In the last year, Nokia Corporation's stock has roughly doubled. The challenge for investors in a stock that jumps this much in a year is answering the question, "where do we go from here?" Nokia has agreed to sell its Devices & Services business to Microsoft for about $7 billion. While this was seen as a huge win for Nokia, now what? Looking at the company's most recent earnings, there are at least three reasons investors need to bring their expectations back to reality.

Nokia can't wait for Microsoft's money
Prior to the close of the sale of the Devices & Services business, Nokia looks like a poor value relative to a few of its peers based on its cash-to-market-cap percentage. A good way to find potentially undervalued companies in the same industry is by comparing their net cash to their current market cap.

A few of Nokia's peers offer much more compelling values by this measure. For instance, Juniper Networks currently has about $3.2 billion in net cash and investments, which is the same amount Nokia carries on its balance sheet. The huge difference is Juniper's cash represents 24% of its current market cap, whereas Nokia's cash only represents 10% of its current market cap.

Cisco Systems is another competitor that offers investors a far superior percentage of its market cap as net cash. Cisco reported almost $35 billion in net cash and investments, which is more than 30% of the company's current market cap.

Nokia says it expects to improve its debt profile, and may return some of the proceeds from Microsoft to shareholders. A special dividend would be a short-term positive. However, the first reason investors need to adjust their expectations is, with the stock up 100% already, this potential cash distribution is likely already priced into the stock.

3 Times Worse
The second reason investors may need to adjust their expectations is relative to its peers, the company's stock is a significantly worse value. First, Nokia pays no dividend, whereas Juniper just instituted a dividend yield of 1.5%. Investors looking for a better yield might consider Cisco's 3.5% yield.

Of these three companies, the growth champion is Juniper. In the next several years, analysts expect annual earnings growth of almost 14% from the company. Even though Cisco is going through some challenges, the company is expected to report better than 8% earnings growth in the next five years.

In the most recent quarter, Nokia reported sales declined in all six geographic regions. In addition, the company's NSN division reported a sales decline of 22% and this one division represents almost 90% of the company's total revenue. These challenges are expected to continue as analysts expect annual earnings growth of just 5% over the next few years.

As if no dividend and a lower earnings growth rate wasn't bad enough, Nokia also sells for a forward P/E ratio that is 57% higher than Juniper and 146% higher than Cisco. As you can see, Nokia's stock is anything but a great value at current prices.

By the numbers
The third reason investors need to temper their expectations is Nokia's current market cap is a bit hard to justify. With a nearly $30 billion market cap, we know that the Devices & Services business is worth $7 billion since that is what Microsoft is paying. Subtracting this value, we have $23 billion left to account for.

The company's NSN business has a better growth profile and better margins than the Devices business, so let's be generous and NSN is worth twice what the Devices business sold for. With similar sales and a better margin, maybe that makes sense. If that is the case, NSN would be valued at $14 billion. Taking $14 billion from the $23 billion leaves $9 billion left.

To suggest Nokia's HERE and Advanced Technologies businesses are worth $9 billion with just under $500 million in sales, is a huge challenge. This valuation would suggest that these two businesses combined are worth 18 times sales. Devices & Services sold for about 2 times sales, and NSN might be worth 4 times sales, but thinking Nokia gets 18 times sales for the rest of the company is a challenge indeed.

The bottom line is Nokia made a smart move by selling its Devices & Services business. This business has a better chance of succeeding under Microsoft. However, investors have become so enamored with what Nokia could be, they forgot to see what Nokia is. The company may do better in the future, but it appears most of this is already built into the stock's value. Smart investors should probably avoid the shares at these prices.

Coupons.com soared an incredible 87.5% last Friday to make an exceptional IPO debut. Yet, the performance of this IPO would almost imply investors learned nothing from Groupon . Thus, despite this failed lesson, do Coupons.com and peer RetailMeNot present shareholders with a good deal?

What's driving Coupons.com higher?
Coupons.com is in the business of taking coupons found in a Sunday newspaper and presenting them online. It services consumer package goods companies and retailers on its site, and generates revenue when a coupon is either downloaded from its site or used in a store.

Last year, the company grew its top line by 50% and was able to earn $168 million in revenue. For this performance, Coupons.com scheduled a $130 million IPO with a midpoint price of $13, thus implying a market capitalization of $945 million.

Instead, the company upped the IPO price to $16 and then closed at $30, giving it a market capitalization of $2.2 billion. Clearly, the market sees room to grow and is willing to take a big bet on Coupons.com.

Haven't we seen this before?
While not as hyped, Coupons.com is reminiscent of Groupon, another deal-based company's IPO from 2011. Groupon was one of the most anticipated IPOs of 2011, with 14 underwriters, and the stock price reached $30 for a 50% IPO pop, despite the company canceling much of its IPO roadshow and management dealing with a slew of questions regarding accounting practices.

Needless to say, Groupon had a lot of problems prior to its IPO, but investors were so fascinated with its daily deals and online couponing approach that they were apparently willing to forgive, forget, and value the company at nearly $20 billion. Now, we know those bets were unwise, as Groupon's current market cap sits at $5.7 billion and it has shifted focus away from online couponing in favor of e-commerce.

Groupon's online couponing business failed to produce consistent growth and was met with competing services from the likes of Google, Priceline.com, and even AT&T just to name a few. Still, Groupon was a large business at the time of its IPO, earning annual revenue of $1.6 billion, which gave it a price-to-sales ratio of more than 10 at its most expensive point.

Today, investors are paying a higher premium for Coupons.com  (and the same premium for RetailMeNot) for a business that is not only smaller, but also faces significantly more competition versus Groupon at the time of its IPO.

Hard to be bullish long-term
Currently, the single greatest catalyst for Coupons.com is its growth, or at least its performance in 2013. However, in an interview on CNBC, Coupons.com CEO said, "We're much more interested in growing in a measured, conservative way year-over-year," in response to a question of whether or not 50% growth was sustainable; his response was quite vague.

Essentially, Coupons.com cannot guarantee sustained growth, nor can it fundamentally support its 13 times sales multiple. The primary reasons are that couponing is a business with very few barriers to entry, and history is against Coupons.com. There's also no social media element about the company's model.

With that said, RetailMeNot is Coupons.com's closest competitor, but rather than providing coupons on products such as laundry detergent or groceries, RetailMeNot offers customers deals at particular retail stores like Macy's, on brands like Hewlett-Packard, and at restaurants such as Ruby Tuesday. RetailMeNot offers a wide array of coupons not normally found in the Sunday morning paper, meaning its likelihood of longevity is greater than Coupons.com.

Furthermore, at 11 times sales, RetailMeNot is cheaper; it has higher gross margins at 94%, versus 69% for Coupons.com. Lastly, with 54% top-line growth last year, RetailMeNot fundamentally outperformed Coupons.com. Therefore, it you're seeking an investment in the highly fragmented couponing industry, Coupons.com is likely not your best bet, as RetailMeNot looks better.

Final thoughts
Coupons.com might be a horrible investment deal, but RetailMeNot might not be much better either. However, Groupon is a different story. Groupon's daily deals business reported $401 million in fourth-quarter sales, which is nearly double RetailMeNot and Coupons.com's full-year. Plus, with $400 million, Groupon has finally begun to see a year-over-year decline in the business, but its e-commerce business is growing at a consistent 50% rate.

This e-commerce business could pay long-term dividends to shareholders, but the speed with which Groupon grew and then ran dry should worry investors of RetailMeNot and Coupons.com. The big question is at what point growth might become stagnant for Coupons.com and RetailMeNot, and at that point, will either company be able to innovate and create further investment value? Because these questions remain unanswered, and due to the valuation of Coupons.com, it clearly is not a good deal for shareholders.

In our interconnected world, the announcement that China's exports fell 18.1% in February was all it took this morning to put downward pressure on the major U.S. indexes. The Dow Jones Industrial Average lost 34 points on the day, or 0.21%, while the S&P 500 fell 0.05%. The Nasdaq was unchanged.

Within the Dow, shares of AT&T closed down 0.09%, after falling as much as 1.07% during the day. Investors were probably reacting to the news that AT&T is cutting its Shared Value Plan price from $80 to $65 per month for current customers who are no longer under a two year agreement and sign up for the new plan, or for new customers who pay full price for a phone. But as my colleague Travis Hoium explained earlier today, AT&T is essentially just changing the way it collects money from customers. I don't think shareholders have much to worry about from this move.  

Outside the Dow, shares of Bed Bath & Beyond rose 0.43%, despite Friday's announcement of reduced earnings expectations. Blaming the weather, management cut its forecast from a range of $1.60 to $1.67 per share down to a range of $1.57 to $1.61. The company also sees revenue for stores open at least a year rising only 1.7% for the quarter, down from the previous estimate of 2% to 4%. Credit Suisse said earnings would have been in line with guidance if not for the weather, backing up management's assertions. Sometimes, things are just out of your control.

A big winner on the market today was Chiquita Brands . Shares rose 10.7% this afternoon after the company announced a merger agreement with Dublin-based Fyffes. The new company will surpass Dole to become the world's largest banana company. The companies characterize the merger as a "strategy of survival," as big discount-driven retailers have put pressure on margins. The merger is likely to help for now, but as a way to survive it doesn't seem like the best long-term strategy. If trouble strikes again, there's really nowhere else to go: The new ChiquitaFyffes and Dole together will control more than half of the world's banana market.  

Two very different movies took audiences back in time this weekend, but only one could claim the top spot at the domestic box office.

To the surprise of few, that honor went to Time Warner's  300: Rise of an Empire, which came in at the high end of expectations grossing an estimated $45 million.

At first glance, though, that seems light considering the graphic, quasi-historical effort cost Warner Bros. $110 million to produce. By comparison, its predecessor cost just $65 million, opened to an incredible $70.9 million, and ended as 2007's highest-grossing R-rated film with a worldwide gross of $456.1 million.

300: Rise of an Empire easily won the weekend box office this weekend Credit: Time Warner

But however visually beautiful its battles, nobody really expected Rise of an Empire to repeat 300's stellar performance, anyway.

What's more, it seems to be enjoying greater global acceptance this time: Though this weekend's start puts Rise of an Empire on track to gross "just" $135 million in the U.S. -- assuming it follows a similar path as 300, which grossed $210.6 million domestically -- it has already brought $87.8 million overseas, or a full two-thirds of its current total. When all was said and done in 2007, just 53.8% of 300's worldwide gross was derived internationally.

Should we be worried about DreamWorks?
Meanwhile, it's tempting to be disappointed with 20th Century Fox & DreamWorks Animation's  tag-up in Mr. Peabody & Sherman, which snagged second place with $32.5 million. For perspective, as DreamWorks' first film of 2014, Mr. Peabody & Sherman is also its second-weakest March opening ever, ahead of only the dismal $12.8 million achieved by The Road to El Dorado in 2000.

Mr. Peabody & Sherman is off to a slow start in the U.S. Credit: Dreamworks Animation

Keeping in mind The Croods opened at $43.6 million last March en route to a $187.2 million domestic total, Mr. Peabody & Sherman is on pace to gross around $139 million in the U.S. over the next few months. DreamWorks plunked down $145 million to bring Mr. Peabody & Sherman to life, which makes this weekend all that much more troubling as there should have been little by way of competition preventing its success.

Still, Time Warner's The LEGO Movie just simultaneously grossed $11 million in its own fifth weekend, bringing its global gross to $360.6 million and proving audiences still aren't quite ready to let go of the $60 million film. Heck, even Disney's  four-month-old blockbuster Frozen managed to make the top 10 after adding another $3 million this weekend.

However, I don't think it's entirely fair to compare Mr. Peabody & Sherman to either of this year's biggest family-friendly blockbusters.

Disney's Frozen, for one, has proven a different beast entirely after setting a new record with its Thanksgiving debut, winning two Oscars, and grossing over $1 billion worldwide to make it the biggest movie to ever come from Walt Disney Animation Studios.

Time Warner's toy-centric film also had a great start, staying number-one at the box office for three consecutive weeks after constructing the second-largest February launch of all time.

DreamWorks' saving grace
This in mind, Mr. Peabody & Sherman does boast at least one favorable comparison; only 37.6% of The LEGO Movie's total has originated from international audiences, while Mr. Peabody & Sherman has already grossed $65.8 million overseas. If DreamWorks can maintain that global momentum, Mr. Peabody & Sherman's slow domestic start won't be an issue for long.

And even if it was, DreamWorks has recently proven it's adept at turning seeming box office disasters into successes. Take the horrific $21.3 million U.S. debut of Turbo last Summer, for example, which initially had industry analysts -- including myself -- expecting big writedowns to follow. However, DreamWorks management went on to stun investors during its earnings conference call the following week, when they insisted a late push in worldwide prints and advertising spending would not only avoid such losses, but also enable them to push Turbo into the black.

Sure enough, despite costing $135 million and only posting $83 million in U.S. ticket sales, Turbo managed to add an additional $200 million internationally by the time it closed in mid-December.

Finally, remember DreamWorks investors can also look forward to the June release of How to Train Your Dragon 2, which has some big shoes to fill after the first film grossed nearly $495 million in 2010. That shouldn't be hard to follow up, however, as DreamWorks used its hit Dragons TV series on Cartoon Network to keep enthusiasm for the brand fresh.

In the end, DreamWorks may not be putting up the record numbers investors have come to expect this year, but I'm convinced the animation studio will continue to do just fine.

The last time Microsoft revamped its Office for Mac was in October 2010. Image source: Microsoft.

It's been nearly four years since Microsoft has updated its Office for Mac productivity suite. But As Apple's Mac sales continue to gain market share among PCs, Microsoft's Thorsten Hubschen, who oversees Office in Germany, has revealed that an internal reorganization at Microsoft has resulted in renewed efforts on its Office for Mac suite.

The robust Office for Mac business
Apple's Mac business didn't just slightly outperform the PC market in the fourth quarter of 2013 -- it crushed it. During the quarter, Apple's Mac shipments grew 19% from the year-ago quarter, putting Apple's Mac growth about 25 percentage points ahead of the PC market's decline during the same period. While it's been five quarters since Apple posted year-over-year quarterly unit sales growth for its Mac segment, it does consistently outperform the PC market -- in every quarter except one since 2005 to be exact.

iMac. Source: Apple.

The result is that Apple's share of the worldwide PC market is growing to 5.5% today, from 2.1% in 2005.

With Apple's Mac business gaining share, it makes more sense than ever for Microsoft to focus on an Office product for Mac.

Great news for investors
Considering that Office is one of the Microsoft's largest contributors to the company's operating income, investors should be enthusiastic about Microsoft's renewed interest in developing Office for other platforms. A renewed push for cross-platform versions of Office means the company can focus less on defending its Windows market share and more on providing excellent products and services.

While Hubschen didn't comment on Microsoft's plans for a version of Office for Apple's iOS, Microsoft insider Mary Jo Foley said last month that an iPad version of Office is still in the works.

Microsoft continues to trade fairly conservatively at just 14 times earnings. Still a cash cow, simply maintaining revenue and current pricing power would make the stock an excellent investment. With the market giving the stock so little respect, even small moves like a renewed interest in Office for Mac should give investors incremental confidence in the business.

The U.S. Defense Security Cooperation Agency notified Congress Tuesday of plans to sell the government of Pakistan a C-130 Fleet Upgrade Program package, plus associated equipment, parts, training, and logistical support valued at $100 million in total.

Specifically, the package includes upgrades to the avionics, engine management software and mechanical parts, cargo delivery system, and outer wing sets on six Pakistani C-130 transport planes. Also included in the sale will be spare parts, necessary support equipment, publications and technical documentation, and personnel training and training equipment, plus logistics support. The primary contractor on this sale has not yet been chosen, but the C-130s were originally built by Lockheed Martin . A bidding process will be opened to choose the primary contractor.

Pakistan's air force includes a total of five C-130B and eleven C-130E aircraft. No mention of upgrades to the remaining 10 aircraft was made in the announcement, nor did DSCA clarify which specific models of C-130 would be getting the upgrades.

Explaining the sale to Congress, DSCA noted that Pakistan's planes are "facing airworthiness and obsolescence issues, and will require upgrades and repairs for continued operation and effectiveness. The proposed modernization of the C-130 fleet should ensure continued viability for an additional 10-15 years." DSCA added that this modernization is desirable to "improve the security of a Major Non-NATO ally which has been, and continues to be, an important force for regional stability and U.S. national security goals in the region."

According to DSCA, "there will be no adverse impact on U.S. defense readiness as a result of this proposed sale." Nor will the sale "alter the basic military balance in the region." 

On Tuesday, there was an apparent change in psychology among investors that went beyond the modest declines in the major market averages. Even though most benchmarks fell only by half a percent or so, many formerly high-flying momentum stocks came crashing back to earth, especially those in the hydrogen fuel-cell arena. Yet some stocks still managed to climb even on a tough day, and Knightsbridge Tankers , PowerSecure International , and Zogenix were among the best performers on the day.

Knightsbridge climbed almost 14% after receiving an analyst upgrade from Global Hunter Securities. The oil and dry-bulk shipping company had said on Monday that it would buy six Capesize bulk carriers from Frontline 2012, in which Frontline Ltd. has a stake and which Frontline CEO John Fredriksen also leads, and Karpasia, which is controlled by a trust for the benefit of Fredriksen's immediate family. The deal involves paying a total of $360 million, with more than half coming in Knightsbridge stock valued at $10 per share. The move fits with Knightsbridge's strategic plan to take advantage of what it sees as a recovery in dry-bulk shipping, and if it's right, the new vessels should help it capitalize well.

PowerSecure gained 9% after the utility- and energy-technology supplier reported strong fourth-quarter earnings last night. Sales soared 57% during the quarter, with strongest growth in its energy-efficiency and utility-infrastructure areas. With record levels of backlog, a strong balance sheet, and synergies from recent acquisitions, PowerSecure believes that 2014 has the potential to be an even better year for the company and its stock. The company also got an upgrade from analysts at Maxim Group this morning, adding to the positive sentiment surrounding PowerSecure.

Zogenix rose almost 12%, regaining just about all the ground the drugmaker lost last week. Last Thursday, Zogenix plunged 15% after reporting poor earnings. But the bigger question mark for the company is whether its FDA-approved drug Zohydro, a painkiller that has raised huge amounts of controversy, will end up having its approval revoked. Organizations have been lobbying against Zohydro, arguing that it is too dangerous. Yet with the FDA having already overruled the objections of its advisory committee in granting approval last year, investors are apparently feeling somewhat more secure that the regulatory agency won't act hastily to reverse course at this time.

Every one of the "major" semiconductor companies vying for mobile processor dominance has something that it's really good at - it's "secret sauce." Historically, Qualcomm has been known for its modem/RF prowess and Intel is known for being a world-class CPU designer. However, in the mobile system-on-chip world, a company needs to deliver a product that is best-in-class across the board to get noticed. Interestingly, it seems that everybody these days can design/license a competent CPU and GPU, leaving the main differentiator in smartphone processors to be the modem.

Intel is solidly No. 2 in modems today
There's no denying that Qualcomm is the top cellular modem vendor today and, as an added bonus, is also the strongest mobile SoC vendor. Across the various IPs necessary to build a SoC, Qualcomm is either No. 1 or No. 2 (depending on the benchmark and who you listen to), but it is so consistently good across the board that its SoCs are the choice for just about every "hero device" and even its mid-range and low-end solutions continue to aggressively take share against competitors.

However, a strong No. 2 is beginning to emerge in the form of Intel. Sure, MediaTek is the No. 2 vendor of mobile system-on-chip products by revenue (and Intel's share is negligible), but from the investment level Intel has been committing to this over the last several years and from the features found in Intel's recently announced XMM 7260 LTE-Advanced solution, it's clear that Intel is the only "real" competitor to Qualcomm at the high end of the modem space today. This is a long-term advantage that cannot be ignored as smartphones, at the end of the day, live and die by the quality and features of the modem.

Modems are the best way to differentiate
It seems that just about anybody can build a competent application processor - just license stock ARM Holdings CPU IP, use either ARM/Imagination Technologies graphics IP, and then build up the various IP blocks (imaging, video, camera, etc.) and - presto! - you have an applications processor. However, for this product to have value inside of the much more lucrative smartphone market (which is, again, driven by the modem), it needs to have a top-notch integrated modem (or, at the very high end of the market, a platform paired with a top-notch discrete modem).

This is where Intel and Qualcomm stand alone. While Broadcom has announced that it plans to sample a category 6 LTE-Advanced modem during the middle of 2013, Intel claims that devices with its own category 6 LTE-Advanced modem will be on the shelves by Q2 2014. Qualcomm, too, has been sampling its next generation 20-nanometer MDM9x35 since the beginning of the year and plans to have availability during the second half of the year (iPhone 6, anyone?). Interestingly enough, Intel may actually beat Qualcomm to market with a category 6 LTE-Advanced modem.

Intel and Qualcomm well positioned
Nobody - not Broadcom, MediaTek, Marvell, ST-Ericsson, or NVIDIA - has modem capabilities that today match Qualcomm/Intel, which is a long-term positive for Intel once it ports its modem IP to its own manufacturing technology and integrates it into system-on-chip products. This, in this Fool's view, means that long-term Intel and Qualcomm will largely control the smartphone system-on-chip market.

According to a fairly old article on technology news site Digitimes, Intel's smartphone chip launch schedule looked like this:

• Fourth quarter of 2013 - Merrifield, 22nm/2 core Silvermont/PowerVR G6400
• First half of 2014 - Moorefield, 22nm/4 core Silvermont/PowerVR G6430
• First quarter of 2015 - Morganfield, 14nm/4 core Airmont?/???

According to Intel's latest roadmap, the just-announced Merrifield is a first-half 2014 affair, with Moorefield coming in during second half of the year, likely very early, though. There is no Morganfield scheduled for the first quarter of 2015, but there is a chip known as Broxton scheduled for "mid-2015." So, what's going on here?

Source: Intel

Intel needed to move quickly to Broxton
To not get too lost in code names, it's important to define them upfront. Silvermont is a brand-new CPU design built on the 22-nanometer manufacturing process. Airmont is a slight enhancement of this design but built on Intel's upcoming 14-nanometer process. The CPU following this is known as Goldmont, which is a brand-new design on the 14-nanometer process. This is the CPU at the heart of the next-generation Broxton system-on-chip, and it is likely to be a significant leap from Silvermont/Airmont.

For tablets, Intel will launch Cherry Trail, which is based on Airmont, at the end of 2014. However, Intel has not indicated that a smartphone variant of this processor is coming. This leads one to believe one of the following two possibilities is true:

• Intel pulled in the Goldmont-based Broxton in order to be more competitive, scrapping any potential Airmont-based smartphone platform in the process.
• A smartphone-based Airmont product never existed, and the plan was to move to the Goldmont-based Broxton as quickly as possible.

A search on LinkedIn revealed that there was not a single reference to a Morganfield platform and, indeed, the only three system-on-chip products associated with smartphones were to be Tangier, the SoC found in Merrifield, Anniedale, the SoC in Moorefield, and Broxton, as shown from this LinkedIn profile:

(Source: LinkedIn)

It is likely that Intel never had any intention of putting the Airmont CPU core in a smartphone-targeted system-on-chip and wanted to skip straight to Goldmont. This was probably for competitive reasons against the various ARM-based players that have been advancing their micro-architectures rather rapidly, including ARM's own Cortex A series. 

Foolish bottom line
This is the right strategic move on Intel's part, particularly as the updated Silvermont core, known as Airmont, is unlikely to drive the kind of performance boost really necessary to be competitive in the mid-2015 time frame against ARM Cortex A57 class processors. The good news, however, is that Silvermont was so power-efficient on 22-nanometers and left so much thermal headroom on the table relative to its peers, that Intel can really flex its muscles with Goldmont. This boost will be achieved both by taking advantage of the next-generation 14-nanometer process, which brings substantial density and performance/power improvements, as well as an expanded thermal envelope. 

Salesforce.com , a cloud computing company known for its customer relationship management software, or CRM, has very rapidly become one of the largest software companies in the world. Over the past decade, Salesforce has increased its revenue by a factor of more than 20. Over the past five years, revenue has grown at an annualized rate in excess of 30%. Another year of 30% revenue growth is in cards for 2014 if the company's guidance is to be believed, and there seems to be no indication that growth will slow anytime soon. But even a cursory look at the company's financial statements reveal some big problems, and the massive revenue growth is masking some serious issues.

Where are the profits, exactly?
While Salesforce's revenue growth rate has been impressive, the company's operating profit has been negative for the past three years, and the losses have been accelerating. Part of this is due to a heavy reliance on stock-based compensation, an expense which topped $500 million, or 12% of revenue, in the most recent fiscal year.

Under generally accepted accounting principles, or GAAP, stock-based compensation is counted as an expense, and this is why Salesforce's GAAP operating profit and net income have been negative. But the company likes to tout its non-GAAP numbers, which add back stock-based compensation. Under this system, Salesforce is profitable. In the previous fiscal year, the company lost $0.39 per share on a GAAP basis, but earned $0.35 per share on a non-GAAP basis.

Should stock-based compensation be counted as an expense? It is non-cash, after all, so it doesn't "cost" the company anything. But stock-based compensation is often used in order to attract and retain talent, and if the company didn't give out stock options, salaries would almost certainly need to be higher. Coupled with the dilution caused by the ever-increasing share count, it's clear that stock-based compensation is certainly not free.

The problem is deeper than just stock-based compensation, though. Here's a look at a few troubling trends that have played out over the past few years:

As Salesforce has grown, one would assume that the company would get more efficient over time. Economies of scale should kick in, and the cost to capture each additional dollar of sales should decrease. If there is truly high enough demand to drive 30% annual revenue growth, then Salesforce shouldn't need to spend as much as it had to four years ago in order to win a sale.

This isn't the case, though. Operating expenses have grown faster than revenue, and each additional dollar of revenue seems to cost the company more than the previous one. In fiscal 2011, operating expenses were 74.5% of revenue. In fiscal 2014, this number has grown to 82.3%. This isn't how economies of scale is supposed to work.

You could argue that Salesforce is investing in its future, and that recognizing its subscription-based revenue makes this sort of analysis tricky to begin with. But even ignoring the fact that operating expenses are growing relative to revenue, the fact that these costs are eating up more than 80% of revenue is troubling.

All of this is complicated by the fact that at least some of Salesforce's revenue growth has come from acquisitions. Salesforce has spent a little over $4 billion over the past five years on acquisitions, with $2.6 billion spent last year alone. So the rate of organic revenue growth is significantly lower than the rate of total revenue growth. There's nothing wrong with acquisitions, but it's clear that Salesforce won't continue to grow at 30%-plus per year without continuing its spending spree. And without any profits to fund these acquisitions, more debt is likely.

Meanwhile, companies like Microsoft are looking to capture a bigger piece of the CRM pie. Microsoft recently announced an update to its suite of Dynamics business applications, promising greater functionality and lower costs for customers. Microsoft's strategy is to combine every functionality companies need into a single product, bringing sales and marketing together with a heavy focus on social media. This allows Dynamics to be potentially less expensive than comparable functionality from Salesforce.

Source: Microsoft

Microsoft's enterprise dominance in other areas, such as productivity software, will give the company a big advantage going forward. Companies that already use Office 365, for example, can adopt Dynamics instead of dealing with an additional vendor, and other Microsoft services like Skype and Yammer are directly integrated. By leveraging its other enterprise services and its huge install base, Microsoft poses a big threat to Salesforce's market-leading position.

The bottom line
Salesforce's inability to turn a real profit -- along with costs rising faster than revenue -- is a problem that is going to eventually catch up with the company. Acquisitions are driving some of the rapid revenue growth, but this isn't a sustainable situation. With competition from Microsoft and others getting more intense, Salesforce is going to have a difficult time maintaining the revenue growth that Wall Street has come to expect. Once this revenue growth evaporates, the stock price, currently trading at about nine times sales, will have nothing holding it up.

So far, new GM CEO Mary Barra (shown here with her predecessor, Dan Akerson) has done a good job of handling the fallout over a long-overdue safety recall. But more trouble lies ahead. Photo credit: General Motors 

Last month, General Motors announced the recall of 1.6 million older vehicles due to faulty ignition switches. The switches are blamed for a series of accidents in which 13 people have died.

Concerns that GM had known about the problem for years before agreeing to a recall led the company to issue an unprecedented public apology. At the direction of CEO Mary Barra, GM's legal department has begun a comprehensive internal investigation, and Barra and other GM executives say they are determined to find out what happened -- and to ensure that it doesn't happen again.

But the stakes got raised on Monday: Now, Congress is launching its own investigation.

Now Congress is involved, and this isn't just showboating
The U.S. House Energy and Commerce Committee said late on Monday that it would launch its own investigation into the recall, complete with hearings. Reports on Tuesday suggested that the U.S. Senate might shortly follow suit.

Sometimes, congressional hearings are held mostly to allow ambitious congresspeople an opportunity for some televised showboating. This is not likely to be that: The House committee's chairman, Michigan Rep. Fred Upton, has a long-standing interest in auto safety. 

Upton was the lead sponsor of the Tread Act of 2000, the last major piece of auto safety legislation to pass Congress. The Tread Act came in response to a series of accidents involving Ford Explorers equipped with some types of Firestone tires. Among other things, it requires automakers to more quickly report fatal accidents linked to safety defects.

It's fair to say, in other words, that Rep. Upton has a real concern here. 

Is it time for GM shareholders to get concerned too?

Hard lessons learned from Toyota's experience
Automotive recalls happen all the time, and most are no big deal. Often the defective part is found quickly by the automaker's own internal testing, and the recall is taken care of before anyone gets injured.

The GM recall is an exception, of course. But in recent years, automakers have learned the hard way that it's in their best interest to be proactive about recalls, to err on the side of recalling more cars rather than fewer, and to do it earlier rather than later. The expense and hassle of a no-big-deal recall is trivial next to the expense, hassle, and public relations damage -- and potential legal exposure -- of a recall that is delayed too long.

Toyota found that out to their chagrin a few years ago. A widely publicized series of accidents led to massive global recalls in 2010 -- but only after Toyota dragged its feet for months, and made a whole series of PR blunders. There were congressional hearings in that case, too -- and CEO Akio Toyoda also apologized during his testimony.

The whole incident was a PR disaster for Toyota. It probably cost the company quite a few sales in the U.S., and did big damage to Toyota's reputation for quality. Toyota paid some hefty fines and probably had to pay out some hefty damage settlements as well.

But here's the lesson for GM: Once CEO Toyoda got involved, once Toyota became open about its internal troubles and began addressing them, the furor rapidly died down.

And here's the lesson for GM shareholders: Fast forward to today, and Toyota's sales, reputation, and bottom line are in fine shape. 

In time, it's very likely that GM's will be too. But it's possible that things could get bumpy between here and there.

So how bad will it get for GM?
It's also possible that this won't have all that much effect on GM's sales, reputation, or stock price. There are some very big differences between GM's situation today and the pot of hot water that Toyota was in four years ago -- starting with the fact that GM has clearly learned from Toyota's experience.

First and foremost, the problematic GM vehicles were built between 2003 and 2007, before GM went into bankruptcy and began a sweeping overhaul. GM is a very different company now, under very different management, making much better products. 

That separation between Old and New GM works to the company's advantage. There's a perception that GM's new leaders are working to fix long-standing problems that they inherited from the bad old days; the bureaucracy that delayed this recall was certainly one of them.

On the other hand, unlike most recalls, this one is a big deal. Over 30 accidents are blamed on the defect, and as I said above, 13 people have died. 

On the other other hand, Barra and her team appear to be doing all the right things now. GM has been quite transparent over the last month about what its internal investigations have found. Those investigations were stepped up Monday, when GM announced that it had hired prominent Chicago lawyer Anton Valukas to lead the investigation. Valukas led a court-ordered investigation of failed investment bank Lehman Brothers back in 2008.

GM North America chief Alan Batey did issue that public apology, and the company has launched a website to provide its customers with detailed information about the recall. The company has released a chronology of events uncovered by its investigation so far, and plans to release a more comprehensive one later this week.

A big test for Mary Barra
Barra has made it clear that whatever caused this problem will be found and fixed. GM is clearly taking this seriously, and sharing plenty of details about its process and its investigation's findings. From all appearances, GM is ready to make any changes that might be warranted -- and ready to accept consequences for its failure.

Those are the right moves. It's no consolation to the families of those who have died as a result of the defective switches. But it's the right way to reassure future GM owners -- and current GM investors -- that this kind of thing won't happen again.

Long story short, while this recall has the potential to hit GM's stock price hard, it's more likely that GM will weather the storm without serious damage. Either way, it'll be an important test of new CEO Barra's skills -- one that all GM shareholders should be watching carefully.

eBay executives have found themselves in a nasty fight with billionaire activist Carl Icahn regarding a split of the business' two key segments: PayPal and Marketplace. It's no secret that eBay's Marketplace alone has performance similar to peer Overstock.com , which significantly lags Amazon.com , thus the majority of the company's valuation is tied to PayPal. However, given the multiples placed on growth, Icahn might be right in his attempt to unlock value.

An unworthy Marketplace
Breaking up eBay used to be a hot topic, but has since lost steam in recent years due to the board's unwillingness to entertain the idea. Thus, investors tend to look at eBay as a whole, which has worked out well for the company due to its lagging core Marketplace business.

The Marketplace is eBay's largest segment, which competes with companies like Amazon and Overstock.com. Last year, this segment reported revenue of $8.2 billion, growing just 12% year over year, which actually lagged peer Overstock.com's 16% growth. While Overstock.com is a significantly smaller business, it is also much cheaper at just 0.5 times sales versus a 5.0 multiple for eBay.

Compared to Amazon, eBay's Marketplace comes up short, as Amazon's revenue increased more than 20% year over year. Furthermore, Amazon is guiding for continued growth in excess of 20%, and as it grows larger, over $75 billion, it's also getting harder for eBay to find growth.

eBay is expected to experience continued weakness from Marketplace, while Amazon and Overstock.com's outlook will likely remain intact. However, eBay is able to maintain operating margins in excess of 20%, which is not commonly seen in this industry, due to PayPal. Without PayPal, eBay is just a slow-growing Marketplace with margins equivalent to its peers.

Unlocking more value
It's easy to understand why management wants to keep PayPal attached to eBay -- PayPal makes eBay look good.

In 2013, PayPal accounted for 41.3% of the company's total revenue (37% in 2012 with growth of 19% and full-year revenue of $6.62 billion). Additionally, the number of PayPal users continues to grow, as it reported 143 million at the end of 2013, versus 123 million in 2012. Overall, this is a fast-growing business in a mobile payments processing segment that is expected to triple in size by 2017 to $90 billion.

With all things considered, how much is PayPal worth? According to Reuters, it's worth $40 billion, or 60% of eBay. Yet, as Carl Icahn pointed out, there is likely far more unlocked value, as PayPal might be discounted because of its connection to eBay.

PayPal generated almost all of eBay's $2.8 billion in net income last year. So, using an extrapolated $2.5 billion as PayPal's earnings figure, a $40 billion market capitalization would result in a P/E ratio of only 16 for a company growing at an annual rate of nearly 20% in one of the fastest-growing segments of the market.

Essentially, splitting PayPal from eBay should unlock more value. We've already seen demand for Internet-based companies with large user bases in other mobile segments, and as a result, if eBay decides to move forward in the process of spinning off PayPal, its value will likely rise. Given recent history, it shouldn't be unrealistic to see the market paying 30 times earnings for PayPal, maybe more. In that event, the company could be worth up to $75 billion, the same as eBay.

History is on our side
Icahn has identified the demand for such companies and determined that both eBay and PayPal are worth far more as separate companies.

eBay's board is showing resistance now, but might eventually succumb. For one, management already made an enormous mistake with the Skype ordeal when eBay bought Skype in 2007 for $2.5 billion. eBay sold a 65% stake in 2009 for $1.9 billion, valuing Skype at only $2.75 billion. Less than two years later, Microsoft bought Skype for $8.5 billion, making it a huge mishap on behalf of eBay management, pointing out their inability to properly value the asset.

Final thoughts
In the end, a split will also work in the favor of eBay's core business. Even though eBay's Marketplace is far behind Amazon, and even lags Overstock.com in terms of growth, by splitting PayPal, eBay will have something that neither Overstock.com nor Amazon possess -- a massive cash position.

eBay would be able to sell some, part, or all of its stake in PayPal, which would give it a large cash position to buy back stock, boost its ecosystem, and make acquisitions to spark future growth. Thus, it's a win-win for all parties involved. With Carl Icahn stirring the pot, and history on his side, investors should feel confident about his chances of pushing this company into a value-creating split.

Tuesday brought further losses to the stock market, with somewhat steeper and broader-based declines than investors saw on Monday. Even though most major-market benchmarks lost only about half a percent, the brunt of the selling pressure seemed to center on some of the best-performing stocks in the recent past. Among the stocks that performed the worst today were Plug Power , as well as Bridgepoint Education and Nuverra Environmental Solutions .

Plug Power plunged more than 40% after becoming the latest target of Citron Research, which penned a report that questioned the fuel-cell systems company's business model and suggested that the stock's fair value was just $0.50 per share. The report described a long history of statements from CEO Andy Marsh relating to unit sales that turned out to be overly ambitious, and pointed to large and in hindsight ill-timed offerings of shares and convertible securities at very low prices. Ballard Power Systems , which has a closer relationship with Plug Power, also fell hard on the news, losing more than a quarter of its value. FuelCell Energy was also a victim of the dour view of the industry, falling 17% despite initially rising after reporting earnings last night that included a 22% jump in sales.

Bridgepoint dropped 16% as the for-profit educational company fell well short of investor expectations in its latest earnings report. Revenue fell by almost 22% on an identical percentage drop in total student enrollment at Bridgepoint's Ashland University and University of the Rockies. Despite an encouraging increase of about 10% in new-student enrollments, the company's loss defied expectations of a small profit for the company. Other for-profit educational institutions fell in sympathy, and it's clear that the challenges for the industry are far from over even though hopes for a turnaround have gotten more frequently lately.

Nuverra slid 15% after the company's earnings release last night. Revenue for the unconventional oil-and-gas environmental services specialist fell by about 5% sequentially from the third quarter, as tough weather hurt the company. In addition to earnings, Nuverra announced it would sell its Thermo Fluids division to VeroLube for $175 million, with all but $10 million coming in cash. Investors might not have been thrilled with the sale, simply because the price represents a $70 million loss compared to what Nuverra paid for the business just two years ago. Yet Nuverra's sale is part of its broader strategy to focus on its shale-play environmental solutions business, and many believe that a more focused approach should bring better long-term results for the company. With Nuverra also having resolved some other old issues, including settlement of class action litigation and a transition in the board of directors, the stock could rebound eventually from today's losses.

U.S. stocks ended lower on Tuesday, with the benchmark S&P 500 index and the narrower Dow Jones Industrial Average down 0.5% and 0.4%. Perhaps ominously, a dense quantitative research note from Morgan Stanley published yesterday concluded that the performance of factors that best explain recent outperformance among growth stocks (those factors being long term growth rate forecasts, trailing sales growth, R&D spending, headcount growth) "has mimicked that seen in the Tech Bubble." Not surprisingly, on the other hand, "valuation factors have done poorly at selecting growth stocks." Meanwhile, prominent among the new cohort of growth names, Facebook lagged the market today, ostensibly on a report that its headcount could fall by one; mind you, it's a very important head: that of chief operating officer Sheryl Sandberg.

Facebook had a great start to the week: On Monday, investment bank UBS raised their price target from $72 to $90 - the highest such target among any of the 49 analysts who follow the stock. Investors did not require a better excuse to push the shares up more than 3% to a new record high of $72.03. In explaining the action, UBS cited Facebook's improved pricing power:

Our first-quarter advertiser channel checks suggest that the pricing strength exhibited in Q4, up 92 per cent year on year, price per ad, has carried over into early 2014 and is likely sustainable for longer than our prior estimates had assumed.

Citigroup followed UBS today with a report raising its price target for Facebook's stock from $70 to $85; however, that was not enough for a repeat of yesterday's performance. In fact, Facebook's stock gave up more than 2.5%, erasing nearly all of Monday's gains.

One possible explanation for the decline (beyond the tried-and-trusted "profit-taking"): an article in the New York Post according to which Facebook COO Sheryl Sandberg could be candidate to replace Bob Iger as chief executive of The Walt Disney Company (admittedly, the report was published a half-hour after the market's close.) Iger is slated to remain Disney's chairman and CEO through July 2016; Sandberg currently sits on Disney's board. According to the Post, she "is said to have had conversations about her interest."

This is the opportunity to mention that Sheryl Sandberg's contribution to Facebook is almost certainly overstated in the public imagination (not to mention her image as a model businesswoman). Let me be clear: Sandberg is unusually intelligent and very likely highly competent, but a large part of the high-profile (and billion-dollar net worth) she has achieved is due to being in the right place at the right time when she joined Google in 2001. If Facebook were to lose Sandberg, it would certainly be a loss for the company, but I'm not convinced it would fundamentally impair its growth prospects.

But back to Facebook's shares. They're certainly an example of the phenomenon Morgan Stanley highlighted in their report -- the stock is the second-best performer in the S&P 500 over the past 12 months. Facebook is a better business than I had initially thought, but putting a value on the shares remains a perilously difficult exercise. Shareholders have to take a leap of faith that Facebook's growth and profitability will ultimately overwhelm valuation multiples that look stretched. Furthermore, in order to be vindicated, they will need to be able to tolerate substantial volatility along the way.

Shares in Merck have had a strong three months, up 15% while the S&P 500 has posted gains of just under 4%. However, since the bull market of March 2009 kicked off five years ago, Merck is considerably behind the wider index. While the S&P has risen by 174%, Merck is up less than 150%. Can it perform better in the future, making it a "buy" at current price levels?

News flow
Recent news flow for Merck has been very positive. The biggest reason Merck's shares have performed strongly over the past three months is progress on its PD-1 drug, MK-3475. Merck announced plans to partner with three major biopharma companies (Pfizer, Incyte, and Amgen ) in January, with the group moving forward in combining MK-3475 with other drugs in clinical trials. In addition, Merck will also increase its own work on the drug, with the company announcing early stage studies for 20 different PD-L1-positive solid tumor types that have not yet been explored. The results of the trials (and other developments surrounding MK-3475) are likely to be a major catalyst on the share price.

More recently, Merck released an update concerning a phase 2 trial involving a combination of Merck's MK-5172 and MK-8742 to treat patients co-infected with HIV and hepatitis C. The administration of the combination for 12 weeks resulted in robust hepatitis C suppression, which is good news for Merck. Meanwhile, Merck received yet more encouraging news flow regarding a mid-stage study for an oral treatment for house dust mite reactions. In a Phase 2b trial, Merck's MK-8237 improved 24-week nasal symptoms by 49% at its highest dosage, with the drug also delivering promising dose and time dependent reductions compared with placebo at eight and 16 weeks. Merck will now move forward with a phase 3 trial in later in 2014, the outcome of which is likely to be a share price catalyst.

AbbVie
With an EV/EBITDA of 11.3, Merck appears to offer relatively good value for money. For instance, sector peer AbbVie , has an EV/EBITDA multiple of 12.1, and this is, therefore, slightly less attractive than the equivalent measure for Merck.

However, AbbVie remains a relatively attractive stock and has had some encouraging news flow recently. For instance, AbbVie's hepatitis C combination treatment cured almost 100% of patients in a phase 3 trial. It is one of six late-stage studies that AbbVie conducted to form part of an FDA application, with the company still set to make the submission by the end of June. The outcome could be a major catalyst for AbbVie's share price, since sales projections for the drug aren't included in its most recent set of results.

Amgen
With an EV/EBITDA ratio of 14.3, Amgen appears to offer the least value for money out of the three stocks. However, it remains a relatively attractive company despite experiencing disappointment this week when a phase 3 trial (in partnership with Bayer) did not meet its primary endpoint of improving recurrence-free survival. The drug in question was Nexavar, an adjuvant treatment for patients with liver cancer, although Amgen has said that it remains committed to ongoing research in all stages of liver cancer. Furthermore, the company has multiple projected milestones for its late-stage pipeline in 2014. As a result, 2014 could yet prove to be a good year for Amgen.

Looking ahead
With Merck having the most attractive EV/EBITDA multiple of the three stocks, it looks all set to deliver strong performance in 2014. That's not to say, of course, that Amgen and AbbVie will not, but Merck does appear to be the most undervalued of the three companies. With the potential for further positive news on MK-3475 expected during 2014, this could act as a catalyst for Merck and, with shares up more than 13% already year to date, it could prove be a great year for Merck.

The Dow Jones Industrials adds to its losses from earlier in the week on Tuesday, falling 67 points despite having gained ground early in the morning hours of the trading day. Most investors pointed to continuing worries about Russia and China as well as domestic economic factors that could weigh on future growth and the sustainability of the five-year-old bull market. But when you look at some of the stocks in the market that took the biggest hits, you'll find that they had been generally riding waves of upward momentum in the recent past. Within the Dow, that spelled trouble for financials Goldman Sachs and JPMorgan Chase , given their ability to benefit when markets are frothy.

Powering down
The biggest reversal in the market today came from the fuel-cell industry, where Plug Power dropped by more than 40% after negative comments from Citron Research asserted that the fair value for the company's shares was more than 90% below its current share price. Plug and its peers had soared over the past several days, as hopes that the alternative-energy industry would achieve a more mainstream presence on the heels of a deal with Dow component Wal-Mart to supply fuel-cell equipment for its distribution centers. Yet the violence of the drop showed that investors weren't willing to give Plug or its peers any benefit of the doubt, selling quickly in response to any threat to their profits.

Closer to the financial industry, similar speculative fervor played out in shares of Fannie Mae and Freddie Mac . The two government-sponsored mortgage enterprises had seen their shares climb sharply over the past few months, as large institutional investors made bets that the federal government would be willing to make some concessions to existing shareholders in assessing the next step following its current conservatorship status. Yet lawmakers today didn't seem to make any such concessions, and that sent Fannie and Freddie shares plunging 25% to 30%.

For Goldman and JPMorgan, today's losses of 2.1% and 1.7% weren't nearly as problematic as those for fuel-cell companies and the mortgage giants. But the troubles in those sectors do pose a big threat to one of their biggest potential growth opportunities, because they throw cold water in the face of investors who had previously been willing to take greater risk in order to reap the huge rewards that stocks have provided over the past five years. Any reminder that risk can actually result in big losses could make investors pull back from the market, and that in turn would bode ill for the business that Wall Street firms do in helping companies go public and raise capital from investors. With other potential headwinds, including the possibility of rising interest rates, bad news from the most aggressive end of the stock market is the last thing JPMorgan or Goldman need right now.

Google's YouTube brings in billions of dollars in revenue for the company every year, most of which is derived from video ads -- and competitors are noticing. About four months ago, Facebook's Instagram introduced video ads. Even Facebook itself is planning to launch video ads on its own platform by this summer. Now Twitter has hired former YouTube executive Baljeet Singh as a product director in its revenue organization, with one of his roles including helping the company push new video ads, according to The Verge. For Twitter investors, this is excellent news.

Twitter headquarters. Image source: Twitter. Photo by Aaron Durand (@everydaydude).

What's so great about video ads?
First, they are extremely lucrative. YouTube, for instance, contributed about $2 billion of net digital ad revenue to Google in 2013, eMarketer estimates. Impressively, that $2 billion in net ad revenue was on just $5.6 billion in gross ad revenues -- that's about a 35% margin.

Adding perspective, eMarketer said that YouTube's ad revenue alone accounts for about 1.7% of global digital ad revenues, "higher than the market shares of Twitter, AOL, Amazon.com, Pandora, LinkedIn, Millennial Media and other large players."

Second, the digital video ad market is growing rapidly. In 2011, YouTube's gross ad revenue amounted to just $2 billion, significantly below eMarketer's 2013 estimate for YouTube's gross ad revenue at $5.6 billion. Or here's another way to look at YouTube's impressive growth: Year-over-year gross revenue growth for YouTube in 2012 and 2013 was 85% and 51%, respectively. Further, eMarketer says that YouTube now accounts for a whopping 11.1% of Google's total ad revenues, up from 5.5% in 2011.

Why does Twitter need video ads?
For investors, video ads on Twitter are likely a key ingredient for helping the company live up to the enormous expectations baked into its stock price. The company's $32.6 billion market capitalization calls for some impressive growth.

With Q4 revenue up 116% from the year-ago quarter, the company is living up to those growth standards -- for now. But a small non-GAAP fourth-quarter EPS of just $0.02 is nothing compared to Twitter's $55.30 share price, so high levels of growth, both at the top and bottom line, will need to be sustained for a very long time.

Investors are also concerned revenue growth could decelerate if user growth deceleration persists. Per the company's annual report, the cost of advertising on Twitter fell 18% for the seventh straight quarter of sequential declines in the last three months of 2013. Though ad engagement was up 74% sequentially, Twitter's most recent 10-K filing says that that one of the primary factors driving engagement is monthly active user growth, which slowed considerably in the fourth quarter. Sequential growth in monthly active users was 3.9%, down from 6.4% growth in Q3.

Twitter warns investors of the perils of decelerating user growth in its 10-K:

In the event that cost per ad engagement continues to decline, and we are unable to continue to offset the impact of such decreases on advertising revenue by increasing the number of ad engagements, our advertising revenue would decline.

Video ads, however, may help Twitter dampen the effects of slowing user growth.

The takeaway for investors is that video ads could be a major boon for the company. While the valuation is still a bit too aggressive for me to justify, the hope of lucrative videos ads makes this growth stock worth holding.

Source: YCharts.

Apparel retailers specializing in teens and other young customers, such as Gap , Urban Outfitters , American Eagle Outfitters , and Abercrombie & Fitch , are going through a really challenging period, as customers seem be keeping their wallets closed and the competitive landscape is becoming increasingly aggressive.

Still, uncertainty usually creates opportunity for investors, so let's look at these companies to see whether any of them could turn out to be a convenient purchase for investors looking to buy fashionable companies at discounted prices.

Abercrombie & Fitch is facing serious difficulties as the company's products are falling out of favor with customers and its brands are losing power. However, the stock has risen by more than 20% in the past month, as investors seem to be gaining confidence in the company's chances to implement a successful turnaround after reporting better-than-expected earnings for the quarter ended on Feb. 1.

But it's far too early to identify any signs of a sustainable turnaround at Abercrombie. Total comparable sales declined by a worrisome 8% at the company level, with both the U.S. and international markets showing big declines during the period. Total revenues fell by 11.5% during the quarter as the company is also closing stores to streamline operations.

Cost cuttings can only go so far. Unless Abercrombie & Fitch proves that it can reinvigorate its brands and reverse the declining sales trend, the company is a very risky proposition for investors.

American Eagle is in a similar situation, only that the sales declines aren't as big as Abercrombie's. The stock was falling by nearly 7.8% on Tuesday as American Eagle announced a decline of 7% in both total sales and comparable store sales during the 13 weeks ended on Feb. 1.

Increased promotional activity and the higher impact of fixed costs on a reduced sales volume delivered a double hit to profit margins, so earnings per share fell by a whopping 51% annually, from $0.55 per share in the same period of the prior year to $0.27 per share in the last quarter.

Gap is more globally diversified than Abercrombie & Fitch and American Eagle, and the company has a broader clientele. This typically means more stability for Gap versus the competition, and the company managed to report a 1% increase in comparable-store sales for the quarter ended on Feb.1 in addition to better-than-expected earnings-per-share figures during the quarter.

However, February was a very tough month for Gap, with comparable sales falling by a big 7% during the month. Performance was weak across the board. Comparable sales at Gap Global declined by 10%, Banana Republic delivered a 7% decline, and comparable sales at Old Navy decreased by 6%.

A single month does not make a trend, but investors need to monitor performance carefully in the middle term to see whether February was just a particularly tough month for Gap or the beginning of something more serious and permanent.

Urban Outfitters was falling by 5% on Tuesday as the company´s sales came in below expectations. On a brighter note, weakness was contained to the Urban Outfitters brand, while Anthropologie and Free People are still doing remarkably well considering industry conditions.

Total sales increased by 6% during the quarter ended Jan. 31 on the back of a 1% increase in comparable retail sales at the total company level. Comparable retail sales at the Urban Outfitters segment declined by 9%, but Anthropologhie delivered a big increase of 10% and Free People was even stronger with a 20% increase in comparable retail sales.

Profit margins rose during the period, mostly thanks to improved mark-down rates in the Anthropologie brand. Urban outfitters delivered record net income during the quarter, and earnings per share of $0.59 came in comfortably above analyst's estimates of $0.55 per share.

Management remains cautious about the outlook, though, which is quite understandable considering the industry environment.

Sales are falling steeply at Abercrombie & Fitch and American Eagle, so investors need to be especially careful about these companies. Gap delivered a concerning sales decrease in February, but the company is usually more stable than its peers, so it could be only a transitory slowdown.

As for Urban Outfitters, the company is clearly outperforming when it comes to both sales and profitability, and it's looking like the most solid candidate in the sector for investors looking to take an opportunistic contrarian position in teen retailers at a convenient entry price.

TD Ameritrade has reached a new company milestone. The discount stockbroker reported its operating metrics for February, revealing that its monthly average trading figure reached an all-time high at roughly 501,000. This was also the first time that that figure came in above the 500,000 mark. In the same month one year ago, that number stood at around 386,000. 

Other line items saw notable increases, including total client assets ($612 billion in February, up from $503 billion in February 2013), and average fee-based balances ($132 billion, and $111 billion, respectively).

On a month-over-month basis, some of those numbers were less impressive. Average fee-based balances actually fell across that span of time, from January's $133 billion, while average spread-based balances remained level at $92 billion.

Apple stock could hit $635 in 12 months, says Pacific Crest Securities analyst Andy Hargreaves. That would give investors an 18% return at today's prices. His reason for the bullish outlook? A 4.7-inch iPhone with a subsidized price of $299, $100 more than the price for the iPhone 5s. While his speculation is certainly bold, the underlying assumptions are reasonable.

The case for a larger iPhone
There have been rumors that Apple is, indeed, developing a larger iPhone to launch in another bifurcated iPhone product release this fall. While it seems difficult for iPhone users to imagine a larger iPhone, designer Sam Beckett recently made an excellent case for the device in a concept video, dubbing the smartphone iPhone Air.

Despite the concept phone's 17% larger display than the 4-inch iPhone models, the actual phone in the concept is just 8% larger than the existing iPhone 5s. Designing with circulating rumors in mind, Beckett assumed that side bezels and the top and bottom of the frame could be slimmed down thanks to a sapphire crystal display.

Hargreaves believes Apple could position the iPhone Air as a more expensive device than the current iPhone 5s pricing. The fact that Apple's cheaper iPhone 5c didn't have an adverse effect on iPhone 5s sales, he says, is a sign that consumers are willing to pay more for premium smartphones. The notion goes entirely contrary to the industry trend to sell cheaper smartphones.

How Apple gets to $635
Hargreaves justifies the $635 price target by saying that the more expensive iPhone could reasonably capture 10% of the existing jumbo-sized phone market (smartphones larger than four inches) and add as much as $4 in earnings per share in 2014. That would boost EPS by about 9%. At $635, Apple stock would trade at a price-to-earnings ratio of 14.3, slightly higher than its price-to-earnings ratio today of 13.3.

AAPL P/E Ratio (TTM) data by YCharts

While Hargreaves makes some good points about a larger iPhone and its meaningful potential on Apple's bottom line, there is a broader takeaway for investors from Hargreaves analysis. His scenario highlights the low downside risk to the value proposition for Apple stock at these conservative levels. Really any significant new product with meaningful success could positively impact the stock. And investors are in the fortunate position to know that the company is introducing new product categories, thanks to comments form Apple CEO Tim Cook. That said, Hargreaves price target of $635, in light of a rumored iWatch, revamped Apple TV, and a larger iPhone, seems sensible.

Of course Foolish investors shouldn't think in terms of twelve-month price targets, instead opting for an even longer-term time horizon. But the risk profile outlined for this market leader by Hargreaves is certainly enticing.