Zoe's Kitchen and Zulily Zoom Higher; Dow Rebounds Despite GDP Numbers

Walt Disney gets a little help from the Supreme Court, ends as one of today's top blue chip stocks

Jun 25, 2014 at 6:19PM

The Dow Jones Industrial Average (DJINDICES:^DJI) broke a two-day losing streak on Wednesday, even as abysmal GDP numbers for the first quarter came out. Consensus Econoday estimates called for anywhere between a 2.4% and 1% contraction in the U.S. economy. The reality was far worse: U.S. GDP contracted at a 2.9% rate in the first quarter, the sharpest pullback in economic activity since the woeful days of 2009. But Wall Street was bracing for bad news, and with stocks like Walt Disney (NYSE:DIS) leading the way, the Dow actually finished higher, adding 40 points, or 0.2%, to end at 16,858.

Walt Disney shares jumped 1.5% today, as investors rejoiced at a monumental Supreme Court ruling for media broadcasters like Disney. Aereo, an online video start-up partly financed by media magnate Barry Diller, is a service that allows consumers to watch an array of content from major broadcasters for just $7.99 a month. Aereo in turn paid nothing to broadcasters, reasoning that it had assigned one tiny satellite to each individual consumer, and by plucking TV signals from public airwaves and transmitting different copies on a one-to-one basis to consumers, they weren't violating the broadcasters' exclusive rights to the "public performance of their works." The 6-3 ruling against Aereo could have shattered the entire cable TV model and cost content providers like Disney (which owns ABC, ESPN, A&E, and the Disney Channel) billions upon billions of dollars.


A picture of something delicious-looking from Zoe's Kitchen: Source: Zoe's Kitchen

Zoe's Kitchen (NYSE:ZOES), which tacked on 6.6% today, is in quite a different stage of its company life cycle. While Disney may never again see 40%, or even 30% growth in year-over-year sales, this fast-casual Mediterranean restaurant grew sales by 47% in the period ended April 21. This sort of rapid growth in the restaurant industry is highly unusual, and already has commentators like my colleague Andrés Cardenal comparing it to the likes of Buffalo Wild Wings and Chipotle Mexican Grill. While just the mention of Buffalo Wild Wings and Chipotle elicits thoughts of both mouth-watering returns and mouth-watering food, Zoe's Kitchen is just a fraction of the size of these two companies, isn't yet profitable, and trades at more than 4.4 times sales. I'm staying away from Zoe's until it can serve up some reliable profits.

Finally, shares of Zulily (NASDAQ:ZU), another "Z" company that IPO'd in the last year, surged 9.1% today. There are a handful of time-tested activities that will get one dubbed a "risk-taker." Skydiving, bungee-jumping, or vouching for Charlie Sheen's sanity will almost certainly cement your reputation as a person with a high risk tolerance. Investing in Zulily might also peg you as a high-risk type, considering how wildly volatile shares have been since their Fall 2013 debut. Zulily's spike today was driven by a Goldman Sachs upgrade, as the investment bank boosted shares from a buy to a neutral rating, citing its absurd growth rate. While the flash-sales site for moms did grow sales at a blistering 87% pace last quarter, later the company had difficulty filling its orders in a timely fashion, prompting concern that its hyper-growth could be its downfall. 

Warren Buffett just bought nearly 9 million shares of this company
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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 and owns shares of Buffalo Wild Wings, Chipotle Mexican Grill, and Walt Disney. 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

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KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.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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