bowl game itself, which have at times been blowouts. This one won’t be much different. Sorry Giants fans, the Patriots are going to go undefeated. News Corp shareholders are probably hoping that the game is at least interesting enough for people to watch the $1 million commercials.
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