Zulily Rebounds, Potbelly Sinks As Dow Notches Record High
As investors, we try to keep a finger to the wind, testing the gales of the economy for signs of what tomorrow will bring. While this helps us to develop our own forecasts, sometimes a finger to the wind doesn't offer us much new information. The economic data brought to light on Tuesday didn't tell the market anything overwhelming, as retail sales in April logged a 0.1% increase over March. With nothing major to go on, the Dow Jones Industrial Average edged slightly higher, adding 19 points, or 0.1%, to end at 16,715.
Although the Dow wasn't wildly volatile today, its modest gain was enough to earn it an all-time closing high, a feat that McDonald's helped it to achieve. The stock's 0.7% gain today was aided by a price target increase from UBS, which gave shares a $120 target. The investment bank said it sees an opportunity for McDonald's to improve its U.S. same-store sales numbers, which I must agree with. Same-store sales in the U.S. were terrible last quarter, down 1.7%. If you're looking for a low-risk, long-term, income-generating stock, McDonald's is a good bet, but brace yourself for disappointment if you're counting on super-sized returns in the short-term.
Elsewhere in the restaurant industry, Potbelly shares slumped 5.1% on Tuesday as the stock continued a steady decline that began shortly after the company went public last October. While an investment in the $450 million Potbelly is far more likely to double or triple in worth before an investment in the $102 billion McDonald's does, investors assume far more risk with the sandwich chain. Even after Potbelly beat quarterly earnings estimates last week, colleague Michael Lewis delved into several compelling reasons why investors should approach the stock with caution.
Lastly, shares of Zulily were flying high on Tuesday, tacking on 4.8% in trade. The stock certainly gave itself some room to recover from its 35% slide last week, a sell-off predicated by first-quarter results from the flash-sales site. Revenue soared 87% in the most recent quarter, but the company actually posted a slight loss in the period as it struggled to fulfill demand. Higher-than-anticipated demand isn't a bad problem to have, but it's a problem nonetheless, and a clogged sales pipeline threatens to back up orders and leave customers unhappy, which would create a much larger problem. Tomorrow marks the end of Zulily's "lockup period," which could put pressure on the stock as insiders are allowed to sell their shares.
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The article Zulily Rebounds, Potbelly Sinks As Dow Notches Record High originally appeared on Fool.com.John Divine has no position in any stocks mentioned. You can follow him on Twitter, @divinebizkid, and on Motley Fool CAPS, @TMFDivine.The Motley Fool recommends McDonald's. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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