In Tuesday's session, three large-cap growth equities surged higher. These stocks are worth watching over the next few weeks and also in the longer term.
Tesla in Talks with Apple, Breaks the Internet
Tesla Motors Inc. (NASDAQ:TSLA) closed over $200 a share for the first time ever. Investors were excited about the prospects of the electric car company that has become such an icon of Silicon Valley innovation. The Tesla earnings will be out after trading closes on the NYSE today and Wall Street expects robust growth in the fourth quarter.
But it was an early 2013 meeting between Tesla CEO and co-founder, Elon Musk, and Apple's (NASDAQ:AAPL) Adrian Perica that had Wall Street buzzing. Perica is the chief of the M&A team at Apple and this meeting was only published this week by the San Francisco Chronicle.
The consumer electronics giant has been looking to enter new markets after reports that smartphones have now been relegated to commodity status. There has been a slowdown in growth in the U.S. and Europe where high-end mobile devices sell well. It is emerging markets that will drive smartphone growth in 2014, but the problem is that it is the low-end handsets that are proving to be in demand in developing economies like China and India.
Analysts aren't convinced that Apple can make sufficient profits in emerging markets citing the presence of lower-cost competitors in the smartphone market.
Still, it wouldn't make much sense for Apple to buy the electric car maker as the profit margins in the auto industry are a lot lower than in consumer electronics. If Apple were to purchase Tesla, it would go down as an anomaly for the iPhone maker. Unlike tech giants Google (NASDAQ:GOOG) and Microsoft (NASDAQ:MSFT), Apple has never expended billions of dollars to acquire companies.
At Tuesday's closing stock price, Tesla had a market capitalization of almost $25 billion. This puts it at No. 8 among automakers. To put this in perspective, the world's largest automaker Toyota Motor Corp (NYSE:TM) currently has a market valuation of $184.26 billion. Stock analysts opine that if the merger was thought to be likely, Tesla shares would have actually risen more than the 2.76% it did in yesterday's session.
These rumors are nothing new as Silicon Valley technology firms are always going to talk to each other to identify any possible synergies. Apple could likely partner with Tesla. CEO Elon Musk has made it clear that Tesla desires to be "the biggest battery plant in the world by far". And this will be done in partnership with some other companies. One of these potential partners could be Apple which happens to be a big battery user.
Tesla shares jumped $5.47 to $203.70 on increased volume that far exceeded its 50-day average of 8.5 million shares. Tesla stock had an impressive run last year with three straight quarters of nice profits. In 2014 alone, the stock has gained an incredible 47% ever since it hit bottom for the year on January 13 trading at $139.34 a share.
Analysts estimate that Tesla will post earnings of 20 cents a share on sales of $670 million in the fourth quarter, up 119% versus a year earlier. Tesla recently noted that car sales in the three months to December were 20% higher than projected. The firm sold and delivered 6,900 vehicles in the fourth quarter of '13, more than the 6,000 units listed in the guidance. This goes down as the highest sales ever made by Tesla.
Priceline.com: Web Travel Agent Keeps Posting Robust Growth
Priceline.com Inc. (NASDAQ:PCLN) is scheduled to post fourth quarter '13 earnings on February 20. The Wall Street consensus estimate expects a 22% increase in profit for the fourth quarter hitting $8.29 a share.
In Tuesday's session, the online travel company's stock rose 1.69% to $1,301.64 per share, marking its eight straight jump. Priceline.com shares are attracting hedge funds and institutional investors and there has been a lot of accumulation (buying) by big money investors.
Recently, Credit Suisse upped its priced target on Priceline.com to $1,450 and raised its forecasts. The global financial services company is optimistic that Priceline.com will keep gaining market share. Credit Suisse has an "outperform" rating on PCLN stock.
The thing that really sticks out about Priceline is its remarkable history of earnings per share growth in addition to impressive net income growth. Over the past 12 months, PCLN shares have gone up an amazing 64% and it doesn't look like its losing steam. EPS growth has been encouraging over a period of two years and this trend is expected to continue.
For the quarter to December '13, Priceline expects the pro-forma EPS to be between $7.80-$8.30. Revenues are forecasted to rise 19-26% year over year for the fourth quarter. Gross margins have grown in the quarter primarily due to higher revenues as a result of increasing average daily rates in the hotel industry.
Google is Getting Bigger and Bigger
The search engine leader has kept showing promise even after its stock crossed the momentous $1,000 a share mark. Google shares have gotten mighty close to their 52-week high of $1,212.87 a share after the stock price extended its gains for the year surging 8.08% to $1,210.88 a share.
The global Internet search king is not sitting on its laurels and has gone on an acquisition spree lately. Google spent $3.2 billion to buy Nest Labs, the Palo Alto-based home automation company which makes thermostats and smoke detectors. Furthermore, over the past few months, Google has scooped up several robotics companies.
The decision by the Internet giant to lease a 35,000-square foot office space in San Francisco indicates that more hardware firm acquisitions are up its sleeve. Additionally, it is another attractive way to get more top talent. The new office space in SF can accommodate up to 200 employees and is perfect for those who find the commute to the company's Mountain View headquarters rather time consuming.
The move comes at a time when Silicon Valley technology firms are increasing their presence in the city of San Francisco to try and get the best talent and pamper them.
Google stock is now up 8% year to date.