This Week's 5 Smartest Stock Moves
If you're feeling good about the market, you're not alone. Take my hand as we go over some of this week's more uplifting headlines.
1. Microsoft's meaty hook
How would you like an Xbox 360 -- complete with the bar-raising Kinect motion-based controller -- for just $99? The bundle typically sets die-hard gamers back as much as $299.
There's a catch to getting Microsoft's (NAS: MSFT) video game console with a $200 price break. Tech watcher The Verge is reporting that the software giant will begin offering this deal for buyers willing to commit to at least two years of an enhanced Xbox Live Gold subscription that will fetch $15 a month.
The monthly ransom is quite a bit more than the typical Gold membership that costs connected gamers $60 for the entire year, but surely Microsoft will find a way to enhance the offering with digital download credits and streaming access.
I like this for a few reasons.
For starters, Microsoft is taking a page out of the wireless-carrier playbook. Mobile giants don't have a problem subsidizing hundreds of dollars on a new smartphone for a customer willing to sign a two-year contract. Microsoft is simply applying the strategy at a price point that is feasible for the company.
Once someone is tethered to Xbox Live and taking advantage of enhanced features, it will make it that much easier for Mr. Softy to make them spend more in its growing collection of digital offerings.
The move also makes sense proactively. The Wii U will likely be hitting the market later this year, and now Microsoft can point to a $99 price point to distinguish its trusted Xbox from the likely far more expensive Wii U.
The move seems dumb at first. Why would Target stop selling the most popular e-reader? It will continue selling the Nook, but the chain may seem a little out of touch if it's neglecting this country's electronic book reader of choice.
However, it makes perfect sense when you consider who owns the Kindle. Target's been selling the Kindle for a couple of years now, and all it ultimately does is encourage buyers to sidestep Target with online purchases in the future.
Some will argue that the Nook does the same thing, but the Kindle ecosystem is evolving to replace books, CDs, DVDs, and video games with media that can be delivered electronically. Target may not be able to get in the way of progress, but it doesn't have to validate its own disruption.
3. Sirius serves up subscribers
Sirius XM Radio (NAS: SIRI) is juicing up its subscriber guidance after a strong first quarter in terms of both attracting new accounts and retaining existing ones.
The satellite radio service provider is now expecting to close out the year with 1.5 million more subscribers. Three months ago Sirius XM's outlook called for just 1.3 million net additions.
This is a welcome surprise, because Sirius XM initiated a 12% rate increase in January. Sirius XM still wound up closing out the first quarter with nearly 405,000 additional subscribers. Churn held steady at 1.9%, and Sirius XM's conversion rate is holding firm at 45%.
This is huge. New subscribers aren't balking at the higher price of $14.49 a month. Just as importantly, 35% of Sirius XM's subscribers are now paying the new rates, and it's largely the more price-sensitive listeners that are on month-by-month plans.
Satellite radio apparently has surprising pricing elasticity.
4. A mint under your Zillow
Zillow (NAS: Z) keeps building on its strong foundation.
The fast-growing real-estate website delivered another blowout quarter. The stock climbed higher yesterday after Zillow reported that revenue more than doubled and adjusted EBITDA soared fivefold. Zillow's adjusted profit of $0.06 a share was double what Wall Street was expecting.
Residential real estate may not be bouncing back, but never underestimate a disruptor in an otherwise ugly industry. Zillow has now posted better-than-expected results in each of its first four quarters as a public company.
5. Don't panic, go organic
Whole Foods Market (NAS: WFM) is the grocer you want to hold closer.
The fast-growing organic supermarket operator posted another blowout quarter. Comparable-store sales climbed 9.5%, as Whole Foods has now come through with a dozen consecutive quarters of positive comps.
Whole Foods also raised its guidance. Why not? As long as the economy doesn't fall back into a funk, consumers will continue to seek out "better for you" foods.
At the time this article was published The Motley Fool owns shares of Zillow, Microsoft, and Whole Foods Market.Motley Fool newsletter serviceshave recommended buying shares of Zillow, Microsoft, and Whole Foods Market.Motley Fool newsletter serviceshave recommended creating a bull call spread position in Microsoft. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
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