Despite the rebound in Apple ( AAPL) stock, one bearish analyst is sticking to his guns and says recent optimism over the iPhone maker's services business is misguided.
"We are hard pressed to argue the services business is wildly undervalued," said Instinet analyst Jeffrey Kvaal in a report published Monday. Kvaal has a neutral rating on the stock.
According to Reuters, 16 analysts rate the tech icon a buy and 13 rate it outperform. Kvaal is one of 14 analysts with a neutral or hold rating on Apple stock.
Shares gained 0.7% to close at 187.63 on the stock market today, continuing its rally after reporting fiscal second-quarter earnings in April. The stock is up more than 11% thus far in 2018 and has jumped 22% from a year ago.
"Apple believes its shares are undervalued in part as investors do not fully appreciate its growing services business. It is thus buying back $100 (billion) of its shares," added Kvaal in the report. "However, we believe at least some of the services strength is embedded in the shares."
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"We believe the investor community would be better able to grasp the services story with better disclosure — particularly as margins likely vary wildly within the services portfolio," he added.
Apple services growth built-in price?
The company's services businesses include Apple Music, Apple Pay, AppleCare, iCloud, App Store and other offerings.
Its iPhone sales in the March quarter were light and Kvaal says the June quarter may disappoint.
The consumer electronics giant sold 52.2 million iPhones in the quarter, vs. analyst predictions for 53 million units.
"Apple guidance implied fiscal third-quarter iPhone unit volumes that were better than feared. We do not believe, however, sell-through has meaningfully improved," said the bearish analyst.
Pure Storage ( PSTG) reported quarterly earnings after the market close Monday that topped analyst estimates, as did its second-quarter outlook.
The provider of data storage systems reported revenue of $255.9 million, up 40% from the year-ago quarter. That beat Wall Street views of $250.6 million. Pure Storage reported an adjusted loss of 7 cents per share. That beat estimates of a 12-cent loss.
Pure Storage shares were down 4%, near 22.53, during after-hours trading on the stock market today. During regular-hours trading Monday, though, Pure Storage hit a record high of 24.31.
The company said it added 300 new customers in the quarter, raising the total to 4,800. The company estimated second-quarter revenue in the range of $296 million to $304 million. The midpoint of $300 million was above the estimate of $299 million.
Shares of Target ( TGT), Ross Stores ( ROST), RH ( RH), Kohl's ( KSS) and Amazon ( AMZN) are nearing entry points Monday, so keep an eye on these retail stocks as they approach or hover around buy territory.
Before the open, Kohl's reports, with Wall Street expecting the department store retailer to report a 26% increase in earnings to 49 cents a share on 3% revenue growth to $3.95 billion. The stock is consolidating, with shares climbing toward a 69.58 entry point, and it rose 2.8% to 65.47 on the stock market today.
Off-price chain Ross Stores is on tap to report earnings on Thursday, where analysts are expecting 29% earnings growth to $1.06 a share on a 9% sales rise to $8.5 billion. The stock briefly broke out of a cup-with-handle base, clearing an 82.91 entry point, but is struggling to definitively stay in the zone. On Monday, it dipped 0.65% to 81.93.
Target has been climbing for 10 consecutive sessions as it builds the right side of a flat base with 78.80 entry point, and climbed 1.2% Monday to 76.87. This months-long base has the stock reaching highs it hasn't seen since late 2016. Consensus is for EPS to grow 14% to $1.38 and for sales to notch a 3% gain to $16.43 billion when the big-box retailer reports Wednesday.
RH shares are in an area of messy consolidation, with the stock swinging above and below its 50-day moving average. Since late April, the stock has been on an uptrend and gained 1.9% to 103.72 on Monday. Its retail strategy to build out enormous showroom spaces has bucked the trend of creating smaller-format stores and focusing on e-commerce.
Amazon shares, on the surface, appear to have formed a cup-with-handle base, edging 0.7% higher to 1,585.46. But that base was not quite seven weeks long, the minimum to be considered a true cup-with-handle base. (Handle-less cup-shaped bases can be six weeks long.) Look for a 1,617.64 entry point on Amazon shares, although investors might want to wait for the stock to clear its post-earnings peak of 1,638.10.
World Wrestling Entertainment ( WWE) stock muscled to new highs on reports 21st Century Fox ( FOX) has reached a "massive" deal to broadcast WWE's "SmackDown Live" show on network TV.
It comes after Comcast ( CMCSA) reportedly turned down its option to keep the show in favor of focusing on retaining its stablemate program "Raw" on its USA Network cable channel. Comcast's NBCUniversal reportedly is working on a "Raw" deal that could triple what it currently pays.
WWE shares shot up 12.5% to 57.86 on the stock market today. The stock has rapidly increased in value since breaking out from a flat base with a correct entry of 39.19 on April 12. 21st Century Fox rose 0.7%; Comcast lost 1.2%.
According to ESPN, the Fox Network made a "massive" offer to secure the franchise, in which oiled, musclebound men (and some women) parade around in tight outfits and pretend to fight each other.
A separate report in The Wrap said the show will air on Friday nights when it moves to Fox in the fall of 2019. It currently airs live on Tuesday nights on the much smaller USA Network.
Subscriptions have also increased for WWE's digital streaming service — a big part of the company's move to stay relevant to cord-cutters.
Last month, WWE said subscriptions to WWE Network hit a record 2.12 million subscribers following April 8's WrestleMania, the event that often marks the annual boiling point for WWE's drama. That 2.12 million figure was up 9% on April 3, 2017, following last year's WrestleMania.
Earlier this month, WWE also forecast a " meaningful increase" in second-quarter sales due to new content distributed internationally.
The company has a group-leading IBD Composite Rating of 94, and broke into the top-10% club in April. Its Relative Strength Rating is an even more impressive 98. Earnings growth has been improving in recent quarters, but consistent growth has been hard to pin down.
WWE has successfully undertaken a move from its wrestling roots to movies, publishing, music, online streaming and various other business ventures. Its film company helped launch the career of Hollywood star Dwayne Johnson, who first shot to fame under his wrestling moniker of The Rock. He continues to make appearances, as does fellow grappler-turned-actor John Cena.
President Trump trumpeted his administration's temporary trade truce with China on Monday. The S&P 500 index and Nasdaq composite rallied, but the Dow Jones industrial average led the way. Dow Jones stocks Boeing ( BA), Caterpillar ( CAT) and 3M ( MMM), along with NXP Semiconductors ( NXPI), Qualcomm ( QCOM) and Deere ( DE), all should benefit from easing tensions between the world's two largest economies.
Meanwhile U.S. Steel ( X) and other domestic steel stocks took a hit, even though Chinese steel makes up a small share of U.S. steel imports.
The aerospace giant is America's biggest exporter and China is a key customer. China's jet purchases could reach a worth of $1.1 trillion over the next 20 years. A U.S.-China trade war could have been damaging to the Dow Jones aerospace giant.
Back in April, Morgan Stanley analyst Rajeev Lalwani said the Boeing threat was "dissipating" due to Chinese and American policymakers seeking to avoid a trade war, with a mutually beneficial outcome. He noted that China's proposed 25% tariffs on aerospace products would only impact imports of Boeing's 737-700 and MAX 7. They account for less than 1% of Boeing's backlog orders.
NXP Semiconductors, Qualcomm Merger Odds Rise
NXP Semiconductors stock rose 3.3%, to finish at 114.65, as a trade deal increases the chances its takeover by Qualcomm will go through. The stock gapped above its 50-day moving average and hit its 200-day line before retreating.
The Dutch company already had climbed on reports that Chinese regulators are looking more favorably upon Qualcomm's attempt to acquire the chipmaker. That came after President Trump signaled he would ease stiff sanctions vs. Chinese telecom gear giant ZTE.
Analysts have said completing the $44 billion NXP transaction is Qualcomm's most pressing near-term issue. The deal was first announced in October 2016.
San Diego-based Qualcomm also risked fallout from its status as a major supplier in China.
Qualcomm shares initially rallied but pulled back fractionally as the chip giant likely will go ahead with its hefty NXP takeover.
Other semiconductor firms with a big China presence include Intel ( INTC), Texas Instruments ( TXN), Nvidia ( NVDA) and Micron ( MU).
Caterpillar has been investing heavily in China as it competes in the world's largest construction- and mining-equipment market.
Last year the firm announced a five-year pact with China Energy Investment tied to mining-equipment sales and rentals in the future. It is also hoping to cash in on the country's "Belt and Road" initiative. The $1 trillion infrastructure spree builds on old Silk Road trading routes and spans Asia, Europe, the Middle East and Africa.
Caterpillar stock rose 2.1% to 158.92, hitting its best levels intraday since late February. The Dow Jones stock is working on a consolidation with a buy point of 173.34.
The Dow Jones industrial average firm, which makes thin coatings and many other industrial products in addition to Post-its and Scotch tape, made 10% of its sales from China last year.
3M stock rose 1.4% to 201.76, but has plunged in recent months, hit by a weak earnings report.
The farm equipment giant has invested significantly in China, and risked a big drop in demand at home from Chinese tariffs and bans of U.S. agricultural products. Back in April China said it would slap tariffs on $50 billion worth of American imports, including soybeans, wheat, corn, cotton and other agricultural commodities. China imported $14 billion worth of soybeans from the U.S. last year.
Deere stock rose 2% to 158.33. The stock has been building a cup base for the past 13 weeks and is shooting for a 175.36 entry point. Deere shot up 5.75% Friday on its quarterly earnings report.
In every trade war there are winners and losers, and steel seemed to be a big winner when the Trump Administration slapped a 25% tariff on imported steel and a 10% tariff on imported aluminum.
But the Trump administration has made several exemptions and postponements on those tariffs. The China trade truce suggests that the Trump administration is likely to settle for relatively modest achievements rather than carry out full-blown trade wars.
U.S. Steel fell 3.8%, with Steel Dynamics ( STLD) slipping 0.8% and AK Steel ( AKS) tumbling 5.1%.
Boeing ( BA) took a page out of its defense business for its new widebody airliner.
The Navy's Boeing F/A-18 Super Hornets have folding wings to save space on aircraft carriers and now Boeing's 777X will become the first heavily used commercial airliner with the technology.
While the wings are common on smaller defense aircraft, the FAA had to institute new regulations for Boeing's commercial plane to avoid mishaps like the wing flaps coming loose during high winds.
Boeing assured the regulator that a locking mechanism would make it impossible for the wings to retract while in flight.
The FAA finally gave approval to the 777X on Friday, according to Bloomberg.
Shares of the Dow Jones component climbed 3.6% to close at 363.92 on the stock market today in high volume, already near the high end of buying raing after clearing a cup-with-handle buy point of 348.67 on Friday in light volume.
Airlines will be able to park the 777X at current gates despite its 235-feet wingspan, thanks to the 12-foot foldable section. The wings are made from lighter carbon-fiber composites instead of metal. Airbus' ( EADSY) A380 with its 262-foot-wide wing, needed some airports to build new gates to handle the massive super-jumbo jet.
The FAA's approval opens the door for even larger airplanes and wings that can be fitted to current airport infrastructure.
"This airplane actually will be the most efficient twin-jet ever developed in commercial history," said Terry Beezhold, the 777X's chief engineer, according to Bloomberg.
The longer wingspan gives the widebody plane, which can seat up to 400 passengers, more lift and saves fuel by helping it act like a glider.
Rising fuel costs could bring "a significant shakeout" in the airline industry in the months ahead, Ryanair ( RYAAY) CEO Michael O'Leary said, potentially affecting one of the biggest discount-airfare competitors to Delta Air Lines ( DAL), United Airlines ( UAL) and American Airlines ( AAL) over the Atlantic.
The speed of that shakeout, he told Bloomberg Television, will determine future profitability. Among the "key issues" for the next 12 months, he said, was the fate of low-cost, long-haul carrier Norwegian Air Shuttle.
Norwegian is among the carriers that early last year threatened to push profits lower for the big three U.S. carriers in the trans-Atlantic market. Norwegian is currently offering one-way flights, scheduled in December, from Oakland, Calif., to London for as little as $144.90.
O'Leary said Norwegian was "hugely loss-making last year with oil at $40 a barrel." And he said that the carrier's fortunes could worsen dramatically at $80 a barrel. Norwegian told Bloomberg that O'Leary's remarks had "no root in reality."
Some airlines may find themselves in trouble as soon as this winter, he said, adding that the loss of Norwegian as a competitor could allow others to raise airfare more easily. A rescue of some kind by British Airways parent IAG would be less to his liking, as it might only slow capacity growth.
IAG has taken close to a 5% stake in Norwegian. The company has tried twice, unsuccessfully, to take over Norwegian. IAG reportedly plans to make a third attempt.
O'Leary said his carrier was "well-hedged" on fuel prices for the next 12 months, and was 90% hedged at around $59 a barrel.
Shares of Ryanair jumped 4.9% in the stock market today, rebounding above their 200-day line. Delta was up 2%, surfacing above its 50-day line. American rose 2.1%, while United gained 2.4%. Sales have rebounded internationally for the big three recently. But beyond Europe, one analyst warned the U.S.' exit from the Iran nuclear deal could pose a " material risk" to airline profits.
Ryanair On 'Pessimistic Side Of Cautious'
But O'Leary's remarks came as Ryanair deals with higher oil and labor costs. Lower airfare brought by a crowded market, along with higher oil prices, led the Ireland-based discount carrier on Monday to forecast weaker profits vs. last year's. For the year ahead, Ryanair said it was on the "pessimistic side of cautious."
The carrier said it sees full-year net income of 1.25 billion to 1.35 billion euros, less than the 1.45 billion euros for last year.
Ryanair said it sees non-fuel unit costs up 6%, following pay increases to pilots and other staff. Raymond James analyst Savanthi Syth, in a research note, called that "the biggest surprise."
The carrier has also had to come to the negotiating table after struggling with a shortage of pilots.
"We expect above-average EU capacity growth to continue into (fiscal 2019), which will have a downward effect on fares," the carrier said in an earnings release on Monday.
But Ryanair expects some upward pressure on airfare later in the year "as significantly higher oil prices impact margins, especially those EU airlines (that) continue to expand despite having no prospect of achieving profitability."
Syth, in a research note earlier this month, indicated optimism about the carrier.
"We remain constructive on Ryanair's competitive positioning and earnings potential, particularly in a rising fuel price environment that should place increasing pressure on weaker competitors," she said.
GE will receive $2.9 billion in cash at the deal's closing, expected in Q1 2019. GE and its shareholders will own 50.1% of the combined company, while Wabtec shareholders will retain the rest. The combined company, with roughly $8 billion in revenue, "will make Wabtec a Fortune 500, global transportation leader in rail equipment, software and services, with operations in more than 50 countries," according to a joint statement.
The strategic merger is expected to be tax-free to shareholders of GE and Wabtec. That was in line with April reports saying GE might spin off its rail unit through a "hybrid deal" that avoids a big tax bill. General Electric did something similar in forging Baker Hughes, a GE Co. ( BHGE). GE has a majority stake in Baker Hughes.
GE rose 1.9% to 15.26 on the stock market today, rising intraday to 15.55, its best level since early February. GE was among Monday's top performers on the Dow Jones industrial average.
Wabtec stock rallied 3.5% to 98.55, now extended from an early-May breakout past a 93.31 cup-shaped entry.
As for other rail equipment makers, Trinity Industries ( TRN) advanced 0.1% Monday, and Greenbrier ( GBX) jumped 2.35%. German engineering giant Siemens ( SIEGY) and France's Alstom are in the process of merging their rail businesses in Europe. Siemens rose 0.5%.
Baker Hughes added 1.2%.
Locomotives: 'Extreme Cyclicality'
General Electric is one of the world's biggest makers of locomotives. But the "extreme cyclicality and uneven order flow" of the business has hurt both GE Transportation and Wabtec (formerly Westinghouse Air Brake Technologies), CFRA analyst Jim Corridore wrote Monday. He expects conditions to improve over the next two years as the industry comes off a trough in demand in 2017.
"We think the combination should somewhat smooth the cyclicality GE Transportation has faced, and increases cross-selling and cost synergy opportunities," Corridore added, keeping a hold recommendation on GE shares.
In 2017, GE's transportation unit revenue slid 11% to $4.2 billion and profit tumbled 27% to $0.8 billion. GE's overall 2017 revenue totaled $122.1 billion, according to GE's annual 10-K filing.
Wabtec's Raymond Betler will remain president and CEO of the merged company. GE Transportation chief Rafael Santana will run Wabtec's freight segment.
Zunum Aero, a Boeing ( BA)- and JetBlue Airways ( JBLU)-backed startup, plans to deliver its first hybrid-electric plane in 2022, a few years ahead of an electric plane from European rival Airbus ( EADSY).
Charter airline JetSuite, which has backing from Qatar Airways and JetBlue, eventually plans to take delivery of 100 Zunum Aero 10 planes.
They will seat up to 12 passengers and have a range of up to 700 miles. But the startup has plans for a larger plane, the Zunum Aero 50, which will have a range of 1,000 miles and debut in the mid-2020s.
Meanwhile, Airbus has teamed up with Siemens ( SIEGY) and Rolls-Royce for its own electric plane ambitions, the E-Fan X.
The E-Fan X will have a capacity of up to 94 passengers, with the first test flights expected in 2020 and commercial flights starting in 2025.
Shares of Boeing rose 3.6% to 363.92 on the stock market today, remaining in buy range after clearing a cup-with-handle buy point of 348.67 in light volume Friday. Airbus rallied 3.6%, JetBlue added 0.7% and Siemens edged up 0.5%.
Zunum told Bloomberg it plans to modify and electrify an existing twin-engine plane for flight tests. Ahead of that, ground-based testing of key systems will be begin later this year and in early 2019.
The U.K.'s EasyJet discount carrier also has electric flight ambitions as oil prices account for nearly one-third of any airline's operating costs. And NASA is looking at a similar concept with its X-57 Maxwell.
LaSalle Hotel Properties ( LHO) stock surged Monday as private equity giant Blackstone ( BX) beat back a rival bid to buy the firm in a busy Monday for merger news.
NextEra Energy ( NEE), Fifth Third Bancorp ( FITB), Roper Technologies ( ROP) and IHS Markit ( INFO) are other big names involved in takeovers and deals today.
Blackstone Checks Into New Hotel
Blackstone won its battle for LaSalle Hotel Properties, paying $3.7 billion, or $33.50 per share.
The private equity behemoth outdid the Pebblebrook Hotel Trust ( PEB), which had tendered a $3.5 billion bid in April. LaSalle owns 41 upscale hotels, and operates in 11 markets in seven states and the District of Columbia.
The deal comes just days after Blackstone checked out of its position in Hilton Worldwide ( HLT) after an 11-year stay by selling off the last of its shares. It sold off 15.8 million shares, around 5.8% of the iconic luxury hotel chain.
Utility powerhouse NextEra Energy ( NEE) revealed Monday that it will buy $5.08 billion in assets from rival Southern Co. ( SO)
NextEra will obtain Gulf Power, Florida City Gas and Southern's interests in the Oleander and Stanton natural-gas plants. The deal is worth $6.48 billion including debt.
The move comes amid wider industry consolidation in the U.S. utilities look for ways to be more energy efficient. NextEra stock rose 2.4%. Southern advanced 1.7%.
Fifth Third Bancorp
Fifth Third Bancorp will buy Chicago-based MB Financial Bank ( MBFI) for $4.7 billion in a 90% stock, 10% cash deal.
It will create the fourth-largest Chicago bank in total deposits. The combined firm will hold a 6.5% share of the total market in the city, and 20% of its middle market.
Fifth Third fell 7.9%. MB Financial stock jumped 13%.
The IT services provider announced Monday it is buying software company PowerPlan for $1.1 billion cash from private equity firm Thoma Bravo.
It's the second billion-dollar deal between the companies. In 2016 Roper purchased business software business Deltek for $2.8 billion.
Roper Technologies stock climbed 2.1%.
Blackstone is involved in another deal Monday, selling its stake in data firm Ipreo to information services giant IHS Markit ( INFO).
Goldman Sachs ( GS) is also selling of its stake in Ipreo as part of the $1.86 billion deal. The deal allows British firm IHS Markit to expand its contracts business and strengthen its financial services operations.
Cannabis tech and infrastructure outfit TILT Holdings is "absolutely" considering listing on a U.S. exchange after the company merges, its CEO said, adding to the list of available and potential marijuana stocks to invest in.
The possible move comes as marijuana companies in the U.S. and Canada show less inhibition about striking cross-border deals to expand and raise money. Such deals are likely to become bigger and more complex, as the industry finds more creative routes around legal roadblocks in the U.S., where marijuana is federally illegal.
TILT Holdings is the product of four cannabis companies — one in Canada, three in the U.S. Those four companies announced plans to merge into TILT Holdings last week. The merger, one that appears to be unique in the industry, brings together companies specializing in analytics software, cultivation-related services and logistics for dispensaries and other parts of the marijuana industry.
Alex Coleman, TILT's CEO, said he expects the deal to close around mid-August. In a follow-up interview on Monday, he said the company started the process of pursuing a U.S. listing "in earnest" last week. Additional details, like which U.S. exchange the company might try to list on, weren't clear yet.
He said on Friday that as a company with some business that directly involves handling the plant, "the United States is still a challenge on the U.S. market."
"But our interest is to continue to trade on other markets as they become available to the company," he added later.
Marijuana Stocks To Invest In
Canadian marijuana producer Cronos Group ( CRON) in February became the first pure-play marijuana stock to list on the Nasdaq. But more U.S. marijuana stocks are on the horizon.
Canopy Growth Corp. said last week that it had applied to list on the New York Stock Exchange. Canopy trades under the ticker "WEED" in Canada. It would carry the ticker "CGC" on the New York Stock Exchange.
Similarly, U.S. companies are looking northward to draw money from capital markets in Canada, where recreational legalization is set to kick in this year. Last Monday, Green Thumb Industries, a marijuana producer and dispensary operator in Chicago, detailed plans to go public in Canada via a reverse takeover.
U.S. marijuana dispensary chain MedMen, meanwhile, plans to go public in Canada via a reverse takeover deal with Ladera Ventures. Ladera trades on the TSX Venture Exchange in Canada. Ladera announced the reverse takeover deal last month. MedMen also has agreed to form a joint venture with Cronos.
Meanwhile, there are more indirect marijuana stocks to invest in, such as Scotts Miracle-Gro ( SMG), which sells hydroponic equipment used in growing weed. GW Pharmaceuticals ( GWPH) makes seizure-fighting drugs containing cannabidiol.
And Marijuana-focused ETFs, like ETFMG Alternative Harvest ( MJ) and AdvisorShares Vice ETF ( ACT) track the cannabis industry.
Unique Marijuana Industry Merger
The TILT Holdings deal arrived the same week as Aurora announced plans to acquire MedReleaf. That tie-up would create a company with a footprint in Canada, Brazil, Australia, Denmark, Italy and Germany.
Unlike other marijuana mergers geared toward churning out more pot, the TILT deal focuses more on industry services. The three U.S. companies in the deal are Denver-based software company Baker Technologies; Boston-based Sea Hunter, which offers cultivation, retail and capital support to the industry; and Briteside, in Bend, Ore.
The Canadian company is Sante Veritas Holdings, which is trying to get a cultivation license. The combined company will have offices in Denver, Boston and Toronto. It expects to pull in more than $200 million in sales next year.
"Aurora acquiring MedReleaf on Monday was a massive headline deal in the Canadian market, more of a play in terms of the production side of the business," said Jonathan Sherman, an associate at Cassels Brock, a law firm that advises cannabis businesses, including Canopy Growth.
"The TILT transaction seems to be looking at pulling together some of the ancillary aspects of the cannabis industry into one holding company," he continued.
A 'Holistic' Marijuana Industry Solution
The deal could be unique in other ways. It's the first Sherman heard of that brought together that many companies in a cross-border deal. The marijuana industry largely subsists on a patchwork of software, from a slew of startups. TILT could help smooth out the software systems marijuana businesses use.
"Initially, as the markets evolved both in Canada and the U.S., there hasn't been a platform where there's a real solid integration of softwares," said Beau Whitney, senior economist at New Frontier Data, a cannabis research firm.
The company intends to offer a "more holistic solution to the industry," Joel Milton, CEO of Baker Technologies, said in a statement on Tuesday announcing the deal.
He said TILT will offer "greater access to capital and resources." The company also expects to make more acquisitions.
"Due to the conflict between federal and state law, the industry still faces numerous challenges that are impeding the ability of businesses to effectively deliver products and services to a large and growing demand base," Coleman also said in that statement.
Cronos Group rose 3.85% in the stock market today, just under its 50-day line. Constellation edged down 0.5%.
Celgene ( CELG) plunged to another four-year low Monday on a report that an executive in charge of business development quietly retired in mid-April.
But RBC analyst Brian Abrahams says the departure of George Golumbeski was planned years in advance of his April 16 retirement. Golumbeski had worked for Celgene business development for about nine years.
Robert Hershberg took over as executive vice president, head of business development and global alliances, in April 2017. Golumbeski then moved to more of a strategic role. Hershberg was responsible for the deals with Juno Therapeutics and Impact Biomedicines.
"Given that this has been a transition in the works for some time, we do not see any relation between reports about this emerging today and proximity to upcoming (clinical study) readouts," Abrahams said in a report.
In today's action on the stock market, Celgene toppled 4.3%, near 75. Shares touched a low last seen in May 2014. Broadly, shares of biotech companies slipped 0.8%. Abrahams noted investor sentiment on Celgene has been low this year.
Revlimid Also Challenged
Two weeks before Golumbeski's departure on April 16, former chief operating officer Scott Smith unexpectedly departed Celgene. Smith had been instrumental in helping to launch Otezla, one of Celgene's biggest moneymakers.
Celgene delivered a beat-and-raise earlier this month. Otezla sales grew and beat views. Still, investors are wary of the inflammation and immunology franchise. In February, U.S. officials delayed Celgene's application for multiple sclerosis drug ozanimod.
Meanwhile, investors are also concerned about a looming patent cliff for key cancer drug Revlimid. Celgene is hoping the acquisition of Juno will help offset some of that. Juno is working on a number of cancer treatments.
Abrahams found it "somewhat ironic" that shares would sell off on news of Golumbeski's departure. Investors have long been critical of the biotech company's business development strategy, which they see as not sufficiently preparing for post-Revlimid revenue sustainability.
"However, we do believe it illustrates the sharply negative sentiment pervasive in the name, which we continue to believe will require a turnaround in catalysts to improve on," he said.
Tesla ( TSLA) failed to receive a recommendation from Consumer Reports in a review published Monday of a fully equipped Model 3.
Consumer Reports says it found plenty to like about the luxury compact sedan but also found flaws, such as difficult-to-use controls and long stopping distances in emergency braking tests, among other things.
"These problems keep the Model 3 from earning a Consumer Reports recommendation," the report said.
The Tesla's stopping distance of 152 feet from 60 mph was far worse than any contemporary car the publication tested and about 7 feet longer than the stopping distance of a Ford F-150 full-sized pickup, it said.
Also compromising the Model 3's road-test score was its controls. The Tesla Model 3 has almost all its controls and displays on a center touch screen, with no gauges on the dash, and few buttons inside the car.
"This layout forces drivers to take multiple steps to accomplish simple tasks," the report said. "Our testers found that everything from adjusting the mirrors to changing the direction of the airflow from the air-conditioning vents required using the touch screen."
As a result, the touch screen can cause driver distraction. Each act forces drivers to take their eyes off the road and a hand off the steering wheel, it said.
Tesla's profitability depends highly on the success of its Model 3 production. The company expects to achieve positive net income, excluding noncash stock-based compensation, in the third and fourth quarter. It also expects to achieve "full GAAP profitability" in each of those quarters.
Also hurting its test score was excessive wind noise at highway speeds and a stiff ride.
Though Consumer Reports did say the Model 4 was "thrilling to drive."
"We were impressed by the Model 3's glued-to-the-road handling and quick, precise steering."
Shares of Tesla were up 2.7%, near 284, during afternoon trading on the stock market today.
Consumer Reports says it spent $59,000 on a Model 3 that includes a long-range battery pack and several premium features. There's also an enhanced Autopilot, full self-driving and other add-ons.
Bloomberg reported Monday that some Model 3s, billed as a $35,000 car for the masses, could cost more than double that amount, at up to $78,000.
The Model 3 is in mass production at more than 2,000 cars a week, and the company intends to eventually ramp that up to 5,000, though it intends to go through a production pause this week.
U.S. shale companies like Diamondback Energy ( FANG), Continental Resources ( CLR) and EOG Resources ( EOG) are becoming the new swing producers for the global oil market, rising to compete with and take market share from the industry's traditional powerhouses, Saudi Arabia and Russia.
Meanwhile, even integrated energy giants Exxon Mobil ( XOM), Chevron ( CVX) and Royal Dutch Shell ( RDSA) are pouring more money into U.S. shale plays, especially the Permian Basin.
Watch for new technologies and efficiencies from U.S. producers as they try to get around price hikes from service providers Halliburton ( HAL) and Schlumberger ( SLB) as well as any additional OPEC attempts to slow shale's advance.
Roche ( RHHBY) jumped early Monday on unsurprisingly strong data for its hemophilia treatment, Hemlibra — prodding shares of Shire ( SHPG) to slip.
Analysts expect Roche to rout Shire with its hemophilia treatment. Blood disease treatments are among Shire's biggest moneymakers. But it's unlikely Shire stock will move much on the news, RBC analyst Douglas Miehm said in a report.
"We view downside as relatively limited for Shire given the pending Takeda (Pharmaceutical's) acquisition and Shire share price weakness prior to March 28," he said. "We do not believe this morning's results move the needle in one way or another for the unit."
Roche tested Hemlibra every week or two weeks in patients with hemophilia A whose bodies don't make a blood-clotting protein called Factor VIII. A second study used Hemlibra every four weeks to prevent episodes of bleeding in patients with or without Factor VIII.
In the first study, Hemlibra cut down on bleeding episodes by 96% and 97% in patients who received doses weekly and every two weeks, respectively. In addition, 55.6% of weekly patients and 60% of patients who received Hemlibra every two weeks saw no bleeding episodes.
During the second test, 56.1% of patients experienced no treated bleeding episodes. More than 90% experienced three or fewer bleeding episodes that required added treatment, Roche said in a news release.
"These results demonstrate that Hemlibra administration every four weeks can provide clinically meaningful control of bleeding in people with hemophilia A with or without Factor VII inhibitors," the company said.
Hemlibra's performance was in line with or better than current hemophilia treatments, RBC's Miehm said. He doesn't expect significant erosion for Shire. The pharmaceutical company is already on the brink of being acquired by Takeda.
Blood disease treatments are a huge piece of Shire's rare-disease portfolio. In the first quarter, sales of hematology products brought in $952.6 million in sales, growing 9% vs. the prior year. That accounted for 35% of Shire's rare-disease drug sales in the quarter.
Electric cars seem to be everywhere now, but just wait. Automakers like Tesla ( TSLA), General Motors ( GM), Volkswagen ( VLKAY), and Toyota Motor ( TM) are about to unload millions of electric vehicles on the global car market in the next several years.
This flood of electric vehicles is coming despite the fact that the automotive industry loses money on EVs, which suffer from lack of scale, limited consumer appeal and high component costs. But automakers are approaching a major tipping point. EVs could soon be cost competitive with traditional cars and profitable. In fact, GM expects its electric cars to become profitable by 2021.
Economies of scale will come as the auto industry invests more than $100 billion through 2030 to build up capacity. Other cost improvements will extend from the powertrain and design studio to the supply chain and factory floor. A global push to phase out internal combustion engines and to offer "robotaxi" services should further open the floodgates of demand and the door to profits.
"Battery costs are coming down, and OEMs and suppliers are developing lower-cost motors and electronics," said Navigant Research analyst Sam Abuelsamid in an interview. "As battery capacity increases, the vehicles become more appealing, which will all combine to improve demand and profitability."
Electric Car Industry Growth
The rush to roll out electric cars may seem curious, given lagging demand and margins for traditional passenger cars in North America. Ford plans to abandon passenger cars here for the most part and instead focus on high-margin trucks and SUVs. Meanwhile, GM and Tesla are estimated to be losing thousands of dollars per unit on their electric cars. And Tesla Model 3 production is struggling to ramp up to targets.
But automotive industry forecasts point to electric vehicles taking a 40%-50% share of the global auto market by 2040, up from around 3% today. GM plans to sell 1 million electric vehicles a year by 2026, including electric trucks and SUVs. Tesla aims to build 1 million cars in 2020 (though its targets are notoriously optimistic). Volkswagen sees up to 3 million a year by 2025. Toyota eyes electric vehicles and hybrid sales of 5.5 million by 2030. Even truck king Ford ( F) is investing $11 billion in electrification, with Chairman Bill Ford saying "We're all in now."
But the auto industry still has work to do to turn a profit from their electric cars.
Kelley Blue Book analyst Rebecca Lindland told IBD it's "very, very difficult to make a profit, but not impossible." She says Toyota reportedly needed more than 10 years to turn a profit on the hybrid Prius. GM will take at least that long for the plug-in hybrid Volt. She estimates the Bolt EV could turn profitable quicker because it borrowed technology and lessons from the Volt.
Industry Analysis Of Electric Cars
UBS analysts performed one of the most comprehensive EV cost examinations ever last year with a Chevrolet Bolt teardown.
UBS estimated that GM was losing $7,400 on every Bolt EV based on its $37,000 price tag before government incentives. (Those incentives will be phased out as manufacturers start to reach their cumulative sales volume caps.)
By an easier measure, Tesla's higher-end Model S reportedly carries a marginal cost of $30,000 excluding the company's fixed, up-front costs, implying a hefty marginal profit vs. its $70,000 sticker price.
But UBS estimates Tesla loses thousands of dollars on the Model 3, which is priced at $35,000 before incentives. A customer would have to buy $6,000 in additional options for Tesla to break even on each sale after all expenses. Meanwhile, Tesla as a company loses money overall.
And if Tesla hopes to reach CEO Elon Musk's goal of generating 25% gross margins on the Model 3 by the end of this year, a customer would have to cough up $16,250 on extras for a total of $51,250, UBS said. On Saturday, Musk announced a high-performance version of the Model 3 that would be priced around $78,000.
For its part, GM should have by 2028 a margin of 5% on earnings before interest and taxes for the Bolt, UBS predicted.
"The cost of making batteries is going to dictate whether you make a profit or not," Lindland said.
Electric Cars: Battery Costs
The Bolt's battery pack, which includes cells, assembly modules, control and cooling systems, costs $12,300. By 2025, UBS sees that dropping 37% to $7,800. Savings should come from cell chemistry, higher energy density and lower assembly costs.
GM has revealed little about how its next-generation batteries will drive down costs, apart from increasing energy density.
Higher density means a battery offers more energy generation, faster recharging and a longer useful life, while also reducing material and assembly costs.
Solid-state batteries promise to more than double the energy density of current lithium-ion technology. EV maker Fisker, Toyota, LG Chem, appliance maker Dyson and several Chinese companies are working on the technology.
Meanwhile, Munro & Associates, which partnered with UBS on the Bolt teardown, also tore down the Tesla Model 3 recently. The benchmarking firm lauded Tesla's battery, rating it higher than batteries from Samsung SDI (a BMW i3 electric car supplier) and LG Chem (a Bolt supplier).
But the costs of metals used in batteries could be an obstacle, with cobalt supplies tight and dependent on risky African trade. Lithium is abundant, but mining projects take time to develop. China's dominance of rare earths also looms over the auto industry.
Electric Vehicles' Powertrain Savings
While the battery represents the biggest source of savings for electric cars, other powertrain modules offer potential too.
The electrical drive, including the e-motor, transmission and motor housing, costs about $1,200. UBS sees that falling 10% by 2025. New e-motors with fewer moving parts should cut machining and labor costs. They also could reduce or even eliminate the use of costly rare earths. Toyota recently developed a new magnet for electric motors that halves the amount of neodymium required.
Power electronics, including the e-motor controller, converter and power distribution unit, make up another $1,200 in costs. Here, UBS foresees savings of 25% by 2025, driven by innovations in semiconductors. Chipmaker STMicroelectronics ( STM) replaced standard silicon with silicon carbide in its inverters and onboard chargers to make EV electronics more efficient.
Other miscellaneous components, for thermal management, charging and cabling, add more than $1,500 to costs. Potential to reduce costs is sizable in some cases and limited in others, UBS estimates.
EV Platform Optimization
The auto industry is also looking afresh at the entire design and production process.
Redesigning vehicle architecture allows companies to imagine mechanically simpler, more efficient electric cars, RBC Capital Markets analyst Joseph Spak wrote in a May 11 note.
Ford, for example, expects its next EV lineup to slash footprint in the final assembly area in half. That should produce a 50% cut in capital costs and a 30% improvement in labor hours per unit.
GM will use its new EV platform across cars, crossovers, SUVs and self-driving vehicles, streamlining production costs.
A highly optimized EV platform also could eliminate unnecessary elements that carried over from traditional cars, Navigant's Abuelsamid said.
Electric Vehicles: Industry Trends & Mandates
UBS estimates the Bolt's price tag could be $13,200 lower by 2025, with economies of scale a key driver of the reduction.
Scaling up will be pivotal to cutting battery costs, which is why Tesla is building its "gigafactory" to mass produce them.
RBC's Spak says global EV battery production capacity will surge to 346 gigawatt hours in 2025 from 143 GWh last year. Such growth will produce economies of scale that should allow manufacturers "to gain fixed-cost leverage and lower costs."
A major catalyst for mass production is coming from the global momentum against auto emissions. China, India, Norway, Britain and France plan to slowly phase out gas and diesel vehicles. ( Sales of electric vehicles in China, the world's biggest auto market, are already on pace to hit 1 million this year.) California lawmakers have toyed with a similar mandate.
"Automakers are forced to reach to develop and offer EVs that are really expensive to make and that people don't really want to buy," said KBB's Lindland. "That's why we continue to see incentives on these."
Fleets Of Self-Driving Electric Cars
A concurrent trend is improving the business case for electric cars: autonomous taxi service. GM calls robotaxis a multitrillion dollar market. Morgan Stanley sizes the personal transport market at $10 trillion, far bigger than the car market.
Electric vehicles are envisioned for these future fleets of shared autonomous cars as they would be easier and cheaper to maintain.
Waymo, owned by Alphabet ( GOOGL), plans to launch a driverless taxi service in Arizona this year. It has tested in Texas, California, Michigan, Arizona, Washington and Georgia. GM plans a similar service next year, and tests in California and Michigan with plans for Manhattan next year.
GM's service may be why it has a bullish 2021 timeline of achieving EV profitability.
"As a pure consumer retail play, profitability is a stretch in that time frame, especially since they are on target to use up all federal tax credits by early 2019," Navigant's Abuelsamid said. "As a service play I think they can get more volume and revenue."
He added that several of GM's 20 forthcoming electric cars "will probably be focused on autonomous mobility applications where the potential for recurring revenue changes the business model and the way you calculate profitability."
Boeing ( BA) and Airbus ( EADSY) remain fierce competitors in commercial aviation as demand remains strong for passenger jets to serve growing middle classes in China, India and other emerging economies.
But the contest has been more lopsided in the midrange segment, forcing Boeing to develop a new jetliner and stem market-share losses to Airbus.
On the defense side, the Trump administration is expected to boost Pentagon spending but also press for cost savings in individual programs like Lockheed Martin's ( LMT) F-35, which is poised to see a major ramp-up in production soon. Northrop Grumman ( NOC) is building a new stealth bomber amid criticism that costs aren't transparent enough, while Boeing looks to keep a foothold in combat aircraft.
Bookmark this page to stay on top of the latest defense and aerospace sector news.
These Are The Big Stock Winners From The Trump-China Trade TrucePresident Trump trumpeted his administration's temporary trade truce with China on Monday. The S&P 500 index and Nasdaq composite rallied, but the Dow Jones industrial average led the way. Dow Jones stocks Boeing, Caterpillar and 3M, along with NXP Semiconductors, Qualcomm and Deere, all should benefit from easing tensions between the world's two largest economies. Meanwhile... Read More
Boeing's New 777 And Super Hornet Fighter Jet Can Both Do ThisBoeing took a page out of its defense business for its new widebody airliner. The Navy's Boeing F/A-18 Super Hornets have folding wings to save space on aircraft carriers and now Boeing's 777X will become the first heavily used commercial airliner with the technology. While the wings are common on smaller defense aircraft,... Read More
Boeing Vs. Airbus: Who's Winning The Electric Aircraft Race?Zunum Aero, a Boeing- and JetBlue Airways-backed startup, plans to deliver its first hybrid-electric plane in 2022, a few years ahead of an electric plane from European rival Airbus. Charter airline JetSuite, which has backing from Qatar Airways and JetBlue, eventually plans to take delivery of 100 Zunum Aero 10 planes. They will seat up... Read More
4 Best Ways To Play Dow Defense Stocks As Trade War Fears EaseDow defense stocks Boeing and United Technologies soared Monday, boosting the Dow Jones industrial average and aerospace/defense exchange traded funds. The Dow stock took off Monday after Treasury Secretary Steven Mnuchin said the U.S. and China trade war is "on hold." The aircraft maker, which is America's biggest exporter, had pulled back in... Read More
Boeing Stock Breaks Out; These 4 Aerospace & Defense Stocks Are Near Buy ZonesBoeing stock broke out to buy range Friday, leading aerospace and defense stocks for your investing portfolio watch list. Elsewhere in the space, aerospace and defense stocks with more commercial exposure are holding up and trading near highs while those with more military exposure are still struggling. Aerospace & Defense Stocks Like Boeing, Hexcel... Read More
Boeing Could Deal Another Blow To Airbus In This ContestBoeing is expected to beat out European rival Airbus for a widebody jet order from United Airlines, according to reports, potentially marking another win in that category for the U.S. aerospace giant. United is reportedly looking at 787 Dreamliners or A330neos to replace up to 50 of its aging 767s. Airbus had hoped a deal... Read More
Stock Upgrades: Aerovironment Shows Rising Relative StrengthOn Friday, Aerovironment got an upgrade to its Relative Strength (RS) Rating, from 88 to 91. When looking for the best stocks to buy and watch, be sure to pay attention to relative price strength. IBD's unique rating identifies market leadership with a 1 (worst) to 99 (best) score. The grade shows how... Read More
Boeing, Airbus May Get One Of The Biggest Aircraft Orders EverDubai Aerospace Enterprise is in the market to buy 400 single-aisle jets from Boeing and Airbus. The aircraft lessor controlled by the government of Dubai told Reuters Thursday that it's looking at the Airbus A320neo line and Boeing 737 MAX. The order would double Dubai Aerospace's fleet as traffic grows in the Middle... Read More
Stocks To Watch With Earnings On Tap: HeicoHeico is in a potential buy zone with earnings on tap for May 23. It's trading approximately 0% above a 75.65 buy point from a first-stage flat base. Be aware that buying just before a stock reports can be risky. You don't know how the stock will report and how the market will... Read More
Started in 1896 with 12 stocks, the Dow Jones industrial average (DJIA) now includes 30 of America's largest companies from a wide range of industries, including Apple ( AAPL), Exxon Mobil ( XOM), Intel ( INTC), General Electric ( GE), Nike ( NKE) and Goldman Sachs ( GS).
X In conjunction with the Nasdaq Composite and S&P 500, the Dow Jones index and the 30 Dow stocks serve as a bellwether for the general market and the American economy, helping investors gauge the current environment and future outlook.
Bookmark this page for ongoing coverage of Dow stocks and the benchmark index.
Scroll down to see a list of the 30 component stocks on the Dow Jones industrial average index.
Boeingstock broke out to buy range Friday, leading aerospace and defense stocks for your investing portfolio watch list. Elsewhere in the space, aerospace and defense stocks with more commercial exposure are holding up and trading near highs while those with more military exposure are still struggling.
Aerospace & Defense Stocks
Like Boeing ( BA), Hexcel Corp ( HXL) is also in buy range, while Textron ( TXT) and Flir Systems ( FLIR) are slightly extended from buy range and Heico ( HEI) is well extended from its last proper base, but near an add-on entry.
Meanwhile, Lockheed Martin ( LMT) and General Dynamics ( GD) are each 12% below their highs. Northrop Grumman ( NOC) and Raytheon ( RTN) are 9% and 8% off their highs, respectively.
Boeing Stock A Buy
Boeing stock rose 2% Friday. The low-volume breakout puts the 2017's top-performing Dow Jones component above a handle buy point of 348.67. But investors may want to focus on the conventional entry of 371.70, ten cents above the stock's all-time high. The reason for this is that the handle does not show up on a weekly chart, and IBD founder Bill O'Neil made it a policy to focus first on weekly charts.
Low volume on a breakout is another flaw, as you ideally want to see strong institutional buying demand as a stock breaks out. A good rule of thumb is to look for volume to be 40%-50% above normal.
Hexcel has been on a very steady climb over the past few weeks. Shares cleared a 69.62 buy point in a base-on-base pattern earlier this month and remain in the 5% buy zone. The relative strength line, which measures price performance vs. the S&P 500, is moving to a new high along with the stock.
Hexel rose 1.3% on Monday morning, still in buy range.
Textron Stock Extended
Textron gapped out of a flat base with a 62.29 buy point on April 18 after issuing earnings. The stock soon pulled back and tested the buy point, but is now once more trading at all-time highs and is extended from buy range.
Textron climbed 1% Monday.
Flir Systems Pulling Back?
Flir Systems, like Textron, is slightly extended from buy range. Shares are on a streak of fractional losses. But it's important to note that many leaders do pull back into buy range after breaking out, providing an additional buying opportunity. You just want to make sure that pullback is gentle, and doesn't come in heavy volume.
Flir climbed 0.9% early Monday.
Heico Finds 50-Day Support
Heico's last breakout from a proper base was in December. Shares are now up 22% from the 74.50 entry, and have found support near the 50-day along the run. The first few pullbacks — and successful rebounds — from the 50-day line are a good chance to add shares to your position.
Heico rose 1%.
Military-Focused Defense Stocks Struggle
Lockheed Martin, Raytheon and General Dynamics edged higher Friday, while Northrop Grumman rose 1.4%. But the defense contractor stocks are down sharply over the last several weeks. The sell-off began with defense stocks' earnings season and a failure to raise cash flow guidance despite more Pentagon spending. The sell-off continued amid easing tensions with North Korea and rising bond yields.
Lockheed, Raytheon, General Dynamics and Northrop rose about 1% Monday morning.
Collectively known as the FANG stocks, Facebook ( FB), Amazon ( AMZN), Netflix ( NFLX) and Google parent Alphabet ( GOOGL) are among the tech titans of our time.
X Facebook and Google alone capture the lion's share of all global online advertising, including in the fast-growing mobile format, while Amazon dominates e-commerce and cloud services with its Amazon Web Services business.
And although Netflix is facing increasing competition from Hulu and fellow FANG stocks — particularly Amazon and YouTube owner Google — its original programming and massive global expansion have cemented its leadership in the streaming industry.
Check this page regularly for ongoing coverage of the FANG stocks, including potential buy and sell signals.
How financial advisors get clients is often the most important lesson. If you want to attract more millennials as clients, it's going to take more than unleashing your inner hipster.
At some point, many seasoned financial advisors fret that their aging clients are dying off. That leads them to look for younger professionals to replenish their pipeline and sustain their practice for years to come.
Unfortunately, it's easier said than done.
Alan Moore urges advisors to pursue the next generation of clients with vigor. But it requires some heavy lifting.
Moore, 31, co-founded the XY Planning Network in 2014 along with Michael Kitces. The national membership organization provides resources and support for fee-only advisors who specialize in working with Generation X and Generation Y clients.
A certified financial planner, Moore sold his advisory practice in 2015. He's the chief executive of AdvicePay, which provides online payment processing for advisors. Based in Bozeman, Mont., he also hosts a radio podcast for independent advisors.
In this interview with IBD, Moore strategizes on how advisors can cultivate younger clients and foster lasting relationships with them:
IBD: For advisors who want to bring in more millennial clients, what steps should they take?
Moore: It's not a small tweak to appeal to millennials. It's not like you can make a few small changes. If you're going to do it, you need to go all in.
IBD: How can you go all in?
Moore: I'm talking about marketing, fee structure, technology — everything that goes into a practice. A lot of firms don't go all in because it can mean a lot of changes.
IBD: What if advisors aren't able or willing to overhaul their entire business?
Moore: A lot of advisors hire a millennial planner and let them come in to build out a service model and build a new brand. That might mean a brand with a different website, a coffee shop look (to the office) that's more attuned to what these younger clients expect. That can absolutely be done, and it's a wonderful strategy if that's the way you want to go.
IBD: Can you elaborate on how this new brand might differ from an advisor's existing brand?
Moore: If you look at the branding of many of our (XY Planning Network) members, you can see how it varies from old-school advisors. You can barely tell they're in the same industry! The service model is so different. They have more-frequent but shorter meetings with clients, while old-school advisors may have more in-person, longer meetings. They have a different technology platform. And the conversations with clients are very different.
Moore: Our advisors like to ask their clients, "Where do you want to be in 30 years?" Millennials may have no idea. So career planning becomes an important part of what these advisors offer. They may also discuss saving habits, budgeting and managing student debt, while old-school advisors may focus more on protection of assets, Social Security needs analysis, cash flow analysis in retirement.
IBD: Do younger and older clients have different perceptions of an advisor's role?
Moore: Younger clients look to advisors as more of a guide than a gatekeeper. They want an advisor who can serve as a filter, who takes all of the information out there and filters out what doesn't apply to them. Older clients may want an advisor who tells them what to do, who's more authoritarian. They may be looking for someone who manages and protects their assets, rather than someone who understands and manages debt.
IBD: You mentioned career planning. How can advisors develop expertise in that area?
Moore: Most advisors don't tend to ask their clients questions such as, "How much do you enjoy your job?" and "How can you invest in yourself?" But these are great questions to ask millennials, and other clients as well. Some old-school advisors are focused on a client's assets. But if you're going to attract younger clients, you need to make it not just about the money.
IBD: Are clients surprised when their financial advisor raises career-oriented issues?
Moore: I think many clients, especially younger ones, want someone to walk them through these life decisions. An advisor who has all this financial knowledge and who can also connect with clients and communicate in a more personal way can provide a great service.
IBD: What tips can you give older advisors in hiring a millennial planner to build a distinct brand to attract their peers as clients?
Moore: Say to these younger advisors that you bring on, "Here's our business plan. Here's how you can build this service model from Day One. I'll be your mentor and coach." That's better than putting them through two or three years of training before they can make decisions.
IBD: What if these young newcomers seek equity in the firm?
Moore: You hear that millennials want equity. But I hear more that what they really want is control. They want to make decisions in how they charge clients, what technology to use, their marketing strategy. It still makes sense if you tell them, "Here's your partnership track." The caveat is: The fastest way to burn bridges is to promise equity or promise to grant ownership in five or 10 years, and then you don't. That's worse than not promising it at all.
IBD: Does that happen often?
Moore: There are owners who thought that they'd retire early and turn over the practice to a younger advisor. But then they change their mind and don't retire as planned.
IBD: Any other suggestions for older advisors on how to help their new hires hit the ground running?
Moore: Have your junior advisors sit in on every client meeting. Let them watch you work. And allow them to train your team on their areas of expertise. They may have developed skills that benefit you and your colleagues.
For financial advisors seeking to build a sustainable business, attracting clients is a strategic imperative. Learning how to market financial services to millennials can pave the way for years of steady growth.
Yet trying to discern the preferences and proclivities of millennials — those born in the 1980s and early 1990s — poses a series of challenges for financial advisors in a hiring mode. While they may have grown up on social media and rely on tech tools to manage their everyday lives, their attitudes and aspirations are hard to pin down.
Depending on whom you ask, millennials are a different breed of consumer — or they're similar to older generations. They enter into professional relationships with different expectations — or the same ones that older clients bring.
Stereotypes of cynical, lazy narcissists miss the mark. Assuming that they are coddled, entitled or impatient can stymie marketers, hiring mangers and professional service providers.
When advisors strategize about the future, they often conclude that they must redouble their outreach to millennials. Winning over young adults paves the way for long-term relationships as they accumulate assets and need comprehensive financial planning.
"My target is clients age 25 to 35 because that's an underserved market," said Mike Zeiter, an advisor in Carthage, Mo. "This age group lacks the assets to work with traditional advisors, but they may have student loans and face decisions about their 401(k), buying a home and setting other financial goals."
Young professionals with limited income can still benefit from an advisor's guidance. The financial decisions they make at an early stage of their career can have lasting, powerful effects.
Zeiter says that many of his clients are young couples with a combined annual income over $100,000. These clients may lack a deep grounding in financial matters.
"They often don't choose the right 401(k) option," he said. "They may choose the default (option) or what the guy in the next office suggests."
Learning How To Market Financial Services To Millennials Takes Patience
Persuading millennials, even high earners or hard-charging entrepreneurs, to pay for an advisor's services can take patience and perseverance. They may view financial planning as a low priority or harbor misconceptions about an advisor's role.
"It can be a hard sell because it's a service many of them aren't used to," said Zeiter, a fee-only planner who charges a monthly retainer. One of the top questions he addresses on his firm's website is, "What do you offer that I can't do myself?"
Younger advisors wield an advantage because they can connect with millennials better than their elders. In their own lives, they may have grappled with buying their first home, managing debt and optimizing employee benefits.
Creative Marketing Ideas For Financial Advisors
They can also assure clients they will provide financial planning services over the long haul. Zeiter, 28, often tells millennials: "I'm young enough where we can work together for your whole career."
Because he expects to stay in the business for decades, Zeiter has established a client mix of about 75% younger professionals who pay a monthly fee and 25% who are older and pay a percentage of assets under management.
"That can change over the years to a 50/50 split as I get older and my clients get older," he said.
In structuring their practice, advisors who defer to their clients' preferred communication style tend to attract more millennials. Along with providing a secure online platform for clients to access and track their accounts, advisors learn to develop strong working relationships from afar.
"Many millennials don't want to talk on the phone or meet in person," Zeiter said. "They may be more comfortable doing everything virtually."
Communicating largely by videoconference, text messages and email may initially seem like a less effective way to cultivate trust with remote clients. But over time, an advisor's accessibility and sound advice can prove a differentiator.
Marketing Ideas For Financial Advisors
To grow your business, you'll need existing clients to refer their friends and colleagues to you. Traditionally, advisors ask for such referrals. But that approach can backfire with millennials.
"It's not easy to get referrals from millennials," said Greg Karis, a Los Angeles, Calif.-based advisor. Through their online networks, they may know hundreds of people but lack strong connections with them.
Karis, 31, invests time getting to know his millennial clients better — and tracks their lives via social media. Rather than press them for referrals, he waits for the professional relationship to blossom.
"If you ask for referrals too early, they will clam up and pull away," Karis warned.
Prospecting Ideas For Financial Advisors
As an alternate strategy, Karis recently asked a friend — a real estate entrepreneur — for help identifying prospects. After his friend told Karis to scan his LinkedIn contacts, Karis came up with 15 promising leads.
"He told me more about each of them and introduced me to them," Karis said. He reached five of them by phone and he's hoping his outreach bears fruit.
As much as older advisors try to identify with a young client, the age gap can prove tough to bridge. That's why they often seek to recruit new associates who can better relate with their millennial peers.
"If you're an advisor in your 50s or 60s and you want to attract the next generation of clients, look inward and ask who on your team is going to attract the next generation," said Aaron Schaben, executive vice president at the Carson Group in Omaha, Neb. "You need to incubate the next generation of leadership in your firm."
Schaben, 32, works with advisors to grow their business. He extracts insights from his firm's "millennial advisory council," a sampling of young clients who offer input.
"We've found that millennials want an advisor who's the same age as them along with the power of a team who's behind that advisor," he said. "And they want an experience that combines maximum technology with the human touch."
Millennials seeking more connections in the community suggested that the firm host networking events. Pouncing on the idea, the firm launched one-hour "Wine Wednesdays" in which clients and prospects mingled with a guest speaker such as a real estate agent or home health care expert.
Providing financial planning for the self-employed can be lucrative, but this niche market requires special handling.
Many financial advisors seek young professionals as clients. And many of those young professionals are self-employed. It makes sense for an advisor to build relationships with self-employed millennials who have high earning potential.
As their career takes off, so will their assets and their need for comprehensive financial planning.
Self-employed individuals in their 20s and 30s offer a particularly alluring niche. Their business can grow exponentially, giving advisors a golden opportunity to add value. Even if they only attain modest success, solo practitioners face myriad challenges that call for specialized financial expertise.
For advisors who want to attract millennials as clients, targeting self-starters can pay off. That's because 27% of millennials are self-employed, according to Deloitte. And many more aspire to be their own boss.
Experienced planners offer more than investment advice to young entrepreneurs. In providing financial planning for the self-employed, they can also help with tax planning, structuring the business and plotting an exit strategy.
"When it's your own business, you bring your own emotions and biases to your decisions," said Jennifer Harper, a certified financial planner in Chattanooga, Tenn. "An outsider can bring objectivity to your decisions."
Harper, who launched her firm in 2015, knows what it's like to build a business from the ground up. Uneven or unpredictable income heightens the need for long-term financial planning. Budgeting to pay self-employment tax and other benefits merits attention. And new business owners who plan to buy a home may face extra hurdles because lenders can look askance at the first few years of self-employment income.
Simplify Complex Concepts
Because the self-employed sell their time — and need to squeeze more productivity out of every hour — advisors who cater to them need to provide accessibility and flexibility. Just getting a harried business owner to show up for an annual review meeting can prove difficult.
Like many advisors, Harper accommodates self-employed clients by offering virtual planning services. She also helps them address a range of issues, from valuing their business to securing the proper insurance coverage.
"My younger self-employed clients must make sure they have enough of an emergency fund to start a business and be realistic about how long it'll take to generate a revenue stream," she said. "They also need to separate their business and personal finances, and draw up a good partnership agreement if they bring on a partner."
Advisors brimming with technical mastery can talk themselves into trouble with busy self-employed clients. While it's fine to share your knowledge, it's easy to overdo it.
"The self-employed hire you to distill complex concepts in a concise way into plain English," said Justin Harvey, a certified financial planner in Philadelphia. "A big part of that is understanding what is their appetite for detail."
Harvey, 30, recently launched his own firm. He focuses on serving young, self-employed physicians.
"Having the age and life stage in common allows me to build a rapport with them," he said. "And because I'm working with self-employed high earners, that introduces tax complexity so I lean on CPAs and business valuation experts" to assist clients.
Financial Planning For The Self-Employed: Succession Planning
To retain self-employed clients, some independent advisors evolve into wide-ranging business consultants. They go beyond portfolio management and traditional financial planning to provide bookkeeping, risk management and other services.
Business succession, even for younger entrepreneurs, can prove especially valuable. Advisors who help founders envision how their business will sustain itself for decades to come can fortify their client relationships across generations.
"I always start with a detailed cash flow analysis," said Justin Porter, a certified financial planner in Calhoun, Ga. "Then it becomes a long-term process in coaching the client to look at succession planning, to understand all the options of what's possible. They need to prepare for the day when someone else may need to own the business."
By thinking ahead, advisors pave the way for a smooth transition when clients want to sell their business. Reviewing legal documents, often with the help of an attorney, can prevent problems later.
Harper recalls advising a client — a longtime owner of a real estate company — who was preparing to sell his share of the firm. Reviewing the partnership agreement from the early 1980s, Harper spotted several red flags.
"It was a terrible agreement," she said. "The owners couldn't remember its terms. So my client took it back to his partners and they updated it, which helped with the financial impact of the sale of his portion of the business."
For advisors who work with sole proprietors, the focus often shifts to harnessing tax-advantaged retirement savings accounts to maximize tax benefits. For example, they may recommend a simplified employee pension (SEP) IRA or solo 401(k) as a cornerstone of their retirement plan.
The future for the financial advisory industry is in attracting the millennial generation and making them clients, but most financial advisors are more than 50 years old. So how does an industry attract a set of clients more comfortable with texts and Instagram than phones and email? The obvious answer is recruiting young financial advisors.
But can the old school go about recruiting young financial advisors? What are the do's and don'ts to vetting these applicants? And how should small firms train their young advisors to reach out successfully to their peer group in order to cultivate them and turn them into clients?
Richard Saperstein, managing director of Hightower's Treasury Partners, based in New York City, sees three main reasons for hiring millennial advisors: "Capturing the demographic wealth transfer that's going to occur over the next 30 years, enabling a wider range of younger clients to benefit from an experienced team and finally to create a succession plan."
When evaluating candidates, Saperstein looks for maturity and confidence to present to wealthier clients. He said he prefers they have a niche market, such as financial planning, legal, 401(k), or some subspecialty to add to the team. He wants the person to come in with a thoughtful business plan, a strong work ethic and strong outside passion, such as cooking, skiing or reading.
"We need them to have an outside passion and to be an interesting person," he said. "But in the end it comes down to a cultural fit with the team."
Other firms want someone who already takes life seriously, said Bill Francavilla, author of "The Madoffs Among Us." The firms want someone who has a family and a mortgage, and understands the impact of being responsible and planning for the future. "We wanted someone who would relate to the client's situation. Former teachers and coaches went to the top of our line." Francavilla is the former director of wealth management for Legg Mason. He speaks to consumers and investment professionals.
Bill Logue, a financial planner who runs Clearfocus of Mountain Side, N.J., vets applicants based on how they articulate their interest in personal finance.
"Personal finance is different from a finance degree from a university," said Logue. "It's an intimate process that relies heavily on communication. I vet in the interview by asking 'What is your interest in personal finance?' I'm looking for indicators of interpersonal skills and an almost innate need to help."
A big red flag is an emphasis on sales, says Donna Skeels Cygan, president of Sage Future Financial, in Albuquerque, N.M., and author of "The Joy of Financial Security." She said her two worst hires came from large wirehouses. They were trained to see someone in just 15 minutes, focused on pushing products, and didn't have good work ethics.
On the flip side, make sure your firm is a place where someone wants to work. Since so many are owned by a single person, owners have to ask themselves if they've developed a career path for younger financial advisors, said Rita Robbins, president and founder of Affiliated Advisors, a New York-based group of 110 financial advisors, all of whom she recruited. "Do you have the methodology to train them? There are some obvious challenges here. One of the places to look is young people who have been successful in a similar type of business."
Tips For Recruiting Young Financial Advisors?
The traditional advisor model is to have the new advisor try to make their friends and family into new clients. But Logue disagrees with that. Instead he has the young FA shadow existing advisors, then work through the entire process by working with the older FA's clients. The young advisor learns everything from data entry, working with portfolios, selection of investments, cash-flow modeling, and nuances of a client interview by sitting in meetings with the older advisor's clients.
Saperstein also believes in a lot of training and meetings to go over investments, marketing leads and integration with the team. And he encourages advisors to take outside courses.
Most experts recommend introducing young advisors to the adult children of the older advisor's clients to allow the young advisor to try to cultivate them into his or her clients. This has the triple bonus of helping the young advisor get clients around his own age, helping the client's children get an advisor around their age and keeping the assets in the firm when the older client passes on.
Figuring out how to help midcareer executives is fairly easy compared with figuring out what millennials want from financial services.
Midcareer executives hire an advisor to handle the complexities of their financial life. They've got sizable assets to manage, steep tuition bills for their kids and retirement and estate planning needs.
Millennials, by contrast, may have a limited understanding of what advisors do. They're just starting out in their career, so they have less cash on hand.
Moreover, some young professionals harbor suspicions about the financial industry. Growing up amid the Great Recession left them skeptical of Wall Street institutions and investment products.
Yet advisors cannot ignore this huge segment of the marketplace. In the coming decades, millennials will inherit substantial assets from their baby boomer parents while entering their prime earning years.
For advisors to win over the next generation, citing their credentials and knowledge isn't enough. They also need to explain their fee structure.
"A lot of millennials have a negative perception of financial advisors," according to a Deloitte study. "To overcome this negative attitude, wealth management firms initially need to focus on the pricing transparency."
Advisors who court a younger clientele are getting the message. Many of them include an overview of their fees on their firm's website.
"Millennials seem cost-sensitive, particularly with so many low-cost platforms available," said Peter Lazaroff, a certified financial planner in St. Louis. "They are more likely to bring up cost-related questions like, 'How are you paid?' or 'What's the cost of this fund?'"
Name Your Price: What Millennials Want From Financial Services
When millennials weigh whether to hire an advisor, they want assurance that they're hiring an educator acting in their best interest. They don't want a salesperson pitching products.
They may already understand the role of a fiduciary, but many advisors still define the term. Stating at the outset that the only compensation they receive comes from the client — not from products they sell — can address concerns about hidden fees and commissions.
"When we go through the client agreement, our fees are very clearly laid out," Lazaroff said. "We show fees in both annual and monthly terms. Millennials are used to a monthly subscription model, so we bill monthly."
Prospecting Ideas For Financial Advisors
Because many young adults have wide-ranging financial needs, they tend to seek advisors who adopt flexible pricing options. Advisors who offer pricing to fit an individual's situation can attract more early-career clients.
Deb Meyer, a certified financial planner in Saint Charles, Mo., charges new clients a one-time fee, currently $1,000. That reflects more frequent meetings during the first year. From there, financial planning clients pay a monthly amount based on the level of service that she provides. The amount ranges from $175 to $375.
"I give them the exact number after I meet with them, based on their net worth and income," she said. "My practice is heavily focused on young professionals in their 30s and 40s" who welcome different pricing tiers.
She knows of other advisors who charge new clients on an hourly basis or per project. But she rejects that approach. After 10 years as an advisor, Meyer has learned that summarizing her fees on her firm's website filters out some wavering prospects.
"Providing more pricing transparency on my website has improved the quality of leads I get," she said. "There's this question of whether potential clients will be deterred by seeing my fees upfront. But it's fine if that happens because my time is valuable and I'd prefer to serve more engaged clients who are committed to the process."
Explain And Educate
Young professionals may not necessarily understand how advisors get paid. That can lead to faulty assumptions about the nature of the relationship.
When millennials who already have an advisor decide to shop around and switch wealth management firms, they may balk at the notion of paying a monthly retainer. Even though many advisors are embracing this model, it's still sometimes perceived as a less traditional way to charge for financial planning.
When Autumn Campbell, an advisor in Tulsa, Okla., presents her fees to newcomers, a few of them reply, "But my current advisor doesn't charge me."
In addition to educating them about the various ways in which advisors earn compensation, Campbell might propose that they bring in their current statement so that she can compare costs. She finds that many clients aren't accustomed to paying a monthly fee.
"We use a fee calculator, entering (a prospect's) net worth and income on a screen to show what they'd pay," Campbell said. "If there's sticker shock, which we've had just a few times, we thank them and emphasize that we want them to make informed decisions."
Ending the meeting on a positive note pays off. Campbell recalls a woman in her mid-30s who didn't want to pay the fee, but changed her mind three months later and signed on.
The Supreme Court has struck down a law largely banning sports betting as unconstitutional. That May 14 ruling will likely spur many states to legalize it. Where can you bet on sports in the U.S. now?
The Professional and Amateur Sports Protection Act Of 1992 (PASPA) had effectively outlawed sports betting nationwide. That excluded sports lotteries in Oregon, Delaware and Montana, as well as the licensed sports pools in Nevada. In Murphy vs. NCAA, New Jersey appealed the law and the Supreme Court found in the state's favor.
But it may not be the revenue bonanza for global casino stocks such as Las Vegas Sands ( LVS), Wynn Resorts ( WYNN) and MGM Resorts ( MGM) that it first appears.
Which Casinos Win From Sports Betting Legalization?
In fact the biggest winners should actually be the strong regional players, such as Caesars Entertainment ( CZR), Boyd Gaming ( BYD) and Penn National Gaming ( PENN). Horse racing giant Churchill Downs ( CHDN) will also benefit. Churchill Downs was quick to ink a deal to get in on sports betting in New Jersey.
Which States Have Legalized Sports Betting
So where can you bet on sports legally?
The following states have legalized sports betting, or legislation has been introduced. Keep in mind that some states have laws on the books legalizing sports betting in the event that the federal ban was lifted, but some regulatory action is now necessary.
Legislation is pending.
Legislation has been enacted.
Delaware was already exempt from PASPA.
A bill has been introduced.
A bill has been introduced.
A bill has been introduced.
A bill has been introduced.
A bill has been introduced.
A bill has been introduced.
A bill has been introduced.
A bill has been introduced.
A bill has been introduced.
Legislation has been enacted.
A bill has been introduced.
Montana was already exempt from PASPA.
Nevada was already exempt from PASPA.
Legislation has been enacted.
Legislation has been enacted.
A bill has been introduced.
Oregon was already exempt from PASPA.
Legislation has been enacted.
A bill has been introduced.
A bill has been introduced.
Legislation has been enacted.
These States Have Yet To Make A Move On Legalizing Sports Betting:
Alabama, Alaska, Arizona, Arkansas, Colorado, Florida, Georgia, Hawaii, Idaho, Maine, Minnesota, Nebraska, New Hampshire, New Mexico, North Carolina, North Dakota, Ohio, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, Wisconsin and Wyoming
Activision Blizzard ( ATVI) earned thumbs up from Wall Street analysts on Friday for its highly anticipated video game, "Call of Duty: Black Ops 4."
The latest in the "Call of Duty" series of first-person shooter games features a new "battle royale" mode, which has been popularized by such rival games as "Fortnite Battle Royale" and "PlayerUnknown's Battlegrounds." Activision revealed details of the new game at an event on Thursday.
"We continue to believe this will be the biggest 'Call of Duty' (game) and be the cornerstone for deeper esports integration," Oppenheimer analyst Andrew Uerkwitz said in a note to clients. He rates Activision stock as outperform.
"Black Ops 4" is likely to have a long life and "get played well past expiration," he said. It comes out on Oct. 12. "We believe 'Black Ops 4' will have depth and re-playability that position it well for esports and life after the typical 12-18 month life cycle."
"Black Ops 4" will have three playing modes: standard multiplayer online, zombies, and a battle royale mode called "Blackout." In battle royale games, virtual combatants fight to be the last player standing.
Return To Basics
The game is not likely to compete for "Fortnite" players, however, Uerkwitz said. It will appeal to hard-core gamers who play such titles as "Counter-Strike: Global Offensive" from Valve and "Battlefield" from Electronic Arts ( EA), Uerkwitz said. "Fortnite" from Epic Games appeals to younger, more casual players.
"Black Ops 4" is likely to please fans of the series, with "a return to the traditional 'boots on the ground' playing style," Baird analyst Colin Sebastian said in a report. He rates Activision stock as outperform with a price target of 80.
Activision shares rose 0.5% to 71.99 on the stock market today. The stock hit an all-time high of 79.63 on March 12.
A NASA safety group said Thursday that SpaceX's controversial plan to fuel its "space taxi" rockets while astronauts are on board is a "viable option."
Some NASA officials had flagged the "load and go" issue, among others, as a concern leading up to test flights of SpaceX's so-called space taxi later this year. But the space agency's Aerospace Safety Advisory Panel offered a vote of confidence for the company founded by Tesla ( TSLA) CEO Elon Musk.
"My sense is that, assuming there are adequate, verifiable controls identified and implemented for the credible hazard causes, and those which could potentially result in an emergency situation … it appears load-and-go is a viable option for the program to consider," said retired Capt. Brent Jett Jr., a panel member, according to the Los Angeles Times.
SpaceX's "load and go" procedure involves loading super-chilled fuel just 30 minutes before launch because loading it earlier raises the risk it will heat up.
The super-chilled fuel is a critical part of SpaceX's cost-saving strategy of reusing rockets. Because it is more dense than the traditional mix of liquid oxygen and fuel, more can be fit into the boosters. The extra propellant leaves the boosters enough fuel after launch to land back on earth.
But astronauts and ground crew members have never been near a rocket during fueling. And fueling rockets with astronauts on board goes against NASA's practice during the space shuttle program of fueling before they enter the spacecraft.
The issue came up during a meeting of the House Committee on Science, Space and Technology in January, after an explosion during fueling in September destroyed a SpaceX Falcon 9 rocket.
SpaceX is confident that its fueling procedure is safer than traditional practices, because loading the super-chilled propellant is faster and lowers the exposure time for any problems to arise.
Musk also has said an abort system in SpaceX's Dragon capsule, which would house astronauts atop the Falcon 9 rocket, can save astronauts in the event of a fueling problem.
NASA has also contracted with Boeing ( BA) to develop space craft that can take astronauts to the International Space Station and back, ending its reliance on Russia's space program.
The company said it plans an initial crewed test flight of its space taxi later this year, though it could slip to next year as the fueling issue is just one of the red flags NASA has cited.
NASA said in a January report that it's also concerned about the composite pressure vessels that contain helium in the Falcon 9's second stage. The agency is also worried about tiny meteor fragments while capsules are in orbit.
SpaceX has already pushed back key tests for its space taxi. Musk now expects an uncrewed mission to happen in August instead of April, with a crewed mission set for December instead of August.
Boeing's unmanned test of its Crew Space Transportation (CST)-100 Starliner capsule is due in August, and its crewed test is scheduled for November, but the company has reportedly warned that the crewed test could be pushed back to 2019.
Boeing shares closed up 2.1% at 351.23 on the stock market today, clearing a 348.67 entry in low volumw.
President Trump pressured U.S. Postmaster General Megan Brennan to double the rate the Postal Service charges Amazon.com ( AMZN) and other firms to ship packages, the Washington Post reported Friday.
Trump in early April posted comments on Twitter about the e-commerce giant's tax status and its use of the U.S. Postal Service.
Brennan has resisted Trump's push for higher rates, according to the report. She has also told Trump that Amazon's high usage of the Postal Service has been beneficial.
Trump last month signed an executive order mandating a government review of the financially-strapped Postal Service.
"I am right about Amazon costing the United States Post Office massive amounts of money for being their Delivery Boy," Trump tweeted.
The president has lashed out via Twitter several times at Amazon Chief Executive Jeff Bezos, who also owns the Washington Post. The Post has run a number of stories in recent months that are critical of Trump and his administration.
Amazon edged down 0.5% to 1,574.37 on the stock market today. The e-commerce and cloud computing giant is up 65% from a year ago.
China extended its dominance of a critical material for electric cars, underscoring challenges for Tesla ( TSLA), General Motors ( GM), Toyota ( TM) and Volkswagen ( VLKAY) as they plan to make millions of electric vehicles in the near future.
Tianqi Lithium has bought a 24% stake for $4.1 billion in Chilean lithium producer Sociedad Quimica y Minera ( SQM), one of the lowest-cost producers of lithium in the world, from Canadian fertilizer company Nutrien ( NTR).
The agreement valued 62.5 million class A shares of SQM at $65 per share in cash, according to a statement from Nutrien on Thursday. Nutrien retains 20 million class B shares that it will eventually divest.
Western automakers have watched uneasily as Chinese companies dominate the refining and production of critical battery materials, such as lithium, cobalt and rare earths, which are also used in consumer gadgets like Apple ( AAPL) smartphones. China, the world's top auto market, aims to become the global No. 1 in electric cars and is on track to sell 1 million electric cars this year.
Tesla shares closed down 2.7% on the stock market today, while GM fell 1.3% and Ford slipped 1.1%. Shares of SQM ended essentially flat as they build the right side of a base with a 64.30 buy point. Key lithium stocks Albemarle ( ALB) and FMC ( FMC) finished 0.1% higher and 1% lower, respectively.
Global X Lithium & Battery Tech ETF ( LIT), which holds Albemarle, SQM and FMC, eased 1%.
Tesla's Lithium Deal
According to Nutrien, Indian and Chinese officials required the sale of its SQM holdings to clear the merger of Agrium and PotashCorp which formed Nutrien.
The deal is subject to various approvals and is set to close by the end of this year.
The Tianqi news comes days after Tesla struck a lithium deal with an Australian miner.
Australia's Kidman Resources will supply Tesla with lithium hydroxide, but it won't start production before 2021, Bloomberg said Wednesday, underlining the frantic race among global automakers to secure EV battery supply chains.
Kidman will produce the key battery material for Tesla under a joint venture with SQM. Terms of the deal were not disclosed.
Graphics-chip makers Advanced Micro Devices ( AMD) and Nvidia ( NVDA) received fresh buy ratings on Friday, as investment bank Cowen initiated coverage of a host of semiconductor stocks.
Cowen analyst Matthew Ramsay started coverage of 11 chip stocks. He rated eight as outperform, or buy, and three as market perform, or neutral. Ramsay said his top picks are AMD, Ambarella ( AMBA), Broadcom ( AVGO) and Monolithic Power Systems ( MPWR).
He also likes Nvidia, even though it has a high valuation.
"Yes, it's expensive, but it should be!" Ramsay said in a note to clients. Nvidia has growth opportunities in automotive, data center and gaming markets.
Nvidia is currently ranked No. 24 on the IBD 50 list of top-performing growth stocks.
Ramsay set a price target of 325 on Nvidia. It fell 0.7% to close at 245.94 on the stock market today.
The semiconductor market will be driven over the next decade by such growth markets as artificial intelligence, data centers, Internet of Things, industrial and automotive applications, Ramsay said.
"Old guard" chip stocks tied to PCs and smartphones will be less attractive in the years ahead, he said. As such, he rated Intel ( INTC), Qualcomm ( QCOM) and Cirrus Logic ( CRUS) as market perform.
The other stocks he rates as outperform are CEVA ( CEVA), DSP Group ( DSPG) and Silicon Laboratories ( SLAB).
Qualcomm-NXP Deal More Likely
Elsewhere in the chip sector, shares of Qualcomm and NXP Semiconductors ( NXPI) rose Friday on encouraging words out of China about Qualcomm's planned acquisition of NXP.
"The Qualcomm/NXP deal is looking more optimistic now," a Beijing official told the Wall Street Journal. Trade tensions between the U.S. and China are easing as the two countries negotiate, the report said.
China's approval is the last regulatory roadblock to the Qualcomm-NXP deal, which was announced in October 2016. The $44 billion acquisition has received antitrust clearance from eight of the nine required government regulatory bodies around the world.
Qualcomm shares rose 1% to 57.51. NXP jumped 4% to 111.02.
AstraZeneca ( AZN) slumped early Friday after its blockbuster cholesterol drug, Crestor, declined by double digits in the first quarter, leading the U.K.-based pharmaceutical company to lag quarterly sales and earnings expectations.
The drugmaker hopes to shrug off the pain of Crestor patent expirations in Europe and Japan in the second half of 2018. During the quarter, Crestor brought in $389 million in sales, declining 38% year over year.
In China, sales of Crestor grew 39% to $145 million. But in the U.S., revenue from Crestor toppled 59% to $46 million. European and Japanese sales fell 67% and 76%, respectively. Still, AstraZeneca expects full-year total product sales to climb by low single digits.
"This reflects the remaining impact of generic competition, namely Crestor in Europe and Japan, as well as the growing contribution from newer medicines," AstraZeneca said in a news release.
Overall, AstraZeneca reported core earnings per share of 48 cents on $5.18 billion in sales. Earnings declined 51% and missed the consensus of analysts for 60 cents, Reuters reported. Sales fell 4% and missed views ranging from $5.24 billion to $5.28 billion.
AstraZeneca's Strong Products
For the year, AstraZeneca sees core earnings of $3.30-$3.50 per share. The pharmaceutical company insists that newer products like cancer drug Imfinzi and asthma drug Fasenra are strong. Imfinzi brought in $62 million and Fasenra generated $21 million.
Total U.S. revenue of $1.49 billion was stable, the firm said. Sales from oncology products as well as diabetes drug Farxiga and blood thinner Brilinta were strong. Symbicort, an asthma drug, struggled.
"The performance reflected successful ongoing oncology launches, including Tagrisso and Imfinzi, plus strong sales of Farxiga and Brilinta, offset by the impact of continued competitive intensity on sales of Symbicort, which declined 28% to $183 million," it said.
In Europe, product sales declined 1%, to $1.12 billion. Sales from the rest of the world fell 8%, to $612 million.
The Dow Jones, S&P 500 index and Nasdaq composite fell modestly during the week, while small-cap stocks, Treasury yields and crude oil prices kept rising. Macy's ( M) soared on earnings. But Dow Jones stocks Cisco Systems ( CSCO), Walmart ( WMT) and Home Depot ( HD), along with Applied Materials ( AMAT), all beat on earnings and still retreated. PayPal ( PYPL) bought a European rival to Square ( SQ). Penn National Gaming ( PENN) and other U.S.-centric casinos rallied after the Supreme Court struck down a federal law that largely banned sports betting.
Dow Jones Stalls While Small Caps Keep Running On
The Dow Jones industrial average, S&P 500 index and Nasdaq composite fell modestly during the week, consolidating recent gains. But small-cap stocks powered higher. Energy groups did well as Brent crude futures hit $80 a barrel. The 10-year Treasury yield spiked to just above 3.1%, widening the spread slightly vs. the still-rising 2-year yield. Macy's was hot, but Walmart, Home Depot and Nordstrom ( JWN) fell on weak same-store sales. Cisco Systems and Applied Materials topped earnings views, but guidance wasn't strong enough to satisfy investors.
Casino Stocks Rally As High Court OKs Sports Betting
Many gaming stocks rallied after the Supreme Court struck down a law largely banning sports betting as unconstitutional. Regional powerhouses Caesars Entertainment ( CZR), Boyd Gaming ( BYD), Penn National Gaming ( PENN) and Kentucky Derby operator Churchill Downs ( CHDN) all spiked on the news. Churchill Downs inked deals to offer sports betting in New Jersey and other states. MGM Resorts ( MGM) also rose slightly. Las Vegas Sands ( LVS) and Wynn Resorts ( WYNN), which get most of their revenue from Chinese gaming mecca Macau, slipped.
China Internets' Earnings Mixed
Tencent ( TCEHY), China's leader in mobile messaging and gaming, relieved concerns about heavy investments crimping profit, as its WeChat messaging platform and mobile gaming showed double-digit growth, as quarterly results beat. Shares of Baozun ( BZUN) soared after the e-commerce services firm reported earnings that topped Wall Street views, as did second-quarter guidance. But online discount retailer VipshopHoldings ( VIPS) lost a fifth of their value, following its earnings report that missed views as a partnership with two internet giants had yet to help it gain momentum. Gaming company NetEase ( NTES) also sank as quarterly results missed targets.
Baidu ( BIDU) stock fell 9.5% Friday as Lu Qi will leave the role of COO and no longer oversee the Chinese search giant's artificial intelligence efforts.
Cisco Systems Falls On Earnings
Cisco Systems sold off after the computer networking giant's in-line July quarter outlook disappointed. Fiscal Q3 revenue and profit edged views. Management said demand has been strong for a new line of switches, with customer count growing to 5,800 from 3,100 the previous quarter. But recurring revenue ticked down as a percentage of sales. Cisco said spending on recently acquired companies will increase, impacting operating margins. Cisco bought back $6 billion in the April quarter. It has authorized $25 billion in additional buybacks over the next 18-21 months.
Shares fell nearly 6%.
Applied Materials Disappoints On Outlook
Chip-gear maker Applied Materialsearned an adjusted $1.22 a share, up 54% year over year, on sales of $4.57 billion, up 29%, in the fiscal second quarter. Analysts expected $1.14 and $4.45 billion. For the current quarter, Applied Materials expects to earn an adjusted $1.17 a share, up 36%, on sales of $4.43 billion, up 18%, based on the midpoint of guidance. Wall Street was modeling the company to earn an adjusted $1.16 on sales of $4.53 billion.
Shares plunged 8.25% Friday. Several other chip-equipment makers fell.
Walmart Earnings Top, Comps Light
Walmart slightly missed some same-store sales estimates, with U.S. comps up 2.1% vs. views for 2.3%, but EPS of $1.14 and sales of $122.69 billion topped forecasts. Year-over-year e-commerce growth picked up, accelerating to 33% in Q1 after slowing to 23% in Q4. The big-box giant inked a deal to take a 77% stake in India's Flipkart and reportedly dropped its Scan & Go shopping feature. Shares fell 1.9% on Thursday and 1% Friday, but closed the week with a fraction gain.
PayPal Buys Square Rival iZettle
PayPal will buy iZettle for $2.2 billion, its biggest acquisition ever. The Swedish mobile digital-payments processor competes with Square, Canada's Shopify ( SHOP) and Brazil's PagSeguro Digital ( PAGS) in various markets. PayPal rallied on the news. Square retreated.
Macy's Stands Out Among Department Stores
Macy's led the department store pack after crushing forecasts with doubled EPS of 48 cents, a 4% revenue bump to $5.54 billion and same-store sales of 3.9%. The retailer lifted profit and sales guidance for the year. Smaller rival Dillard's ( DDS) topped, but J.C. Penney ( JCP) face-planted, sorely disappointing on same-store sales growth and slashing full-year EPS guidance. Nordstrom delivered surprise earnings growth and lifted the bottom end of EPS guidance, but quarterly sales matched views and comps fell short.
Home Depot All About Weather
The home-improvement retailer beat first-quarter earnings estimates, but revenue and same-store sales came up short, as a cold spring season kept people from buying gardening and other outdoor supplies. Home Depot first held to its full-year financial outlook, citing "a favorable housing and macroeconomic backdrop." Online sales jumped, and rising prices of lumber, copper and other materials bumped up sales. Credit Suisse analysts also expected a rebound for Home Depot in the second quarter, but said "we expect that the near-term direction of the stock to be dictated by weather in the coming weeks."
Retail Sales, Manufacturing Signal Strength
Retail sales data for April showed that the consumer soft patch to start the year has given way to strength, likely helped by delayed tax refunds. April data only matched expectations, rising 0.3% on the month, with the matching rise in sales excluding autos coming in below expectations. Yet the year-over-year retail sales gain accelerated to 4.7%, helped by an upward revision to March data. Some Wall Street economists responded by boosting second-quarter GDP estimates north of 3%.
Meanwhile, the Philly Fed manufacturing index rose in May to just below cycle highs, with hiring strong. New orders and prices-received gauges hit multidecade highs.
Optical Stocks Pop On Trump's ZTE Reversal
Shares in optical-component makers popped Monday after President Trump signaled in a tweet that he would reverse stiff sanctions on their key customer, Chinese telecom gear firm ZTE, as part of China trade talks. Acacia Communications ( ACIA), NeoPhotonics ( NPTN) and Lumentum Holdings ( LITE) gave back some gains amid uncertainty over Trump's intent as well as whether talks with China are progressing. The ZTE sanctions, which barred U.S. companies from doing business with the Chinese giant, followed a probe into illegally shipped equipment to Iran and North Korea.
The odds that Qualcomm ( QCOM) will win China's approval for its planned takeover of NXP Semiconductors ( NXPI) improved significantly after Trump's conciliatory tweet on ZTE.
Tesla Pressure Mounts
Pressure on Tesla ( TSLA) continued to mount as the maker of electric cars said it was temporarily halting work on its production line. Tesla reportedly will pause production at its California factory for six days to work on fixes to its assembly line for its troubled Model 3 automobile. Model 3 production is more than 2,000 cars a week, and Tesla intends to eventually ramp that up to 5,000. Goldman Sachs said cash-poor Tesla will need more than $10 billion in capital by 2020.
News In Brief
Take-Two Interactive Software ( TTWO) delivered a mixed March-quarter report, but Wall Street remained optimistic about the video game publisher's prospects, thanks to its upcoming Wild West action game "Red Dead Redemption 2."
Children's Place ( PLCE) stock gapped down after the kids apparel chain came in well short of earnings views Thursday. EPS fell 4% to $1.87 while revenue stayed almost even at $436 million.
Western-work apparel retailer Boot Barn ( BOOT) surged after coming in at par on earnings Wednesday. EPS jumped 42% to 17 cents per share. Revenue of $171 million was a beat. The stock pared gains Friday as Boot Barn announced a stock offering.
China e-commerce leader Alibaba ( BABA) had its price target raised Friday on the view that the company is shifting from concern over investment spending to a focus on profit growth and long-term opportunity.
MKM Partners analyst Rob Sanderson raised his price target on Alibaba to 280 from 260, bringing it to a 43% premium from where the stock currently trades. He maintained a buy rating.
"We are raising estimates following another strong quarter and encouraging outlook," Sanderson wrote in a report to clients.
Alibaba's Core Commerce business, which refers to the commission and other fees the company receives mainly for e-commerce sales in China, is very healthy, Sanderson said.
"It's showing positive leverage, a growth expectation of around 40% and a lengthy pipeline of monetization levers," he wrote.
62% Gain For Alibaba
Alibaba shares lost 0.5% to close at 195 on the stock market today. The stock is up 62% in the past 12 months. It hit a record high of 206.20 on Jan. 31.
Alibaba's core commerce business heavily depends on the growth in customer spending and the acceleration of the monetization rate.
Early this month Alibaba reported fiscal fourth-quarter earnings that topped views, with strong growth in e-commerce and cloud computing. It guided full-year revenue growth above analyst estimates. Core commerce revenue jumped 62% to $8.2 billion and cloud revenue more than doubled to $699 million, from the year-ago period.
The company is the largest provider of e-commerce services in China, competing against JD.com ( JD). It's investing heavily in what is known as a New Retail strategy. Among its retail initiatives is Hema, a chain of digitized physical supermarkets. Alibaba has also invested several billion dollars into Southeast Asian online shopping giant Lazada Group in an effort to further expand its e-commerce operations.
Amgen ( AMGN) and Novartis ( NVS) shrewdly priced Aimovig below Wall Street's expectations, an analyst said Friday, a day after the drug became the first migraine prevention medication to grab approval in the U.S.
The approval comes as President Trump attempts to tamp down drug prices. Aimovig will go for $575 per month, or $6,900 annually. The Institute for Clinical and Economic Review previously estimated drugs in the same class could go for $8,500 per year.
Piper Jaffray analyst Christopher Raymond suggested Amgen was trying to avoid a battle with insurers over reimbursement by purposefully setting the price below expectations. Amgen learned that lesson with cholesterol drug, Repatha, he said in a report to clients.
"Compared to the PCSK9 payer experience (Repatha), we think this may prove to be a shrewd move by Amgen and Novartis," he said. "We think this will be seen as a reasonable price, which will likely preempt access and reimbursement hurdles."
On the stock market today, Amgen stock rose 0.9% to close at 176.30. Shares are consolidating with a buy point at 192.72. Shares of rival Alder Biopharmaceuticals ( ALDR) popped 4.5% to close at 15.20. Eli Lilly ( LLY) and Teva Pharmaceutical ( TEVA), which are working on similar drugs, each lifted a fraction.
Drugs To Prevent Migraines
Aimovig and competing drugs from Alder, Lilly and Teva belong to the CGRP class, short for calcitonin gene-related peptide receptor. These drugs work by blocking the receptor to cut down on the number of migraines a patient suffers in a month.
Amgen and Novartis are first to gain approval for a CGRP drug. Late Thursday, the Food and Drug Administration approved Aimovig to prevent migraines, both chronic and episodic. Teva, Alder and Lilly will likely follow with their own iterations over the next two years.
The label is broad and clean, Leerink analyst Geoffrey Porges said in a note. It doesn't list any cautionary or warning language. Further, "we believe that Amgen has avoided the pitfalls of excessive pricing in this kind of high-volume indication," he said.
Amgen estimates there are 10 million patients in the U.S. who could benefit from drugs to prevent migraines. This is the first new class of migraine drugs in nearly three decades, Porges said. Before that, Botox gained approval to prevent migraines in chronic sufferers.
Now, Amgen is preparing to jump on its first-mover advantage. It already has a number of patients ready to receive the drug within the next week. Porges ultimately expects Amgen to keep 35%-40% of the market in the long-term as other CGRP drugs come online.
Lilly, Teva, Alder Trail
Lilly's drug, galcanezumab, will likely gain approval in 2018 with Teva and Alder following over the next two years, Porges said. European officials are now reviewing Aimovig.
Aimovig's approval is a de-risking event for Alder, RBC analyst Brian Abrahams said in a report. Alder has been under pressure this year after its chief executive unexpectedly quit in March. The firm previously guided to a launch in 2019.
"We believe the price point set by Amgen should enable good patient access and adoption for the class from the start," he said. This is "favorable for Alder's ultimate later entry into this large market with a differentiated product."
Meanwhile, Teva is expected to be delayed until the end of this year over issues at a plant where the active ingredient is made. Analysts expect its drug, fremanezumab, to launch in mid-2019.
Abrahams models the overall market for CGRP drugs that prevent migraines to be $10 billion to $20 billion. Long term, Leerink's Porges forecasts Aimovig grabbing $1.7 billion in U.S. sales in 2025, below consensus views for $1.8 billion.
Farm equipment maker Deere & Company ( DE) reported weaker-than-expected second-quarter earnings early Friday.
Estimates: Earnings to jump 34% to $3.33 a share as revenue also grows 34% to $9.75 billion, according to Zacks Investment Research. Some estimates saw slightly higher sales.
Results: EPS of $3.14 on net revenue of $9.75 billion.
Outlook: Deere expects net equipment sales to rise 35% in fiscal Q3 and 30% for the full year.
Deere CEO Samuel Allen said in a statement that "we are experiencing higher raw-material and freight costs, which are being addressed through a continued focus on structural cost reduction and future pricing actions."
Stock: Deere stock reversed higher to close up 5.75% at 155.25 on the stock market today, blowing through their 50-day moving average.
Trump, China Trade
Last year, a strengthening economy and hopes of infrastructure spending gave Deere shares a boost. But President Trump's stance on China has more recently pressured shares.
On Thursday, Trump cast doubt on a China trade deal, and Deere could be a big loser in a trade war with the world's No. 2 economy, if American farmers hurt by Chinese tariffs put off buying tractors and harvesters.
Caterpillar ( CAT), a bellwether for U.S.-China ties, easily topped estimates in April. However, shares sank after its finance chief called Q1 results the "high-water mark" for the year. The company later said his remarks were misconstrued.
Deere targets the agriculture and construction industries, but financial services play an important role in its portfolio as well. The unit focuses on equipment rentals. United Rentals ( URI) recently affirmed its growth outlook for that market.
The China-based internet search leader tumbled 9.5% to close at 253.01 on the stock market today, tumbling out of a buy zone.
Credit Suisse downgraded Baidu to neutral on the management shake-up, announced late Thursday.
"In the past 1.5 years, Qi took over the operational management at Baidu enabling CEO Robin Li to spend more time on strategy," Credit Suisse analyst Thomas Chong said in a note to clients. "We view Dr. Lu as instrumental to Baidu's transition to becoming an 'All in AI' company. We believe Baidu's strategy remains unchanged with emphasis on AI. But, we believe visibility is needed about execution of new initiatives post new appointments."
Baidu's Artificial Intelligence Push
The internet search leader views voice-activated, smart-home devices as core to its long-term strategy. Aside from artificial intelligence, Baidu is pushing into self-driving cars.
Baidu said Haifeng Wang will take over as senior vice president and general manager of the company's AI Group. No successor COO was named.
Shares in the Beijing-based web services company broke out above a 275.07 buy point this week. With Friday's sell-off, Baidu is up about 8% in 2018.
The company still consolidates the financial results of iQiyi ( IQ), a Netflix-like video streaming service that it recently spun off. Shares in iQiyi fell 1.2% to 20.08 on Friday. IQiyi accounts for roughly 20% of Baidu's revenue.
At a conference Thursday, iQiyi said it plans to move into virtual reality applications.
Boeing ( BA) is expected to beat out European rival Airbus ( EADSY) for a widebody jet order from United Airlines ( UAL), according to reports, potentially marking another win in that category for the U.S. aerospace giant.
United is reportedly looking at 787 Dreamliners or A330neos to replace up to 50 of its aging 767s. Airbus had hoped a deal with the carrier would help fill in an order gap for the A330neos.
"Airbus doesn't have United," a source told Reuters Friday, added that Boeing has the upper hand because United already flies the 787 and has an option for more.
But that doesn't completely leave Airbus out in the cold. Other sources said Airbus could compete again for another order.
Tepid sales guidance from chip-gear giant Applied Materials ( AMAT) sent semiconductor-equipment stocks tumbling on Friday.
Late Thursday, the Santa Clara, Calif.-based company posted better-than-expected fiscal second-quarter results, but guided below Wall Street estimates for sales in the current quarter.
Applied Materials stock fell 8.3% to close at 49.51 on the stock market today. Other major chip-equipment stocks fell in sympathy. ASML Holding ( ASML) sank 2.5% to 197.34. Lam Research ( LRCX) dropped 3.9% to 195.49. KLA-Tencor ( KLAC) slid 3.4% to 109.39.
IBD's Electronics-Semiconductor Equipment industry group was the worst-performing group on Friday out of 197 tracked. It was down 4.4%.
Investment bank Goldman Sachs downgraded Applied Materials stock to neutral from buy. At least four Wall Street research firms cut their price targets on the stock: B. Riley FBR, Goldman, Needham and Nomura Instinet.
Goldman Sachs analyst Toshiya Hari soured on Applied Materials because of its "underwhelming" market share outlook in its core semiconductor-equipment business. He also cited "worse-than-feared fundamentals" in its display-equipment business. Hari cut his 12-month price target on the stock to 58 from 65.
Display Equipment Sales Weak
Applied Materials expects its display-equipment sales to rise more than 30% this year, but sees a decline of 15% to 20% next year. That decline is much worse than the 1% drop that Hari had been modeling.
"The deterioration in the outlook for Display is being driven by a weaker outlook for OLED adoption in smartphones, which is in turn driving capacity addition push-outs (from 2021 to 2023) at AMAT's OLED customers," he said in a note to clients.
Shares of Universal Display ( OLED), a leading supplier of OLED display materials and technology, fell 5.8%, to close at 94.10.
Evercore ISI analyst C.J. Muse said Applied's long-term prospects remain strong. The company is seen benefiting from the major tech trends of artificial intelligence and Big Data, he said.
Applied Materials "shares are just too cheap to ignore," Muse said in a report. He rates the stock as outperform with a price target of 75.
Accenture ( ACN) and IBM ( IBM) are seeing high demand for consulting and solution-building services around blockchain, says a Keybanc Capital Markets report, while Amazon.com ( AMZN) and Microsoft ( MSFT) this week targeted enterprise customers at Consensus 2018, a blockchain conference.
"Accenture is seeing high interest for blockchain technology across multiple industries; however, it is currently seeing the most demand and success in financial services, supply chain logistics, and digital identity management," Keybanc analyst Arvind Ramnani said in a note to clients. "IBM has deployed solutions in financial services, supply chain management, and digital identity, among others."
At the Consensus 2018 conference, Amazon's cloud computing unit targeted corporate customers. Amazon Web Services. AWS announced a partnership with startup Kaleido, backed by ConsenSys, to allow businesses to deploy private blockchains with AWS supporting the back- end cloud infrastructure.
Blockchain For Microsoft, Alphabet
Blockchain is the software technology behind Bitcoin and other cryptocurrencies. It's a shared public ledger, also called a distributed database, which tracks transactions and ensures that the record of those transactions remains transparent and tamper-proof.
Tim Horan, an Oppenheimer analyst, said in a report that Microsoft has a similar strategy. Microsoft's Azure cloud computing unit can automate the setup of blockchain networks, he said.
"Supply chain management and financial use cases dominated the" Consensus conference, Horan said.
Alphabet's ( GOOGL) Google is working on blockchain-related technology to support its cloud business.
Accenture shares ticked up 0.3% to close at 155.31 on the stock market today. IBM slipped 0.3% to 144.08, Amazon dipped 0.5% to 1,574.37, Microsoft added 0.3% to 96.36 and Alphabet lost 1.1% to 1,069.64.
News reports, subsequently disputed by China, say Beijing is prepared to meet President Trump's request of ramping up American imports to the tune of $200 billion a year to avert a trade war. A deal could hit Friday with Chinese and U.S. negotiators meeting in Washington. But if that happens, don't expect an extended Wall Street celebration.
Putting to rest the risk of a China trade war would be great news. Both sides have detailed plans for 25% tariffs on $50 billion worth of imports. U.S. multinationals like Dow Jones stocks Boeing ( BA), Caterpillar ( CAT) and Apple ( AAPL) face even bigger risks from possible nontariff hurdles to China's market. Boeing staged a low-volume breakout Friday while Caterpillar rose modestly. Apple edged lower, still near record highs.
Yet Trump has been signaling for the past month that he has little interest in a trade war with China. If financial markets aren't really bracing for one, no big Dow Jones relief rally is likely. The bigger issue is that the trade deal that Trump is talking about appears likely to exacerbate all the concerns that have been pouring cold water on the stock market's latest rally attempt.
The Downside Of A U.S.-China Trade Deal
A big increase in American exports to China — even one less than half the size of the supposed $200 billion deal — would be like yet-another injection of stimulus into an economy that's already at risk of overheating. A Trump-China trade deal would put more upward pressure on the dollar, on interest rates, on wages and on inflation.
To dramatically cut its U.S. trade surplus, China would have to shift purchases from other foreign countries, economists say. Already the dollar has been rising because U.S. economic prospects and interest rates have firmed relative to those of other economies. Steering more business to the U.S. and less to other nations would hasten the trend.
Trump's priorities appear to be focused on shrinking the China trade deficit and delivering near-term benefits to the U.S. economy. He also may be prioritizing the increasingly uncertain negotiations with North Korea, in which Beijing is seen as a key partner, over trade concerns.
Private equity behemoth Blackstone ( BX) has checked out of its position in Hilton Worldwide ( HLT) after an 11-year stay by selling off the last of its shares.
The Stephen Schwarzman-led investment giant sold off 15.8 million shares, around 5.8% of the iconic luxury hotel chain. That sale would generate $1.32 billion based on Hilton's Thursday close at 83.30.
Hilton Worldwide has said it is repurchasing about 1.25 million of those shares via private transactions. They'll count toward the hotelier's existing buyback plan.
"The share repurchase has been approved by the audit committee of Hilton and is pursuant to, and will count toward, the company's existing share repurchase program," the company said in a press release.
Hilton shares rose 0.65% to 83.84 on the stock market today. The S&P 500 stock has risen by 36% in the last year. Blackstone edged down 0.5%. Marriott International ( MAR) inched up 0.2% and Wyndham Worldwide ( WYN) rose 6 cents.
Leveraged buyout specialist Blackstone took Hilton private in a $26 billion deal in 2007. Hilton went public again at the end of 2013.
The private equity firm raised $2.33 billion and $2.59 billion via Hilton stock sales in June and November 2014. It reduced its holding to below 50% in a $2.69 billion sale in 2015. In 2016 it sold 25% to China's HNA Group for $6.5 billion, three times what it paid in 2007.
A Wall Street analyst pounded the table for Netflix ( NFLX) stock on Friday, saying the internet television network is poised to expand its competitive moat with original content and international distribution.
GBH Insights analyst Daniel Ives raised his price target on the stock to 400 from 375. He also reiterated his "highly attractive" rating on the shares.
The stock dipped a fraction to close at 324.18 on the stock market today. It hit a record high of 338.82 on April 18. The company is currently ranked No. 13 on the IBD 50 list of top-performing growth stocks.
"We believe Netflix has a number of growth levers which should fuel the company's next phase of strategic penetration among both U.S. and especially international consumers," he said.
The average Netflix user is watching the streaming service for more than 10 hours a week, which is nearly double its nearest competitors Amazon ( AMZN) and Hulu, which are closer to 5 hours a week, Ives said. That's "an eye-popping disparity," he said.
Netflix's 'Robust Profitability'
The company's investment in original content, with shows like "Lost in Space" and "Stranger Things," will help it attract and retain subscribers in the U.S. and worldwide, Ives said.
"Our bullish thesis on Netflix is based on our belief that the company's competitive moat, franchise appeal, ability to increase international streaming customers through 2020, and original content buildout will translate into robust profitability and growth as the next phase of this story plays out over the coming year with $10 of earnings power by 2022," he said.
The looming fight between Comcast ( CMCSA) and Walt Disney ( DIS) over 21st Century Fox ( FOXA) shows how valuable entertainment assets are today, Ives said. Netflix to date has mostly built its content library organically.
The transition to 4K ultra-high-definition television also could be a business driver for Netflix, Ives said. It charges high subscription prices to access 4K content.
The retail landscape is rapidly changing, with Amazon ( AMZN) and other e-commerce sites upending traditional brick and mortar retailers such as Macy's ( M) and Target ( TGT).
How do you keep track of the broad industry trends affecting retailers and restaurants, especially for the current and emerging leaders? IBD keeps all the key sector news here, from company earnings and expansions to monthly retail sales and features about the future of malls and online shopping.
Expect to find news on Home Depot ( HD), McDonald's ( MCD), Wal-Mart ( WMT), eBay ( EBAY) and General Motors ( GM) sales here. IBD will also highlight the best-performing retailers, including fundamental and technical analysis.
China has been dogged by growth concerns in recent months, but U.S.-listed China-based firms, particularly those that cater to China's booming internet population, aren't suffering from lack of growth.
Far from it, actually, as Chinese stocks like Alibaba ( BABA), Sina ( SINA) and Weibo ( WB), among others, continue to produce blockbuster earnings and sales.
Chinese Stocks To Watch
Bookmark this page to stay on top of the latest movers and shakers in China, with ongoing coverage of other industry leaders and disruptors like NetEase ( NTES), Yum China ( YUMC), Baozun ( BZUN) and JD.com ( JD).
Another chief executive fell victim to the slump in the U.S. packaged-food industry.
Campbell Soup ( CPB) CEO Denise Morrison, 64, abruptly stepped down Friday after a lackluster seven-year tenure at the helm of the company. She tried — and never managed — to move beyond canned soup to ignite sales growth as Americans change how they eat and shop. The shares plunged the most in almost two decades.
"They've had a rough go of it," said Michael Halen, an analyst at Bloomberg Intelligence. "The move into the fresh business has been problematic — they've had a lot of things that didn't work."
Morrison will be replaced on an interim basis by Keith McLoughlin, a 61-year-old former CEO at Electrolux who has been a board member since 2016, Campbell said. The Camden, New Jersey-based company didn't say who will permanently succeed her, but last month promoted industry veteran Luca Mignini to chief operations officer.
Whoever replaces Morrison will face the same challenges that have claimed the leaders of other Big Food companies like Kellogg ( K) and Mondelez International ( MDLZ). The stock, down 38% in the past two years, plunged an additional 11% to 34.94 on Friday as Campbell also gave a bleak full-year forecast. Campbell is suffering its biggest intraday loss since January 1999.
Fresh Food Woes
Morrison, who has been with Campbell for 15 years, took over in 2011 and less than a year later Campbell agreed to buy Bolthouse Farms, a maker of fresh juice and salad dressing that also operated a carrot-farming business. The deal was seen as a way to push the canned soup company into fresher and more natural products, which are on trend with modern consumers. But the merger has been hampered by operational issues and a recall that battered results. Campbell has since been mired in a three-year sales slump.
The stock said it will start a strategic review of its businesses, which will "take several months to complete." It plans to update investors on the outcome when it reports fourth-quarter results in late August.
Campbell has been seeking other sources of growth as it grapples with the soup slowdown. In December, the company agreed to buy Snyder's-Lance in a bid to push deeper into salty snacks — a bright spot in the struggling packaged-food industry. That deal gives Campbell, which makes Goldfish crackers, brands such as Cape Cod potato chips and Snyder's pretzels.
The recently promoted COO, Mignini, 55, joined Campbell in 2013. He had been running the snacks unit, and is now overseeing Campbell's soup business in addition to managing the expanded portfolio of snacks.
Bitcoin and other cryptocurrencies have taken off as they gain more mainstream acceptance, from exchange operators like CME ( CME) and CBOE ( CBOE) to Wall Street investment banks and mobile payment company Square ( SQ).
X But prices have been volatile recently, and new currencies keep appearing, leaving individual investors wondering where they are headed next.
Meanwhile, top banks like JPMorgan Chase ( JPM) are evaluating Bitcoin's underlying technology, blockchain, as a cheaper way to settle transactions.
Bookmark this page to stay on top of all the latest Bitcoin news and trends.
PayPal Holdings ( PYPL) has agreed to buy Sweden's iZettle for $2.2 billion, marking its biggest acquisition since being spun off by eBay ( EBAY).
IZettle, a mobile digital-payments processor, competes with the U.K.'s Square ( SQ), Canada's Shopify ( SHOP) and Brazil's PagSeguro Digital ( PAGS) in various markets.
IZettle, which operates in 200 countries, has been preparing to launch an initial public offering on the Nasdaq Stockholm stock exchange. IZettle reportedly sought a $1.1 billion valuation for the IPO.
IZettle initially sold a mobile credit-card reader, similar to Square's, and has expanded into software and financing services to support small businesses. The Swedish company recently launched an e-commerce platform for merchants, which puts it into competition with Shopify.
In Brazil, iZettle competes with PagSeguro as well as bigger rivals Cielo and Redecard.
PagSeguro rose 1.2% to 33 on Thursday. The company went public at 21.50 in January, reached 38 on March 23 and has since dropped out of the IBD 50.
PayPal stock has been consolidating and has a buy point of 86.42. The stock has been pressured by former parent eBay, which is phasing out its relationship with PayPal.
Chip gear maker Applied Materials ( AMAT) late Thursday posted better-than-expected results for its fiscal second quarter, but its mixed guidance for the current quarter sent its stock lower in extended trading.
Applied Materials earned an adjusted $1.22 a share, up 54% year over year. That's on sales of $4.57 billion, up 29%, in the quarter ended April 29. Analysts expected the Santa Clara, Calif.-based company to earn an adjusted $1.14 a share on sales of $4.45 billion.
For the current quarter, it expects to earn an adjusted $1.17 a share. Sales are seen at $4.43 billion, based on the midpoint of its guidance. That would translate to year-over-year increases of 36% and 18%, respectively.
But Wall Street was modeling the company to earn an adjusted $1.16 a share on sales of $4.53 billion.
"Applied's performance in the second fiscal quarter was another all-time record for the company, which demonstrates strong execution and customer pull for materials solutions that help accelerate roadmaps and bring new devices to market faster," Chief Executive Gary Dickerson said in a news release.
Long-Term Drivers In Place
He added, "Applied has the broadest opportunity across major technology trends, and our markets are strong, with long-term growth drivers firmly in place."
Its shares fell 2%, near 52.90, in after-hours trading on the stock market today. During the regular session, the stock fell 2.2% to 53.96.
Celgene ( CELG) toppled to a four-year low Thursday after it appeared on a list from the Food and Drug Administration that tried to "shame" drugmakers working to block generic competition.
Some pharmaceutical and biotech companies are "gaming" the system by limiting access to their drugs for generic rivals needing to do equivalence studies, the FDA said. Analysts, though, expect the so-called "shame list" to have little more than a headline impact on these companies.
In total, Celgene received 31 inquiries for samples of drugs Revlimid, Pomalyst and Thalomid. All three have Risk Evaluation and Mitigation Strategies, or REMS, programs to ensure the benefits of the drugs outweigh the risks. These drugs have certain distribution requirements.
Celgene reportedly said any biotech companies wanting to access these drugs would need to follow specific rules. The biotech said it already has provided samples to companies that fulfilled these requirements, RBC analyst Brian Abrahams said.
"As such, while Celgene might be putting up an understandably high barrier, we believe generic companies willing to put in the appropriate safeguards have already been able to obtain Revlimid to conduct bioequivalence studies," he said in a note to clients.
Unlikely To Speed Competition
The inclusion of Celgene on the list is unlikely to speed along generic competition for Revlimid, Williams said. As of now, the drug is "gated more by (intellectual property) than regulatory questions," he said.
Mizuho analyst Salim Syed agreed. Celgene is already working through generic litigation regarding Revlimid. Analysts expect copycat drugs in 2022.
"We believe this is more modest headline risk than actual business risk," he said in his report.
On the stock market today, Celgene shares dipped 1.7%, to close at 79.98. They earlier slipped to a low last seen in June 2014. Meanwhile, collective shares of biotech and pharmaceutical companies each lifted a fraction.
Biogen, Gilead, BioMarin Also Listed
Other key drugs listed include Biogen's ( BIIB) multiple sclerosis medicine Tecfidera, as well as Gilead Sciences' Letairis and Truvada. Letairis treats pulmonary arterial hypertension and Truvada treats HIV.
RBC analyst Kennen MacKay notes the FDA also included BioMarin Pharmaceutical's ( BMRN) Kuvan. Kuvan treats a condition associated with an elevated amino acid. BioMarin shares dipped 1.4%, near 88.30.
Still, BioMarin has already settled with several general pharmaceutical companies for generic entry after the patent expires in 2020.
"Further, while the FDA's (list) publicizes efforts to prevent generic entry, no actual policy has been put in place to deter or diminish the strategies branded manufacturers employ to limit access to branded drugs," he said.
Mellanox Technologies ( MLNX) saw its stock surge Thursday after the fabless semiconductor firm raised its sales guidance, attributing its brighter outlook to strength throughout its product lines.
The Israeli firm expects its sales to rise 25% year over year to $265 million in the second quarter, based on the midpoint of its guidance. It previously guided to sales of $260 million.
For the full year, Mellanox now expects sales to rise 23% to $1.06 billion, vs. its prior target of $1.04 billion. It also raised its adjusted profit-margin forecast to 23.5% at the midpoint vs. its prior guidance of 21.5%.
"We continue to see strength across all our product lines, including InfiniBand and Ethernet, and we are well-positioned for further growth as the adoption of 25 gigabit per second and above Ethernet adapters continues in 2018 and beyond," Mellanox Chief Executive Eyal Waldman said in a news release.
Mellanox is a supplier of high-performance, end-to-end smart interconnect solutions for data-center servers and enterprise storage systems. It says its products increase data-center efficiency by providing high throughput and low latency, delivering data faster to applications.
Mellanox stock has been on a tear since breaking out of a 35-week consolidation period at a buy point of 52.90 on Nov. 21. In intraday trading on the stock market today, it hit a record high of 88.80. It ended the regular trading session up 2.5% to 87.05.
Microchip, STMicro, TI Gain Share
Sales of microcontroller chips rose 12% in 2017, more than four times the 10-year compound annual growth rate of 2.7%. But some chipmakers did better than others.
Among the chip firms gaining market share in microcontrollers last year were Microchip Technology ( MCHP), STMicroelectronics ( STM) and Texas Instruments ( TXN), investment bank Morgan Stanley said in a note to clients Thursday.
Meanwhile, NXP Semiconductors ( NXPI) lost market share for the second straight year.
Morgan Stanley rates Microchip, NXP and TI as equal weight. It doesn't cover STMicro.
Microcontrollers are used in automotive, industrial and consumer-device applications.
Shares of China-based Baozun ( BZUN) soared Thursday after the e-commerce services firm reported first-quarter earnings that topped Wall Street views, as did second-quarter guidance.
Baozun shares catapulted 18.8% to close at 53.51 on the stock market today, jumping above their 50-day moving average to a record high. The stock cleared a 52.43 buy point.
The company held its initial public offering three years ago, pricing shares at 10. One of its largest shareholders is Alibaba ( BABA). Another partner is JD.com ( JD). Alibaba and JD.com are the two largest e-commerce companies in China.
Early Thursday, the provider of e-commerce services reported revenue of $146.9 million, up 14.5% in local currency from the year-ago period. That topped analyst estimates of $139.7 million. Baozun also reported adjusted earnings of 9 cents per American depositary share, topping estimates for 8 cents.
Services revenue rose 50% to $73.5 million. The company expects services revenue to increase by more than 50% in the second quarter from the year-ago period.
Shopify Of China
Baozun has been referred to as the Shopify ( SHOP) of China. Both companies provide marketing campaigns, digital storefronts and fulfillment services for their customers.
Shanghai-based company Baozun was founded in 2006. It offers end-to-end services — such as information technology, digital marketing, customer services, warehousing and fulfillment — that enable companies to sell goods online.
It expects second-quarter revenue in the range of $166.48 million to $172.7 million. That's above analyst estimates for $163.3 million.
Regeneron Pharmaceuticals' ( REGN) experimental cancer drug "looks legit" in treating a form of lung cancer, an analyst said Thursday — meaning it could soon rival Dow Jones' Merck ( MRK) and Bristol-Myers Squibb ( BMY).
All three are working on cancer drugs called PD-1 checkpoints. These immuno-oncology drugs teach the immune system to identify and fight tumor cells. Merck and Bristol already have drugs approved called Keytruda and Opdivo, respectively.
But Regeneron appears to be hot on their tails. In an early-stage study, Regeneron tested its drug, cemiplimab, in previously treated patients with what's called non-small cell lung cancer. Overall, tumors shrank in 29% of patients, and 57% had their disease under control.
Regeneron unveiled the data late Wednesday ahead of the American Society for Clinical Oncology annual meeting in June. Piper Jaffray analyst Christopher Raymond called the data the biggest surprise of the meeting. Cemiplimab has long been an "also-ran in the (immuno-oncology) space."
"This compares well to (overall response rates) for approved anti-PD-1's Keytruda and Opdivo in the high teens," he said in a note. "Granted, these are small numbers, but we do think investors may take interest in this."
Leerink analyst Geoffrey Porges noted the overall response rate for cemiplimab in that specific group of patients is in line with the 18%-20% rates for Keytruda and Opdivo in Phase 3 studies. Cemiplimab also looks safe in these patients.
"These results, although generated from a small cohort, are encouraging signs that cemiplimab has the potential to compete toe-to-toe with established products on the market," he said in a report to clients.
RBC analyst Kennen MacKay was less surprised by Regeneron's success with cemiplimab in non-small cell lung cancer. The proof of concept came "as expected," he said in a note. Though, the biotech company tested cemiplimab in a small group of patients.
The study supports cemiplimab's potential to have in-line of potentially better effectiveness than leaders Keytruda and Opdivo, MacKay added.
Regeneron Eyes Skin Cancer
Regeneron is also testing cemiplimab in Phase 1 and Phase 2 studies of patients with an advanced form of skin cancer called cutaneous squamous cell carcinoma. Overall responses as well as duration of response improved in updated data vs. this time last year, Leerink's Porges said.
"We believe cemiplimab is well on track to receive an expedited approval in this previously overlooked indication (use) and carve out at least an initial niche in the competitive PD-1/PD-L1 (cancer drugs) field," he said.
Porges sees an 80% likelihood Regeneron will gain approval for cemiplimab in the advanced type of skin cancer. He expects $39 million in 2018 sales of cemiplimab for that use with peak sales of $1.8 billion. He kept his 435 price target on Regeneron stock.
The Food and Drug Administration will review cemiplimab in cutaneous squamous cell carcinoma in October. That review date could help Regeneron and partner Sanofi ( SNY) to be the first to that market, RBC's MacKay said.
Video game publisher Take-Two Interactive Software ( TTWO) delivered a mixed quarterly report late Wednesday, but Wall Street remains optimistic about the company's year-ahead prospects thanks to its upcoming Wild West action game "Red Dead Redemption 2."
Take-Two shares rose more than 5% at one point and ended the regular trading session up 0.7% to 113.88 on the stock market today. In intraday trading Thursday, Take-Two went past a buy point of 117.45 out of a double-bottom base, up to 118.91, before retreating.
The New York-based company earned an adjusted 70 cents a share, down 3% year over year, on adjusted sales of $411 million. That's up 1% for the fiscal fourth quarter ended March 31. Analysts expected earnings of 64 cents a share on sales of $450 million.
Sales in the March quarter were lighter than expected, due to weakness in the company's "NBA 2K18" game. Take-Two also likely was impacted by the popularity of "Fortnite Battle Royale" from rival Epic Games, analysts said.
Take-Two's quarterly report was "messy," but the upcoming "Red Dead Redemption 2" looks like a "smash hit with a long, high-margin revenue tail," Jefferies analyst Timothy O'Shea said in a report. He rates Take-Two stock as buy with a price target of 145.
Three Price-Target Hikes
Take-Two stock received at least three price-target hikes from Wall Street firms after its quarterly report. Those firms — Benchmark, KeyBanc Capital Markets and Piper Jaffray — rate the stock as buy.
KeyBanc analyst Evan Wingren was the most bullish of the group. He upped his price target to 152 from 144.
Take-Two's guidance for the current fiscal year was above expectations considering that a major game, "Borderlands 3," has been delayed until next year, Wingren said in a note to clients.
For fiscal 2019, the company expects net bookings of $2.72 billion, vs. Wall Street's consensus of $2.92 billion.
'Red Dead' Guidance Conservative
The company also appears to be conservative about its expectations for "Red Dead Redemption 2," which comes out on Oct. 26, Wingren said.
Benchmark analyst Mike Hickey raised his price target on Take-Two to 135 from 130.
"We remain impressed with Take-Two's recent earnings power, and expect considerable near-term growth potential driven by 'Red Dead Redemption 2' and continued positive trends in digital including full game downloads and microtransactions," he said in a report.
Investors in Cisco Systems ( CSCO) may fret about Thursday's sell-off after in-line July-quarter guidance disappointed, but they can take some solace in the company's $25 billion stock buyback.
Cisco stock lost 3.7% to close at 43.46 on the stock market today after falling as much as 4.5%. The computer networking giant late Wednesday reported fiscal third-quarter adjusted earnings and revenue that edged views.
As of Wednesday's market close, Cisco stock had gained 34% since it reported fiscal first-quarter earnings in November. The run-up may pause, but there's protection in the stock repurchase program, analysts say.
Cisco spent $6 billion in the April quarter to repurchase its own stock. It has authorized $25 billion in additional stock buybacks over the next 18 to 21 months.
$5 Billion Per Quarter For Cisco
"We estimate that Cisco can repurchase an average of $5 billion in shares per quarter during this time frame, if not more," Instinet analyst Jeffrey Kvaal said in a note to clients.
"Assuming Cisco won't account for any more than 10% of daily trading volume, the company would have to be in the market buying stock for around 200 days (through 2019) to deploy all the capital," Jefferies analyst George Notter said in his report to clients.
On the bright side, analysts note management's third-quarter commentary on strong demand for a new line of network switches, with customer count growing to 5,800 from 3,100 the previous quarter.
But recurring revenue ticked down as a percentage of sales. Management said spending on recently acquired companies will increase, impacting operating margins.
Cisco has stepped up acquisitions to speed up its shift to software and services. Its core business has been selling network switches and routers.
The company said late Wednesday that adjusted third-quarter profit rose 10% to 66 cents per share from a year ago, with revenue rising 4% to $12.5 billion, topping consensus estimates. Analysts expected earnings of 65 cents on sales of $12.44 billion for the period ended April 28.
For the July quarter, Cisco said it expects revenue growth of 4% to 6%, in line with expectations of 4.9% growth to $12.73 billion. It forecast fiscal fourth-quarter profit of 69 cents a share, in line with estimates.
The stock of online education provider Pluralsight ( PS) jumped 33% Thursday as shares from its initial public offering began trading.
After pricing at 15, shares opened at 20 and ended the day at that price on the stock market today.
The Pluralsight IPO raised $310.5 million. It priced 20.7 million shares at 15. That was above an upwardly revised range of 12 to 14. The request for shares among institutional investors was reportedly strong.
Pluralsight says it's focused on closing a global tech skills gap. It's the result of technology moving so fast that most of what a developer knows today will be obsolete in two years, it said. The company has more than 14,000 business customers.
The company provides a platform that customers can use to upgrade their skill sets in areas such as software programming and design. The online education categories it offers cover a wide range of business skill sets. They include network security, Big Data platforms, architecture and construction, manufacturing and design, and project management.
"Today, we have more than 6,700 on-demand and online courses on our platform and are adding on average more than 80 new courses each month," Pluralsight said in its IPO prospectus.
The company is based in Farmington, Utah, in an area referred to as "Silicon Slopes," which is home to a cluster of technology companies in Salt Lake City and surrounding areas. Pluralsight is the first IPO out of Utah since Instructure ( INST) in 2015, according to IPO research and advisory firm Ipreo. Instructure is also an educational technology company. For its 2015 IPO, the company priced shares at 16. They now trade near 43.
Pluralsight reported revenue of $166.8 million in 2017, up 27% from the prior year. It showed a net loss of $96.5 million, up from $20.6 million.
"Our platform is used by businesses to train their software developers, IT professionals, data scientists, data engineers, technical engineers, business users, and technology executives," the company said.
Tesla ( TSLA) might need to raise more than $10 billion in capital by 2020 to fund operations and expansion, Goldman Sachs said Thursday, despite Chief Executive Elon Musk's contention that the company won't need to increase its debt this year.
Goldman Sachs analyst David Tamberrino also set a price target of 195 on Tesla. That's down 32% from where the stock currently trades. He also has a sell rating on the stock.
"Tesla will continue to be challenged with its manufacturing process and see downside to overall margin trajectory for its product," Tamberrino said in a note to clients Thursday.
Analysts have increasingly expressed concern the company will need to raise more funds in 2018 so it doesn't run out of capital. It has struggled to find solutions to manufacturing bottlenecks on the Model 3 assembly line.
Another Price Target Cut
Morgan Stanley analyst Adam Jonas referenced those challenges in his report to clients Tuesday. Jonas cut his price target by 22% — to 291 from 376.
Jonas expects Tesla will need to raise $3 billion in capital, up from a previous forecast of $2.5 billion, by the third quarter. Musk previously said Tesla would not need to raise cash this year. He recently contended that the company will be profitable by the third quarter.
When it reported first-quarter earnings on May 2, Tesla said it ended the quarter with a cash balance of $2.7 billion. That's down from $3.4 billion in the fourth quarter. It plans to reduce capital expenditures to about $3 billion in 2018 from about $3.4 billion.
Tamberrino's estimate that Tesla will need to raise $10 billion includes a scenario in which a new vehicle manufacturing plant and gigafactory are launched in China.
"We see several options available to the company to refinance maturing debt and raise incremental funds, which should allow Tesla to fund its growth targets," Tamberrino wrote. "However, issuing incremental debt (including priming current creditors with secured debt) may weigh on the credit profile of the company while issuing additional equity or convertibles at lower premiums would dilute current shareholders."
The company's profitability depends highly on the success of its Model 3 production. The company expects to achieve positive net income, excluding noncash stock-based compensation, in the third and fourth quarter. It also expects to achieve "full GAAP profitability" in each of those quarters.
Shares in Spotify Technology ( SPOT) and Pandora Media ( P) fell Thursday as investors reacted to Google's YouTube unit announcing plans to launch a new music streaming service on May 22.
Google says it will offer a Spotify-like subscription service for $10 a month. The YouTube Music service will feature a new mobile app and a new desktop player. Google also is making changes to its YouTube Red and Google Play Music services.
Shares in Spotify fell 1.6% to close at 158.76 on the stock market today. Pandora sank 2.8% to 7.41. Google-parent Alphabet ( GOOGL) edged down a fraction to 1,081.26.
"We expect (YouTube's) announcement to drive a knee-jerk reaction around the pure play, music streaming stocks this morning as the market tries to better understand the implications of Google's new music service," Monness, Crespi, Hardt analyst Brian White said in a note to clients.
Competition has intensified in the subscription streaming music business, with Apple ( AAPL) and Amazon.com ( AMZN) also in the mix. Despite the popularity of its YouTube website, which features music videos, Google has struggled to find the right features to stoke demand for either a premium, for-pay music service or a free advertising-supported version.
Spotify has 75 million paying members worldwide, with Apple No. 2 at 40 million.
Spotify went public on April 3, starting at 165.90. Its first earnings release as a public company disappointed investors. Google stock has been consolidating and is trading above its 50-day-moving average but is well below a buy point of 1,208.
Retail behemoth Walmart ( WMT) reported better-than-expected first-quarter earnings estimates Thursday as e-commerce sales growth picked up, but same-store sales missed some forecasts.
Estimates: EPS to grow 12% to $1.12 on 2% revenue growth to $120.13 billion, according to Zacks Investment Research. Consensus Metrix analysts expect 2.1% in same-store sales growth, minus gas and the impact of currency exchange. In the U.S., comps are expected to grow 2.3%.
Results: Walmart earned $1.14 a share with revenue of $122.69 billion. U.S. Walmart comps advanced 2.1%. E-commerce sales rose 33% vs. a year earlier. That's up from Q4's disappointing 23% gain but below Q3's 50% spike.
Stock: Shares of the Dow Jones component initially popped to 87.59 in the stock market today, moving above their 50-day moving average. But the stock reversed to close down 2.1% at 84.34.
World Wrestling Entertainment's ( WWE) stock raced higher Thursday on a report that WWE wrestling programs "Smackdown" and "Raw," could attract a heftier price as TV networks try to land or keep them.
NBCUniversal, owned by Comcast ( CMCSA) is trying to renew an agreement to keep "Raw," according to the Hollywood Reporter. The price tag could be nearly the current price. "Raw" and "Smackdown" current air on USA Network, which NBCUniversal owns.
As for "Smackdown," the Reporter said, World Wrestling Entertainment is courting bidders after NBCUniversal opted not to renew its deal for that program. 21st Century Fox ( FOXA) has been floated as a possible buyer, the Hollywood Reporter said.
WWE stock surged more than 15% to 50.28 in the stock market today, a record high. Shares in April cleared a buy point, but without strong volume. But WWE began to move out of a buy range on May 3 in a high-volume move following strong quarterly earnings. WWE stock has a 94 Composite Rating from IBD.
Live Entertainment, Streaming
Live sports and sports-entertainment programming still draws viewers and network dollars, and "Smackdown" remains popular, the Hollywood Reporter noted. Subscriptions have also increased for WWE's digital streaming service — a big part of the company's move to stay relevant to cord cutters.
Last month, WWE said subscriptions to WWE Network, hit a record 2.12 million subscribers following April 8's WrestleMania, the event that often marks the annual boiling point for WWE's oiled-up, spandexed drama. That 2.12 million figure was up 9% gain April 3, 2017, following last year's WrestleMania.
Earlier this month, WWE also forecast a " meaningful increase" in second-quarter sales due to new content distributed internationally.
Dubai Aerospace Enterprise is in the market to buy 400 single-aisle jets from Boeing ( BA) and Airbus ( EADSY).
The aircraft lessor controlled by the government of Dubai told Reuters Thursday that it's looking at the Airbus A320neo line and Boeing 737 MAX.
The order would double Dubai Aerospace's fleet as traffic grows in the Middle East. But it wasn't immediately clear how the 400 jets would be split between the two archrivals.
Boeing shares rose 0.9% to 344.14 on the stock market today. Boeing is consolidating just above its 50-day line with a potential entry of 371.70.
Airbus climbed 1.4% to 26.85.
If the 400-jet deal is confirmed, it would be one of the largest commercial orders in the history of aviation.
But it would still fall short of a deal at the Dubai Airshow last year, when Airbus signed an order with Indigo Partners, which controls low-cost carriers in the U.S. and Latin America, for 430 A320neos for $50 billion.
Meanwhile, Boeing and Airbus are ramping up production of narrow-body jets as air traffic surges.
Airbus announced plans last month to boost production rates of its A320 to meet increasing demand, but suppliers like United Technologies' ( UTX) Pratt & Whitney and General Electric's ( GE) engine unit are struggling to keep up with output.
Americans, take note: British robots are coming to pack your grocery orders.
As part of a newly inked alliance, Kroger ( KR) is harvesting the ordering, fulfillment and home delivery capabilities of U.K.-based online grocer Ocado, ramping up its arsenal against grocery rivals Walmart ( WMT) and Amazon ( AMZN).
Kroger, which is increasing its stake in Ocado to a total of more than 6%, hailed the Ocado deal as "innovative, exciting and transformative." Ocado's tech-fueled automated fulfillment system involves an intricately managed grid of robots that can "collaborate as a swarm to pick an order of over 50 items in just a few minutes," according to the Ocado video below.
The two companies said they are in the process of looking for three locations in the U.S. in which to build automated warehouse facilities this year, with the goal of identifying up to 20 sites over the first three years of the deal. Ocado will be Kroger's exclusive partner stateside.
"We are actively creating a seamless digital experience for our customers," said Kroger CEO Rodney McMullen in a press release. "Our partnership with Ocado will speed up our efforts to redefine the food and grocery customer experience — creating value for customers and shareholders alike."
The partnership is good news for Ocado's stock, which popped on the London Stock Exchange.
Kroger shares closed up 1.4% at 25.30 on the stock market today, after popping to 26.37 intraday.
Amazon has already begun putting to use its more than $13 billion acquisition of Whole Foods, lowering prices and offering free two-hour delivery of the grocer's products for Amazon Prime members.
Hedge funds and asset managers soured on General Electric ( GE) massively in the first quarter, making GE stock the third biggest in which they trimmed stakes after Cisco Systems ( CSCO) and Bank of America ( BAC).
Big funds that collectively sold more than 126 million GE shares in Q1 included Morgan Stanley Capital Services, Renaissance Technologies, Pimco, Scotia Capital and Harris Associates, Bloomberg reported Wednesday, citing the latest 13F regulatory filings. Highbridge Capital Management and Alyeska Investment Group closed out positions in GE stock.
Big investors sold roughly 137 million Cisco Systems shares and 169 million Bank of America shares over the same period. Cisco and Bank of America share prices are much higher than GE, so the dollar value sold was much higher than with GE shares.
Shares of GE rose 1% on the stock market today and have now rallied 12% since the end of Q1. The Dow giant lost 23% last quarter. Cisco, also a Dow Jones component, dropped 2.9% intraday Thursday after Wednesday's lackluster earnings results and guidance, slicing below the 50-day moving average.
Bank of America dipped 0.2% as it builds the right side of a cup base with a 33.15 buy point.
GE chief John Flannery said in January he is mulling breaking up core businesses into separately traded companies. He also revealed a $6.2 billion charge related to a legacy insurance business.
Cloud computing offers investors a wide range of opportunities that span internet infrastructure, as well as consumer and business services delivered via fast connections to the web. The industry leaders and top cloud stocks cover a similarly wide range, from Amazon.com ( AMZN) and Google parent Alphabet ( GOOGL) to Microsoft ( MSFT), Alibaba ( BABA) and Oracle ( ORCL).
To visualize the internet cloud, think of warehouse-sized data centers packed with computer servers and data storage systems. Then think of the cloud supply chain.
Companies such as Intel ( INTC), artificial intelligence (AI) leaderNvidia ( NVDA) and Micron Technology ( MU) sell chips built into servers. Fiber-optic device makers sell parts for high-speed communications networks. Seagate Technology sells solid-state data storage systems. Arista Networks ( ANET) and Cisco Systems ( CSCO) sell specialized network switches and routers that make the cloud superfast.
The biggest buyers of data center infrastructure are Amazon Web Services, Microsoft's Azure and Alphabet's Google, as well as consumer-facing companies like Apple ( AAPL) and Facebook ( FB).
Cloud computing services are new growth engines for AWS, Microsoft and Google. Companies rent their powerful computers and software platforms to process business workloads remotely via the web. Apple relies on cloud infrastructure for its fast-growing services business, whisking music and other content to iPhones.
Companies like Salesforce.com ( CRM) that offer subscription-based software-as-a-services (SaaS) arrived before the term cloud computing was coined. Many SaaS companies are now working with AWS and other cloud vendors to reach new markets.
Telecom isn't a high earnings- or revenue-growth sector, even though wireless and broadband services are "must-haves" for U.S. consumers. Stocks often run up on merger and acquisition speculation, while tougher regulation can be a worry.
X Big cap telecom stocks such as AT&T ( T) and Verizon Communications ( VZ) have attractive dividends. And, telecom stocks are sometimes viewed as a safe haven when stock markets turn volatile.
T-Mobile US ( TMUS) has grabbed subscriber and revenue market share amid speculation it'll be part of wireless industry consolidation. Comcast ( CMCSA)'s institutional ownership has been rising as it delivers growth from broadband services and media arm NBCUniversal.
Bookmark this page to stay on top of companies such as Charter Communications ( CHTR), Sprint ( S), Dish Network ( DISH), and CenturyLink ( CTL). Also note that telecom developments often impact media stocks such as Walt Disney ( DIS), Discovery Communications ( DISCA) and 21st Century Fox Entertainment ( FOX).
The housing market has recovered from the subprime mortgage crisis a decade ago. And leading homebuilder stocks such as LGI Homes ( LGIH), Lennar ( LEN), D.R. Horton ( DHI), Pulte Homes ( PHM) and Toll Bros. ( TOL) have taken advantage of the rebound. But is a new housing bubble now starting to form?
Bookmark this page to stay on top of the homebuilder stocks, housing trends and the overall real estate market, with coverage of industry players such as KB Home ( KBH), Eagle Materials ( EXP), Home Depot ( HD) and mortgage lenders.
Investors in the biggest internet service providers on Thursday shrugged off passage of a U.S. Senate bill that would reverse the Federal Communications Commission's repeal of net neutrality rules.
AT&T ( T) and Verizon Communications ( VZ), and Comcast ( CMCSA) edged up in early trades on the stock market today while Charter Communications ( CHTR) was unchanged.
The Senate voted 52-47 on Wednesday to reverse the FCC's rollback of net neutrality rules, a vote that signals potential harm to internet companies' business. One reason for mild investor reaction: Passage of a similar bill faces an uphill battle in the Republican-controlled House.
Further, President Donald Trump would need to sign the legislation if passed by both the Senate and the House. Trump would be undercutting Ajit Pai, whom he appointed as FCC chairman, if he signed the bill.
Net neutrality, also called open internet rules, bars internet providers from blocking or throttling content as well as paid prioritization.
The FCC voted in December to repeal utilitylike oversight on ISPs. The move takes effect on June 11.
Net neutrality and voters
Democrats aim to use net neutrality as an issue in the fall elections.
While net neutrality is a hot potato for lawmakers, investors have focused more on other issues. Rising interest rates have pressured AT&T and Verizon, two big dividend-paying stocks. AT&T is down 13% since Jan. 1 while Verizon has skidded 11%.
Worries over video subscriber losses and spending on wireless services has pressured Comcast and Charter. Comcast and Charter are both down about 19% thus far this year.
Two of North America's biggest pipeline companies announced plans to repurchase subsidiaries as the industry seeks to curb future tax obligations in the face of a federal overhaul.
Williams Cos. ( WMB) is buying the remaining stake in Williams Partners ( WPZ) in a $10.5 billion all-stock deal, it said Thursday. Enbridge ( ENB) earlier said it made all-share proposals to the boards of its units to acquire all outstanding securities.
The deals allow the companies to absorb partnership businesses that have come under government scrutiny. Pipeline stocks plunged in March after regulators said so-called master limited partnerships can no longer charge customers for taxes the companies don't pay. Thursday's announcements follow a similar move by Kinder Morgan ( KMI) in 2014.
Williams will acquire the outstanding stock of Williams Partners at a ratio of 1.494 of its shares for each unit of the subsidiary, according to a statement. The transaction represents a 6.4% premium to public unit holders, based on Wednesday's close. It extends the period in which Williams isn't expected to be a cash taxpayer through 2024 and will immediately add to cash available for dividends, it said.
Enbridge's plan affects units Spectra Energy Partners ( SEP), Enbridge Energy Partners ( EEP), Enbridge Energy Management ( EEQ) and Enbridge Income Fund Holdings[ticker symb=EEGUF], according to a separate statement.
The proposed exchange ratios reflect a value for all the publicly held securities of C$11.4 billion ($8.9 billion), or 272 million Enbridge shares, if completed on the terms offered.
Enbridge expects the deals to be "approximately neutral" to its three-year financial guidance and positive to its post-2020 outlook due to tax and other synergies.
Loxo Oncology ( LOXO) shares rocketed late Wednesday after the biotech company released data showing its experimental cancer treatment shrunk tumors in nearly 70% of patients regardless of where their cancers originated.
In after-hours action on the stock market, Loxo flew 19% to 166, after losing 0.8% during the regular session and ending at 139.50. Shares of Blueprint Medicines ( BPMC), which is making a rival drug, collapsed 13%, near 75.
The drug called LOXO-292 works to correct mistakes in the RET gene. In all, 35 patients had what are known as RET fusion positive tumors, including 27 with advanced lung cancer, seven with papillary thyroid cancer and one with pancreatic cancer. Another 20 had medullary thyroid cancer with RET point mutations.
Of those with RET fusion positive tumors, 69% responded. Tumors shrank in 65% of patients with advanced lung cancer, and in 83% with papillary thyroid cancer. In medullary thyroid cancers, 79% responded. The data is current as of Jan. 5. Since then, they have improved, Loxo said in a news release.
Loxo released the data ahead of the American Society for Clinical Oncology meeting set for early June. Then, Loxo will unveil the improved data with a cutoff date in April.
Jounce Therapeutics Tumbles
Also late Wednesday, Jounce Therapeutics ( JNCE) plummeted 27.8%, near 12.80. Jounce said is planning to unveil data from a combination of its drug JTX-2011 with Bristol-Myers Squibb's ( BMY) Opdivo in a variety of cancers. Bristol shares rose 0.2%, near 52.30.
The Phase 1 and Phase 2 study is looking at the combination across four solid tumors including forms of stomach, breast, head and neck, and lung cancers.
Like Loxo, Jounce published an overview of data online that was current as of Jan. 27. Jounce said it will release updated results June 2. Preliminary data show JTX-2011 is well tolerated alone and in combination with Opdivo, the firm said in a news release.
It also "has demonstrated evidence of biologic activity and tumor reductions in heavily pre-treated patients who have failed all available therapies," Jounce Chief Medical Officer Elizabeth Trehu said in a prepared statement.
Video game publisher Take-Two Interactive Software ( TTWO) late Wednesday reported adjusted sales for the March quarter that were well below Wall Street's target and guided significantly below views for the current quarter and year. That sent Take-Two stock down in extended trading.
Take-Two said net bookings were $411 million, up 1% year over year, in its fiscal fourth quarter ended March 31. It had guided to $410 million to $460 million for the period. Analysts had expected $450 million.
The New York-based company earned an adjusted 70 cents a share, up 3% year over year, in the quarter vs. the consensus target of 64 cents.
Take-Two guided to adjusted sales for the current quarter of $240 million, vs. the consensus view of $367 million for the quarter ending June 30.
For the current fiscal year ending March 31, 2019, the company expects net bookings of $2.72 billion. Wall Street was modeling $2.92 billion.
Shares were down a fraction in after-hours trading on the stock market today. During the regular session, the stock slipped 0.4% to 113.07.
Take-Two In-Game Spending Strong
"During the fourth quarter, Take-Two delivered net bookings growth driven by increased recurrent consumer spending — including better-than-expected results from 'Grand Theft Auto Online,' " Take-Two Chief Executive Strauss Zelnick said in a news release. Recurrent consumer spending includes in-game purchases and subscriptions.
Other top selling games last quarter included "NBA 2K18" and "WWE 2K18."
Zelnick said he expects fiscal 2019 to be another year of profitable growth for the company. Take-Two expects record net bookings led by "Red Dead Redemption 2" and new annual releases from the NBA 2K and WWE 2K sports franchises. The highly anticipated western action game "Red Dead Redemption 2" is set for release on Oct. 26.
Cisco Systems ( CSCO) stock fell late Wednesday after the computer networking giant reported fiscal third-quarter earnings and revenue that topped views, but its in-line July-quarter guidance disappointed analysts after a run-up that started in November.
XAnalyst expectations have moved up after Cisco reported revenue growth for the first time in nearly two years in its fiscal second quarter. New corporate tax rules and accounting changes are expected to boost revenue.
The company said adjusted profit rose 10% to 66 cents from a year ago, with revenue rising 4% to $12.5 billion, topping consensus estimates. A year earlier, the company earned 60 cents a share on sales of $11.94 billion. Analysts expected earnings of 65 cents on sales of $12.44 billion for the period ended April 28.
For the July quarter, Cisco said it expects revenue growth of 4% to 6%, in line with expectations of 4.9% growth to $12.73 billion. It forecast fiscal fourth-quarter profit of 69 cents a share, in line with estimates.
What Fueled Cisco Stock Rally
Shares in Cisco popped in November after it reported earnings that beat views. The stock rallied again in February after the company announced a buyback.
Shares in the maker of computer networking gear and software fell 3.6%, to 43.54, in after-hours trading on the stock market today. In Wednesday's regular session, shares slipped 0.7% to 45.16. Cisco has formed a cup chart pattern with a buy point of 46.26.
Cisco has stepped up acquisitions to speed up its shift to software and services. Its core business has been selling network switches and routers.
Ford Motor ( F) will resume building its biggest moneymaker, the F-150 pickup, two weeks after a fire at a supplier's factory halted production of trucks at three plants.
Production of F-Series pickups will restart first at Ford's Dearborn, Michigan, factory on Friday, then at plants in Kentucky and Missouri on Monday.
The automaker rebuilt its supply chain for key magnesium parts used in the trucks and in sport utility vehicles including the Lincoln Navigator and Ford Explorer, according to a statement.
"While the situation remains extremely dynamic, our teams are focused on returning our plants to full production as fast as possible," Joe Hinrichs, Ford's president of global operations, said in the statement. "The ramp-up time to full production is improving every day."
The May 2 explosion and fire at the Chinese-owned Meridian Magnesium Products plant in Eaton Rapids, Michigan, disrupted output for Ford and several other automakers, including General Motors ( GM), Fiat Chrysler Automobiles ( FCAU) and Daimler AG's Mercedes-Benz.
The pain has been felt most acutely at Ford, since F-Series generates most of the company's profit. The company had shut down F-150 assembly at the plants in Dearborn and near Kansas City and also stopped building bigger Super Duty pickups at a factory in Louisville.
F-Series is the top-selling vehicle line in America, hauling in about $40 billion in annual revenue. Morgan Stanley values the franchise as worth more than the entire company.
Pluralsight ( PS) is receiving a high level of interest from institutional investors for its upcoming initial public offering that looks to raise up to $290 million.
According to IPO research and advisory firm IPO Boutique, the deal is "many multiple times oversubscribed," meaning the request for shares is above what's being made available. Underwriters are guiding pricing to the high end of its range.
Pluralsight plans to offer 20.7 million shares at a price range of 12 to 14. That's up from a previous range of 10 to 12, indicating strong investor interest in the IPO.
Pluralsight provides a platform that customers can use to upgrade their skill sets in areas such as software programming and design. The online education categories it offers cover a wide range of business skill sets. They include network security, Big Data platforms, architecture and construction, manufacturing and design, and project management.
The company is based in Farmington, Utah, in an area referred to as "Silicon Slopes," which has a cluster of technology companies in Salt Lake City and surrounding areas. It's the first IPO out of Utah since Instructure ( INST) in 2015, according to IPO research and advisory firm Ipreo. Instructure is also an educational technology company. For its 2015 IPO, the company priced shares at 16. They now trade near 43.
The IPO is scheduled to begin trading Thursday morning on the Nasdaq under the ticker PS. The lead underwriters are Morgan Stanley and JPMorgan.
Pluralsight reported revenue of $166.8 million in 2017, up 27% from the prior year. It showed a net loss of $96.5 million, up from $20.6 million.
"We empower the people who power businesses by democratizing professional technology learning and enabling businesses around the world to drive innovation through a smarter workforce," Pluralsight said in its IPO prospectus.
AbbVie ( ABBV), Celgene ( CELG) and Regeneron Pharmaceuticals ( REGN) could spike in the second half of 2018 amid an accelerating number of drug approvals and launches, an analyst said Wednesday.
This would reverse a trend in the first half of the year that saw shares of biotech stocks slip to No. 27 out of 197 industry groups tracked by Investor's Business Daily. The group was ranked fifth just 13 weeks ago. Meanwhile, pharmaceutical companies are ranked No. 78, down from No. 51.
Leerink analysts classified the first half of 2018 as "disappointing for large-cap biopharma companies." Biotech stocks and pharmaceutical companies faced a dearth of clinical study results to validate their pipelines and re-price their stocks, they said.
"The second half of the year promises to be more exciting for small-/mid-cap biopharma stocks, with significant clinical events on the horizon, including readouts from binary Phase 3 trials," they wrote in a note to clients.
Among other biotech stocks and pharmaceutical companies, AbbVie is expected to report data from a study of its drug, upadacitinib. Researchers are looking at the drug as a treatment for forms of arthritis.
Further, the Food and Drug Administration likely will decide whether to approve AbbVie's drug called Elagolix as a treatment for endometriosis, a condition of the female reproductive system. The FDA will also decide the fate of a drug dubbed Venclexta in a form of leukemia.
Stock market trackers also expects Celgene to unveil data from late-stage studies of Revlimid and luspatercept. Celgene partners with Acceleron Pharma ( XLRN) on luspatercept in two blood diseases. Revlimid is Celgene's major cancer drug.
Celgene could also reveal more about its Juno Therapeutics acquisition, through which it is moving into a class of cancer therapy known as CAR-T, short for chimeric antigen receptor T-cell therapy. There, it competes with Novartis ( NVS) and Gilead Sciences ( GILD).
"Data from CAR-T development updates should define the path forward for these products (Revlimid and luspatercept)," Leerink analyst Geoffrey Porges said in the note.
Porges also expects the FDA to make a decision on Regeneron and Sanofi's ( SNY) Dupixent as an asthma treatment. Physicians can already use Dupixent to treat eczema. The duo also has cemiplimab, which the FDA is considering in an advanced form of skin cancer.
Other Biopharma Catalysts
In addition, Intra-Cellular Therapies ( ITCI) is working on a drug dubbed lumateperone as a schizophrenia treatment. Analysts will focus on whether the FDA accepts the application for approval based on "mixed Phase 3 data," Porges said.
"Intra-Cellular will also report topline data from the ongoing Phase 3 study in bipolar depression in the second half, as they look for a second indication for lumateperone," he said.
Porges expects Zogenix ( ZGNX) to have data for a late-stage study of its drug, ZX008. Researchers are considering the drug as a treatment for a type of epilepsy called Dravet syndrome. GW Pharmaceuticals' ( GWPH) drug, Epidiolex, will likely gain approval for this use in June.
Additionally, Dova Pharmaceuticals ( DOVA) and FibroGen ( FGEN) have catalysts in chronic liver and chronic kidney diseases, respectively. Dova expects the FDA to soon decide whether to approve its drug. FibroGen expects to unveil topline data from a study of its drug in the second half of the year.
The FDA is also taking a flexible stance on orphan drug development, Leerink analyst Joseph Schwartz said in the note. The approval of Sarepta Therapeutics' ( SRPT) Duchenne muscular dystrophy drug, Exondys 51, in 2016 "triggered a cascade of noteworthy filings," he said.
"We continue to believe the FDA's continuing evolution will warrant positive sentiment for rare disease-focused companies, particularly names like Amicus Therapeutics ( FOLD), Sarepta and Uniqure ( QURE) as long as the investigational drug is deemed safe and demonstrates strong (effectiveness)," he said.
Total ( TOT) became the first oil company to announce that it is pulling out of Iran in the wake of President Donald Trump pulling the U.S. out of the Iran nuclear agreement.
The French oil major said Wednesday that it will not be able to continue it's South Pars 11 gas development project and will unwind all operations in Iran before Nov. 4 unless it's granted a waiver by the U.S. government.
"Total has always been clear that it cannot afford to be exposed to any secondary sanction," which could include the loss of financing by U.S. banks or inability to continue its operations in the U.S., the company said in a news release.
A secondary sanction would be a major loss for the company. It said over 90% of Total's financial operation comes from U.S. banks, and U.S. assets account for over $10 billion of capital employed.
But Total assured investors that leaving Iran wouldn't impact its production-growth targets.
Total shares closed down 1% at 63.21 on the stock market today. despite crude prices reversing higher on bullish U.S. supply data. Exxon Mobil ( XOM) edged up 0.3% to 82.02. Chevron ( CVX) fell 0.1% to 129.56, but is still in buy range after clearing a 128 buy point last week coming out of a cup-with-handle base. Royal Dutch Shell ( RDSA) eased 0.3% to 72.42, in buy range, after breaking out of a cup-with-handle base with a 71.79 entry point. BP ( BP) was off 0.2% at 46.71.
U.S. oil rose 0.3% to settle at $71.49 a barrel, and Brent crude rallied 1.1% to $79.28 a barrel.
Crude Inventories Fall
Domestic crude stockpiles fell by 1.4 million barrels last week, with gasoline inventories down by 3.8 million barrels, according to the U.S. Energy Information Administration.
Analysts had expected a 1.75 million-barrel decline in crude stockpiles. But the American Petroleum Institute reported late Tuesday a 4.854 million-barrel increase in crude stockpiles along with a 3.369 million-barrel drop in gasoline inventories.
Domestic production rose to 10.723 million barrels per day, up from 10.70 million bpd, EIA said.
Global Inventories Hit Milestone
Earlier, the International Energy Agency said Wednesday that global crude inventories are below average for the first time since 2014. That reflects the OPEC-Russia production curbs in recent years, even as U.S. production hits record highs.
While oil markets already priced in the impact of leaving the Iran deal, the IEA said Wednesday there is "understandable uncertainty" about Iran's exports following President Trump's decision to leave the Iran nuclear deal. The IEA added that production in Venezuela is in "free fall" as the country's economic crisis worsens.
"For now, the rapidly changing geopolitical landscape will move the attention away from stocks as producers and consumers consider how to limit volatility in the oil market," the agency said in its monthly oil market report.
The IEA also warned in its monthly oil market report Wednesday that its expects the "recent jump in oil prices will take its toll," on demand. The agency lowered its outlook for global demand growth to 1.4 million barrels per day this year vs. a prior estimate for growth of 1.5 million bpd.
On Monday, OPEC added the U.S. exit from the Iran nuclear deal to a list of economic uncertainties fueled by U.S. trade policies.
Downloads of Square Cash, boosted by its Bitcoin exchange, are growing faster than PayPal Holdings' ( PYPL) Venmo app, says an Instinet analyst.
San Francisco-based Square ( SQ) makes credit-card readers that plug into mobile phones and tablets. In November, it set up a Bitcoin exchange so that users of its Square Cash app could buy and sell the digital cryptocurrency.
"Square Cash App downloads are growing faster than Venmo, with growth accelerating in recent months," Instinet analyst Dan Dolev said in a note to clients Wednesday. "With about 28 million cumulative downloads, the number of Square Cash app downloads is only roughly 1 million below PayPal Venmo levels, as the spread between the two increasingly converges."
Venmo is a popular money-transfer service for millennials. With Venmo, consumers link a bank account to a smartphone app and send money to friends or family using an email address. Apple ( AAPL) has also launched a Venmo-like service.
Bitcoin Not Money Maker
Bitcoin has not been a big moneymaker for Square. Square said Bitcoin accounted for $34 million in gross revenue in its first quarter. That's the total sale amount of Bitcoin to customers.
But adjusted revenue from Bitcoin during the period was $200,000. That's Square's Bitcoin sales to app users, minus the cost of purchasing the digital currency.
Square stock jumped 3.6% to close at 56.59 on the stock market today. Square has a buy point of 58.56, having formed a cup chart pattern. The stock has jumped 190% from a year ago.
Alternative To Coinbase
Square Cash app for Bitcoin is an alternative to Coinbase, the best-known cryptocurrency exchange. Coinbase customers can purchase Bitcoin, Litecoin and Ethereum. Coinbase on Tuesday unveiled new tools for institutional investors.
"With Square Cash now open for Bitcoin trading in most states, comparing its growth vs. the popular Coinbase app is noteworthy," added Dolev. "While Coinbase saw growth peak around the holiday time — as Bitcoin prices spiked — Coinbase's growth has slowed from record levels, whereas the Square Cash app experienced more balanced growth."
CEO Dorsey All In On Bitcoin
Square Chief Executive Jack Dorsey, meanwhile, spoke at a cryptocurrency conference in New York City on Wednesday.
"The internet deserves a native currency; it will have a native currency," Dorsey said, according to a Bloomberg report.
"I don't know if it'll be Bitcoin or not," he said, but "I hope it will be."
Shares of three semiconductor-equipment makers are nearing buy points, including industry giant Applied Materials ( AMAT), which is set to report its fiscal second-quarter results after the market close Thursday.
The other two are Entegris ( ENTG) and MKS Instruments ( MKSI). Each of these three stocks has formed a double-bottom base over the past 10 weeks. Many top stocks have been forming this key chart pattern lately.
Entegris' buy point is 37.93. It was up 1.8% to finish at 36.50. The buy point for MKS Instruments is 122.87. It was up 1.9% to 116.65.
IBD's Electronics-Semiconductor Equipment industry group has fallen out of favor with investors over the past three months. The 36-stock group is currently ranked No. 137 out of 197 industry groups. Three months ago, it was ranked No. 95 and six months ago it was No. 8.
But the chip-gear group was the 10th-best performing group on Wednesday, rising 2.1%.
Applied Materials Earnings On Tap
Investors will be following Applied Materials' quarterly earnings report on Thursday to gauge the health of the broader semiconductor and display markets.
Analysts expect the Santa Clara, Calif.-based company to earn $1.14 a share, up 44% year over year, on sales of $4.45 billion, up 26%.
For the current quarter, Wall Street is modeling Applied Materials to earn $1.16 a share, up 35%, on sales of $4.53 billion, up 21%.
Verizon Communications ( VZ) has put off the launch of its own live-TV internet service, but the telecom could announce a video streaming partnership next week, with Google's YouTube TV looming as a possibility.
Matt Ellis, Verizon chief financial officer, said at a JPMorgan conference in Boston on Wednesday that it's exploring other options rather than offering its own over-the-top, or OTT, video product.
JPMorgan, meanwhile, last week upgraded Verizon to buy on views that next-generation, "5G" wireless services will drive growth. JPMorgan analyst Philip Cusick also noted "Verizon has no plan to build its own full OTT linear video offer. Instead the company will announce on May 21 its plan to partner with an existing linear OTT player bundled with the fixed broadband product, as well as four Oath channels."
Verizon holds a meeting with sell-side analysts on May 21 to update its plans in wireless and digital media. The company plans to bundle video-streaming services with its 5G wireless services.
Verizon, which acquired AOL and Yahoo, has grouped the internet assets in a new unit, branded Oath. Verizon has a portfolio of rights to stream sporting events, including those in the National Football League and National Basketball Association, as well as entertainment assets and Yahoo Finance.
Hulu Up For Grabs
If Verizon announces a video streaming partner, Google's YouTube TV looms as a possibility by a process of elimination.
Verizon competes with AT&T ( T) and Dish Network ( DISH), which have their DirecTV Now and Sling streaming services, respectively. Hulu's owners include Walt Disney ( DIS), 21st Century Fox ( FOXA) and cable TV firm Comcast ( CMCSA), also a rival of Verizon.
AT&T could be part-owner of Hulu if its acquisition of Time Warner is approved. Hulu also could be up for grabs as Comcast and Walt Disney fight over acquiring Rupert Murdoch's Fox.
YouTube TV A Money Loser
Google-parent Alphabet ( GOOGL) has not disclosed how many subscribers the $40-a-month YouTube Live service has signed up. Bernstein Research analyst Todd Juenger said in a note to clients earlier this week that YouTube TV is a money-loser, though it doesn't matter to a company the size of Google.
"There doesn't seem to be an obvious path to not losing money. The financial model doesn't scale," he said. Juenger says Google could have an interest in expanding sports content to set its service apart.
Verizon edged up 0.2% to close at 47.86 on the stock market today. A high-dividend paying stock, Verizon has been pressured by rising interest rates.
Alphabet inched down less than 0.1% to 1,084.09. Its stock has been pressured by rising investments in self-driving cars, cloud computing and other areas. Alphabet is up 1% for 2018.
Pharmaceutical company Zoetis ( ZTS) plans to acquire Abaxis ( ABAX) for nearly $2 billion — propelling Abaxis stock to break out in morning trades Wednesday.
The deal values Abaxis at $83 a share in cash. Abaxis makes chemical analyzers used in human and veterinary patients. Zoetis, a pharmaceutical company, makes drugs for use in animal health. The acquisition is expected to close by the end of the year.
Raymond James analyst John Ransom called the price tag rich. It represents a 15.7% premium to Abaxis stock's prior closing price and only a 5.7% premium to the high seen in January. For Abaxis shareholders, the price is reasonable. But the firm is unlikely to get another bid, he said in a note.
"We view this price as somewhat rich relative to an asset that had not performed exceedingly well of late, with core chemistry growth somewhat of a question in the mind of investors," he said.
But investors rewarded Abaxis stock. On the stock market today, Abaxis shares popped 16.2% to close at 83.34. It had been consolidating with a buy point at 78.63 and was among stocks near a buy zone on Tuesday. Zoetis shares dipped a fraction to 82.85.
A 'Logical' Buyer
Zoetis sees the deal as boosting its animal diagnostics exposure. The firm estimates that market is valued at north of $3 billion, with a compound annual growth rate of 10% over the past three years. Zoetis expects that segment to continue outgrowing the overall animal health market.
"Together, we can bring more veterinarian customers a broader range of products that fit into our comprehensive solutions and innovations, from prediction and early detection of disease in animals to prevention and treatment," Zoetis Chief Executive Juan Alaix said in a written statement.
Raymond James' Ransom says the deal makes sense for Zoetis, which is already in 45 countries. This will save Abaxis time and expenses of slowing building out its global infrastructure. Recently, Abaxis expanded in Europe, Latin America and Asia-Pacific.
Zoetis is "a logical (and very interested) buyer," Ransom said. In 2016, it bought Scandinavian Micro Biodevices for $80 million to expand its pipeline in veterinary diagnostics. The smaller firm made "lab on a chip" diagnostics.
Abaxis Sees Global Growth
The acquisitions of Scandinavian Micro Biodevices and Abaxis suggest Zoetis has "a desire to more meaningfully enter the field beyond the existing rapid assay product line," he said.
Abaxis Chief Executive Clint Severson sees "a prime opportunity to grow our business as part of Zoetis." In the fiscal year ended March 31, Abaxis generated $244.7 million in sales, up 8% vs. last year. That year, about 83% of its sales were from diagnostics and services in the veterinary market.
"Zoetis has the global presence and direct veterinary customer relationships to deliver greater value to more customers around the world and accelerate growth of our international operations," Severson said in a prepared statement.
China internet leader Tencent Holdings ( TCEHY) reported quarterly earnings Wednesday morning that relieved concerns about heavy investments crimping profit, as its WeChat messaging platform and mobile gaming showed double-digit growth.
Tencent, China's leading provider of mobile messaging and online games, reported revenue of 73.53 billion yuan, or $11.693 billion, up 48% in local currency from the year-ago period. That beat analyst estimates of $11.268 billion, as polled by Zacks Investment Research.
Adjusted earnings of 1.915 yuan, about 31 cents, matched predictions of 31 cents. But net profit for the quarter was $3.66 billion, topping estimates of $2.75 billion from analysts polled by Thomson Reuters.
Tencent had warned in March that heavy spending could crimp profit, sending shares sharply lower at the time.
Tencent shares, which trade on the U.S. over-the-counter market, jumped nearly 7% to close at 53.80 on the stock market today, rising above their 50-day moving average.
The top Chinese internet stock has ramped up spending as it competes with e-commerce rival Alibaba ( BABA) on many fronts. This includes investments in cloud computing, retail, online entertainment, and payments. Tencent has big stakes in several notable Chinese companies, including e-commerce giant JD.com ( JD).
Game Revenue Soared
Tencent's WeChat messenger app now has 1.04 billion users, up 11% from the year-ago period. That helped drive a 55% local currency gain in advertising revenue to 10.69 billion yuan.
Smartphone game revenue soared while PC gaming revenue was flat as PC gaming users fell.
"We drove adoption of our infrastructure services, seeing notable progress in areas such as mobile payment, cloud services, online financial services, and smart retail," said Ma Huateng, chairman and chief executive in prepared remarks with the earnings release. "We will continue to invest in improving our own products as well as enabling services for our partners."
It's no secret that Starbucks ( SBUX) is laser-focused on growing its presence in China, and the java giant announced Tuesday plans to ramp up store openings to 600 annually. The goal is to have 6,000 stores in the country, more than tripling revenue and more than doubling operating income there by the end of fiscal 2022 vs. 2017.
"No Western company or brand is better positioned to evolve with the rapidly expanding Chinese middle class — and we continue to mindfully evolve a coffee culture in China where the reward will be healthy, long-term, profitable growth for decades to come," said Starbucks CEO Kevin Johnson in a statement. "We are committed to long-term investment in China."
There are currently around 3,300 Starbucks locations in China, which means the company is looking to nearly double its overall store count over the next four years.
Same-store sales growth in China locations rose 4% vs. a year earlier in fiscal Q2 vs. 2% in the U.S. and worldwide.
Shares of Starbucks rose 0.9% in the stock market today, with the stock back up above its 200-day moving average after closing below the key level Wednesday. Therelative strength line, which tracks a stock's performance vs. the S&P 500 index, has been trending lower for more than two years.
Starbucks and Nestle recently inked a $7.15 billion deal, giving Nestle the rights to sell packaged Starbucks coffee abroad. Starbucks said Wednesday that it is planning to leverage that partnership to bring more off-the-shelf packaged coffee to Chinese consumers.
Stateside, the ubiquitous coffee shop chain's promotion and marketing strategies are undergoing a makeover. Instead of its broad-based "Frappuccino Happy Hour" promotion on summer afternoons, it is now targeting certain customers with invitations to buy discounted espresso beverages — and hopefully sign up for its Starbucks Rewards program.
Nike ( NKE) shares broke out Wednesday morning, a day after rival Under Armour ( UAA) cleared a bottoming base.
Shares of the Swoosh rose 2.65% to 71.34 in the stock market today, eclipsing a 70.35 entry point from a flat base. Under Armour sprinted 8.7% to 20.52, now slightly extended from its 18.85 entry.
The rise comes as apparel stocks — including Lululemon ( LULU) and Ross Stores ( ROST) — collectively move higher. Boot Barn Holdings ( BOOT) shot up 11.7% to 24.52 Wednesday following a solid earnings and sales beat late Tuesday. Boot Barn was already extended from a 20.41 entry.
While Nike shares have been holding up, the athletic-apparel giant itself is in the midst of a major leadership shuffle. Nearly a dozen executives and managers have left over the last two months, reportedly spurred by female employees' concerns of harassment, bullying and hiring inequities.
Horse racing giant Churchill Downs ( CHDN) has inked a deal to get in on sports betting in New Jersey.
The Kentucky Derby operator has sealed a partnership with Golden Nugget Atlantic City to enter real-money online gaming and sports betting markets there.
It comes just days after the Supreme Court backed the state's bid to legalize such wagering by striking down a 1992 federal law that prohibited it.
"We are looking forward to offering integrated iGaming and sports betting products in New Jersey," Churchill Downs CEO Bill Carstanjen said in a news release. "We have the unique opportunity to leverage our knowledge and experience operating the largest legal online horse racing wagering business in the U.S. as we enter the iGaming and sports betting markets."
Nasdaq-listed Churchill Downs rose 2.9% to 306.40 on the stock market today. The stock, which broke out of a cup base Monday on the Supreme Court ruling, is now extended from the 279.55 buy point. The stock is the joint leader of the Leisure-Gaming/Equipment industry group, along with Las Vegas Sands ( LVS).
Las Vegas Sands rose 0.6%. Wynn Resorts ( WYNN) climbed 0.8% while MGM Resorts International ( MGM) advanced 0.6%.
Sands, Wynn and, to a lesser extent, MGM are heavily exposed to Macau.
As for more-domestic casino names aside from Churchill Downs, Boyd Gaming ( BYD) edged up 0.4% and Penn National Gaming ( PENN) 1%. Boyd is working on the right side of a consolidation while Penn National is in buy range.
Golden Nugget Atlantic City is operated by private company Landy's.
Sports betting could start in a matter of weeks at casinos and racetracks in New Jersey.
Meanwhile, the Kentucky-based company also sealed an alliance with SBTech, a sports betting platform provider. This will let customers place online bets in Pennsylvania and Mississippi. It will also play a key role in New Jersey.
SBTech will provide a platform, consisting of a consumer website, mobile apps and back office systems to manage iGaming and sports wagering.
"We are confident that our strategic partnership with SBTech provides us with an industry leading platform to offer innovative and exciting, integrated iGaming and sports betting products," CEO Carstanjen said.
The Professional and Amateur Sports Protection Act of 1992 had effectively outlawed sports betting nationwide, except for sports lotteries conducted in Oregon, Delaware and Montana, as well as the licensed sports pools in Nevada. In Murphy v. NCAA, New Jersey appealed the law and the Supreme Court on Monday found in the state's favor.
Several other states are expected to legalize sports betting.
Paddy Power In FanDuel Move
Meanwhile Irish betting giant Paddy Power Betfair is in talks to merge its U.S. unit with fantasy sports company FanDuel. The bookmaker is eyeing the American market amid regulatory tightening in the U.K. and Australia.
"Discussions are ongoing and there is no certainty as to whether agreement will be reached, or as to the terms or timing of any transaction," the Dublin-based company said in a statement.
FanDuel agreed to merge last year with rival DraftKings. But they scrapped the deal after the U.S. Federal Trade Commission objected on antitrust grounds.
Last year Paddy Power acquired fantasy sports company Draft for $48 million.
Macy's ( M) crushed first-quarter expectations early Wednesday and raised full-year guidance, sending the stock shooting to a 14-month high intraday. Department stores led all 197 industries tracked by IBD, followed closely by several other retail groups.
Estimates: A 50% rise in EPS to 36 cents on 1.7% sales growth to $5.43 billion, according to Zacks Investment Research. Consensus Metrix projects same-store sales notching up 0.3% and same-store sales, including licensed departments, to lift 1%.
Results: EPS of 48 cents on revenue of $5.54 billion. Same-store sales rose 3.9% on an owned basis and 4.2% on an owned and licensed basis. Excluding a shift of Friends and Family from Q2 to Q1, same-store sales were up 1.7% on an owned plus licensed basis. Net operating cash flow jumped 36% to $322 million.
Macy's also ended with Chinese joint venture with Fung Retailing Limited but will remain active on Alibaba's ( BABA) TMall, as well as social media channels.
Outlook: Full-year EPS is now seen at $3.75-$3.95, up from a prior view of $3.55-$3.75, and better than consensus views for $3.64. Revenue is seen down 1% to up 0.5%, up from a prior view of down 0.5%-2%. Comp sales on an owned plus licensed basis are seen rising 1%-2%.
"Our first quarter performance reflects solid execution of our North Star Strategy, including merchandising and marketing activities," Chairman and CEO Jeff Gennette said in a statement. "We also saw continued healthy consumer spending and significant improvements in international tourism."
Stock: Macy's jumped surged 10.8% to 33.17 in the stock market today, hitting a 14-month high. Shares rebounded from around their 50-day moving average after briefly breaching the key level last week.
Department stores had a solid holiday quarter, but a mist of bearish sentiment is creeping back over the industry group.
Just last week, Morgan Stanley analysts downgraded Macy's to underweight from equal weight, cutting their price target to 25 from 27 after its analysis suggested that shuttering physical stores might not be enough to stem comparable sales declines.
Also last week, a Deutsche Bank analyst warned of " limited upside" in the space despite a sales bump from the holidays late last year.
Look for Nordstrom ( JWN) and J.C. Penney ( JCP) earnings on Thursday.
Nordstrom rose 2.4%. J.C. Penney and Kohl's ( KSS) jumped 5.5% and 2%, respectively.
Not surprisingly, Elgin Baylor was the No. 1 pick in the 1958 National Basketball Association draft. After all, he'd been selected to the Associated Press All-American team and named Most Valuable Player in the NCAA Final Four. So he was rewarded with the highest salary ever paid to an NBA rookie: $25,000 for the season. The average salary paid to an NBA player today is over $72,500 per game — whether they play or not.
You'd think that Baylor might be a tad envious, but he isn't. In typical Baylor fashion, he looks to the positive.
"That was a lot of money then," he said in a phone interview with IBD. "Teachers were only making $6,500 a year."
Baylor, of course, went on to a magical career, named to 11 NBA All-Star teams (he was 1959's All-Star Game MVP), averaging over 27 points per game over 14 seasons with the Lakers — first in Minneapolis and then in Los Angeles — and inspiring fans and teammates alike.
He was born Sept. 16, 1934, and grew up in heavily segregated Washington, D.C. His father — presciently — named him Elgin, after his dependable watch. It was a difficult life, but Elgin had basketball.
The park in Baylor's neighborhood did not have a hoop, but he and his brothers started sneaking into a white neighborhood's park at night to play. Once the authorities put up a basket in his neighborhood park — it was a rim without a net and a wobbly wooden backboard — there was no stopping him.
Baylor became obsessed with basketball, playing after school and on weekends. He was good, far better than his peers. So he begged his brothers to take him along to their games. "I wanted to play with older guys," he said. "Playing with kids was no fun." He couldn't learn anything.
When he was 14, Baylor got into a one-on-one game with a taller, older boy who played for his college team. The game was close, but Elgin lost. And he lost the second game, too. And the third. They played each other almost daily for weeks before Baylor eventually won one. And after that first victory, he never lost again.
"I'm living the old saying: If you want to improve your game, play against somebody better."
Current fans of the game likely wouldn't recognize the way basketball was played then. It was mostly a lot of passing until someone was clear to take a two-handed set shot. But Baylor was fast, jumped high and recognized that he didn't have to be constrained. He had moves. And he had great hang time. He could stop on a dime and jump over defenders for one-handed shots.
There are times where he took one of his jumpers and he heard "the crowd gasp," he recalled. "That's what I'd call it — a collective gasp, as if coming from one large body."
Confidence Under Pressure
But Baylor had more than skill working for him. He took to the court every day with another important ingredient for success: confidence. He built it in the schoolyards where trash-talking was an important element in the game — "You can't guard me," was a regular Baylor refrain to opponents — and carried that through to the NBA.
"The thing about it is that in the neighborhood I lived in, everybody had an attitude that they were better than the other guy. You had to go out there (on the court) with that attitude and give as good as you got."
Trash talk didn't end in the schoolyard. It extended all the way to the top levels of the game, "especially when I was a rookie," Baylor said. "The most important thing is having confidence and the veteran players would try to break that in me, especially because I was the first player chosen in the draft.
"I was never arrogant or cocky, but I felt I had the skills to go out there and do what I had to do and I just concentrated on that."
Baylor's single-minded focus on playing his game and avoiding distractions was significantly more important for him than for other rookies — and not just because he was the first draft pick. He was also the savior. It had been years since the Minneapolis franchise enjoyed a championship season as it did during the years when George Mikan led the team to titles in six years (1949-54). The Lakers finished 19-53 in the season before Baylor joined the team.
But along with the team's lackluster performance there was another problem: It was hemorrhaging cash. And there were some who placed the team's future squarely on Baylor's shoulders.
"I never thought about it," Baylor told IBD. "I was just happy to be able to play professional basketball, and that's what I concentrated on."
It paid off. The Lakers made it to the NBA finals in the next two seasons, before moving to Los Angeles. Certainly it was Baylor who made the difference, not only because of his skills but also his attitude.
He came to his first training camp prepared — and respectful. He'd memorized the names, numbers and stats of all his new teammates. Watching him in practice, they in turn soon came to appreciate him and his skills.
However, practice doesn't always make perfect. Early in the season, Baylor's performances were largely lackluster until teammate Hot Rod Hundley lectured him.
"I remember Hot Rod told me I was thinking too much. I was a rookie and didn't want to go out there and show off too much. But he said I should play my game, that I wasn't playing the way I did in practice."
That discussion not only freed Baylor to become the player he became, but also a leader of a team he would lead on and off the field.
"He treated everyone with respect," teammate Jerry West said in an email exchange. "He was beloved by all his teammates. I used to watch him out of the corner of my eye (wondering) can I learn anything from this? He never called attention to himself. His own teammates were the ones who called him great."
Part of the example he set was not holding on to tough losses. His philosophy: Once a game ends, it's over. We'll get 'em next time.
"You can't let a loss bother you," Baylor said. "My mother used to tell me everything is going to be fine. You have a long life ahead of you."
The professional part of that life, however, was potentially curtailed by a serious knee injury. Multiple doctors were unable to diagnose the root cause of his pain, so Baylor just kept playing. Finally, one physician figured out what the problem was, and successfully operated on it, but doubted Baylor would be able to play again. In fact, he told Baylor he might walk with a limp.
Baylor refused to listen. Instead he followed an extensive exercise regimen that sufficiently recuperated his leg so that he could play.
"I was concerned about how well I could play," Baylor recalled. "I had to change. I knew I couldn't do the same things I did before."
So at first, he did not play all-out, until his surgeon cornered him:
"He told me, 'You're not playing the way you should play. I did a great job on your knee. But you're just going out there being tentative. If you're going to play like that, you might as well come and sit on the bench with me.'"
Baylor went back and played all-out. And no one appreciated his presence more than fellow All-Star West.
"He helped draw me out of my shell (to the point) where I was more personable with people," West said. "My tendency was to always run away from publicity. I would watch Elgin sit and talk to reporters. He had a grace about him. Some people are real. He came into a room, and there'd be this white light where he was sitting, He had this aura about him. He's someone I care about deeply, as a player — and a person."
A perennial All-Star, he was a great athlete and a team leader.
Overcame: Growing up in a deeply segregated Washington, D.C.
Lesson: Find something you like and concentrate on that.
Quote: "As a youngster growing up, all I wanted to do was play, and I tried not to let the other stuff (such as inferior facilities in his neighborhood) bother me."
Top hedge fund managers have bet against Warren Buffett and taken large positions in UnitedHealth ( UNH), Anthem ( ANTM) and other health insurers.
Meanwhile Buffett's Berkshire Hathaway ( BRKB) has more than doubled its stake in generic drugmaker Teva Pharmaceutical ( TEVA). It also confirmed it has become the second-largest shareholder in Apple ( AAPL).
In an SEC filing detailing its U.S.-listed stock holdings as of March 31, the company said it owned about 40.5 million Teva American depositary receipts worth about $693 million. This is up from 18.9 million ADRs worth $358 million the previous quarter.
Health insurers shares slumped after Buffett, Amazon ( AMZN) chief Jeff Bezos, and JPMorgan Chase ( JPM) CEO Jamie Dimon announced January a joint venture whose aim is to cut U.S. health care costs.
"We want our employees to get better medical services at lower cost," Buffett said at Berkshire's annual shareholder's meeting earlier this month. "The resistance will be unbelievable, and if we fail, at least we tried."
However rivals are betting against the plan, with power player Jana Partners revealing Tuesday new positions in Anthem and Cigna ( CI), while Omega Advisors and billionaire investor Julian Robertson's Tiger Management have taken new positions in UnitedHealth, according to their regulatory filings.
Teva had been under pressure since Mylan's ( MYL) generic version of its multiple sclerosis drug Copaxone was approved in October and amid challenges facing the U.S. generic medicines industry.
To contend, Teva announced a restructuring plan to trim $3 billion in spending by closing plants and cutting drug programs. In February, Teva said it was well on its way to realizing half those savings by year's end.
Common Ground: Apple
One Buffett decision that hedge fund managers seem to agree with is his increased Apple holding. Barry Rosenstein's Jana Partners has a new position in the tech giant, though it has sold all its shares in Facebook ( FB). Highlighting the rough recent performance of homebuilders, Jana also revealed it had cut its stake in D.R. Horton by 96% to 47,000 shares. Other new positions include Adobe Systems ( ADBE), ADT ( ADT), Boston Scientific ( BSX) and Dr Pepper Snapple ( DPS).
In contrast, Tiger Management upped its positions in Facebook, while also taking more stock in Google-parent Alphabet ( GOOGL).
David Einhorn's Greenlight Capital added InterActiveCorp ( IAC) and exited Chemours ( CC)
Activist investor Carl Icahn sold off his stake of American International Group ( AIG) and increased his position in Herbalife Nutrition ( HLF). Hedge fund superstar Bill Ackman famously lost his $1 billion bet against Herbalife back in March, which he took out after claiming the company was a pyramid scheme.
Third Point raised its stake in Facebook by 18%, took 1.5 million shares in Wynn Resorts ( WYNN) and 550,000 shares in Microsoft ( MSFT).
Amgen ( AMGN) stock took double hits Tuesday as Dow Jones component Pfizer ( PFE) grabbed approval for a knockoff of Amgen's anemia treatment and Eli Lilly ( LLY) reported strong results for a competing headache drug.
On the stock market today, Amgen stock toppled 2.1% to close at 172.34. Pfizer dipped 0.5% to finish at 35.69. Lilly slipped 1% to 82.21.
The Food and Drug Administration approved Pfizer's drug called Retacrit midday Tuesday. Retacrit is a biosimilar — and almost identical biologic copy — of Amgen's drug Epogen/Procrit. Epogen/Procrit is an anemia treatment.
Pfizer's approval isn't a major hit for Amgen's revenue, which saw just $244 million in first-quarter sales of Epogen. Epogen was Amgen's seventh biggest drug in the first quarter, but sales declined 10% vs. the year-earlier period.
But others are attempting to copy Amgen's biggest drugs, Neulasta and Enbrel. Neulasta increases bone marrow stimulation. Enbrel treats five chronic diseases including some forms of arthritis and psoriasis. Both are blockbusters.
Novartis ( NVS) has an Enbrel biosimilar called Erelzi. The drug is approved, but Novartis' unit Sandoz can't launch Erelzi until its patent dispute with Amgen is complete. Novartis' Sandoz, Mylan ( MYL) and Coherus Biosciences ( CHRS) also are working on biosimilars of Neulasta.
Lilly's Migraine Drug
Amgen is also rivaling Lilly, Teva Pharmaceutical ( TEVA) and Alder Biopharmaceuticals ( ALDR) with a migraine drug in a class called anti-CGRPs, short for calcitonin gene-related peptide. All four firms are working on treatments that would prevent chronic migraines.
On Tuesday, Lilly said its medicine, called galcanezumab, met its key goal in a late-stage study of patients with episodic cluster headaches. It reduced weekly cluster headaches compared with a placebo across weeks one to three of a two-month treatment period.
A statistically significantly greater percentage of patients treated with Lilly's medicine also saw at least a 50% reduction in weekly attacks compared to placebo at week three. The drug proved safe and tolerable. Lilly's drug is also being studied in migraines.
Amgen and Novartis partnered to develop Aimovig. It's likely to be the first in its class to get approval to prevent chronic migraines. The Food and Drug Administration is expected to make a decision about Aimovig later this week.
Ligand Pharmaceuticals ( LGND) stock broke out Tuesday and touched a record high, defying a broader downturn that saw biotech companies' stocks dip a collective fraction.
By the closing bell on the stock market today, Ligand stock gained 2.3% to close at 185.37. Shares broke out of a cup base with a buy point at 184.89. The stock has remained in the black for the past five trading days.
Analysts are bullish on Ligand, which has licensing deals across biotech companies and pharmaceutical companies. Its bigger clients include Novartis ( NVS), Amgen ( AMGN), Celgene ( CELG) and Gilead Sciences ( GILD). It also works with Dow Jones components Pfizer ( PFE) and Merck ( MRK).
Ligand Pharmaceuticals Stock Leads
Ligand is an IBD 50 and a top growing stock. The firm acquires early-stage technologies necessary for drug development and then licenses those platforms out to other pharmaceutical companies.
The stock has an IBD Composite Rating of 98 out of a best-possible 99, meaning it performs in the top 2% of all stocks in terms of key growth metrics. Ligand stock leads the biotech group, ahead of Supernus Pharmaceuticals ( SUPN), which also has a CR of 98.
In the first quarter, Ligand crushed expectations and topped guidance views. Currently, four analysts have buy ratings on Ligand stock, according to MarketBeat.com. One has a sell rating on shares.
This is the second time Ligand stock has broken out in two months. Shares hit an entry out of a flat base in March.
Can Cisco Systems ( CSCO) deliver an earnings report that sparks a stock rally for a third quarter in a row?
Investors will find out late Wednesday when the computer networking giant reports fiscal third-quarter earnings.
Cisco stock has popped 32% since November, when it reported first-quarter earnings that beat estimates. It followed up by posting its first revenue gain in nearly two years when reporting second-quarter results in February.
Shares, which dipped 0.5% Tuesday to close at 45.48, are in a cup base with a buy point of 46.26.
The stock has hit a snag near 46 as investors look for more positive signs from the company. It aims to do so by increasing revenue from software and services.
For the third quarter, analysts estimate 8% profit growth to 65 cents a share. Revenue is seen rising 4% to $12.44 billion.
What Cisco Analysts Say
Here's a sampling of what analysts are saying ahead of Wednesday's earnings report.
James Faucette of Morgan Stanley is eyeing corporate demand for a new line of network switches, the Nexus 9000 and security products. "We and the market expect a strong April quarter report. Importantly, Cisco looks like it is laying the groundwork for potential fiscal 2019 upside, which we think could push it past recent resistance," he said in a note to clients.
UBS analyst Steven Milunovich in his note said: "Since the last earnings report when Cisco increased revenue guidance to 3% to 5%, the stock has risen 9% vs the S&P 500's 1%. Our survey of (resellers) finds a solid sales expectation for calendar Q1 with a better outlook for Q2, which could mean a positive surprise for July quarter guidance."
Mitch Steves, analyst at RBC Capital, is cautious. "We think fiscal Q3 results will likely surpass consensus expectations," he said in his report, "but given a history of providing conservative revenue guidance, we think it is likely the July quarter comes in in line to a tad below at the midpoint — avoiding raised expectations."
Simon Leopold, analyst at Raymond James, says the July-quarter revenue forecast is key. "We expect April quarter results to be in line with expectations, and remain cautiously optimistic regarding the outlook vs. the Street's 5% year-over-year growth estimates for July," he wrote.
Internet television network Netflix ( NFLX) has room to raise its prices, a new survey of U.S. subscribers indicates.
"Netflix could raise prices to $15 or more today and approximately two-thirds of subs would absorb the increase and remain on the service," Piper Jaffray analyst Michael Olson said in a note to clients Tuesday. He based his statement on the results of a survey of 1,100 domestic Netflix subscribers.
Netflix currently charges $10.99 a month for its standard streaming plan, which allows users to watch high-definition videos on two screens at the same time.
According to Piper Jaffray's survey, 64% of subscribers said they would not cancel Netflix until the price goes over $15 a month.
"With pricing-related surveys (for any product/service), responses are typically more negative than reality," Olson said. "Customers typically suggest a lower willingness to absorb a higher price than what they're actually willing to do in the event of raised prices."
Less Than 36% Would Cancel
Based on that observation, he believes that less than 36% of Netflix subscribers would drop the service if pricing went above its current rate.
"This leaves Netflix with significant room for domestic price increases in the coming 3-5 years," he said.
Also, the survey showed a higher percentage of subscribers willing to pay a higher monthly fee than in a survey conducted two years ago.
That suggests that Netflix content has improved enough to increase its value to subscribers, Olson said.
Netflix Faces Growing Competition
Netflix ended the March quarter with 56.7 million subscribers in the U.S., or 45% of its global total. It previously indicated that it can reach 60 million to 90 million domestic subscribers.
It faces a host of competitors including Amazon.com ( AMZN), Hulu and Time Warner's ( TWX) HBO. More competition is on the way from the likes of Walt Disney ( DIS) and Apple ( AAPL).
Apple Chief Executive Tim Cook confirmed his company's push into the video content market in an interview with Bloomberg Television, released Tuesday. But he declined to give specifics.
"We are very interested in the content business. We will be playing in a way that is consistent with our brand," Cook said. "We're not ready to give any details on it yet. But it's clearly an area of interest."
Netflix shares ended trading Tuesday down 0.7% to 326.13 while Apple dipped 0.9% to 186.44.
Shares of China online discount retailer Vipshop Holdings ( VIPS) lost a fifth of their value Tuesday, following its first-quarter earnings report that missed views as a partnership with two internet giants had yet to help it gain momentum.
Vipshop reported first-quarter earnings after the market close Monday. It reported revenue of $3.2 billion, up 24.6% in local currency from the year-ago period. That beat analyst estimates for $3.08 billion.
But lower gross margins offset the revenue hike, as Vipshop reported adjusted earnings of 17 cents per share. That missed predictions of 18 cents and fell 20% from the year-ago period, in local currency.
Second-quarter guidance provided by Vipshop implied its partnership with JD.com ( JD) and Tencent Holdings ( TCEHY) was not generating the volume of traffic that analysts anticipated.
The company projected second-quarter revenue in the range of $3.2 billion to $3.36 billion. The midpoint of $3.27 billion was below the consensus estimate of $3.3 billion.
$863 Million Investment
Vipshop recently established partnerships with JD and Tencent, two of China's largest internet companies. Tencent and JD.com in December invested a combined $863 million in Vipshop. The partnerships are expected to give Vipshop a boost in revenue and users throughout the rest of this year and beyond.
"We believe the guidance implies little contribution from Tencent and JD, which was not our expectation given good traffic growth in the mini-program on WeChat and strong commitment from JD with co-promotions in June," KeyBanc Capital Markets analyst Hans Chung said in a note to clients.
JD.com in March granted Vipshop a prominent position on its main page and within its mobile application and will assist Vipshop in achieving gross merchandising volume targets. In April, Tencent granted Vipshop a spot on the Chinese version of the popular WeChat communication platform.
"Looking ahead, we will continue to work closely with Tencent and JD.com in order to improve the traffic flow and conversion rates, which will contribute meaningfully to our long-term customer and revenue growth," said Eric Shen, Vipshop chairman and chief executive, in prepared remarks with the earnings release.
Vipshop ended the quarter with 156.6 million active customers, an increase of 1.1 million from the year-ago period. Total orders in the first quarter rose 25% year over year to 90.2 million.
Mizuho analyst Irina Koffler upgraded Valeant to a buy rating from neutral and raised her price target to 27 from 15. She noted, "we acknowledge the turnaround."
"After a drug-by-drug review, we conclude that Valeant is growing its key brands and has stabilized losses from older products," she said in a report to clients. "There is even potential pipeline upside."
Valeant Pipeline Strong
Today, Valeant's profile looks more Mylan's ( MYL), Koffler said. About 70% of its sales consist of stable products that are either consumer-focused or are older drugs that have already gone generic.
Further, "there is actual growth potential from its pipeline, which contains multiple catalysts in 2018-20," she said. "For this stock to work in the next year, we think Valeant simply needs to execute on its quarters and push through new product launches."
So far that's happening. In the first-quarter, Valeant stock jumped after the pharmaceutical company topped sales views and raised 2018 guidance. The firm will soon change its name to Bausch Health Companies, after its Bausch and Lomb segment.
Valeant pledged to double its dermatology revenue over the next five years. Koffler doubts that promise will come to fruition. But she does see $1 billion in sales from Valeant's "significant seven" drugs as possible.
Acne, Psoriasis Treatments
Among the " significant seven," Valeant lists psoriasis treatments called Siliq, Jemdel and Duobrii. It also has treatments for glaucoma, eye redness and opioid-related constipation.
The firm expects sales to grow at a 4% to 6% compound annual growth rate from 2018 to 2021, and for adjusted earnings before interest, taxes, depreciation and amortization to grow 5% to 8%. Koffler sees the guidance as challenging.
But other pharmaceutical companies have set similarly high, "seemingly unattainable," growth targets, she said. Plus, there's minimal clinical downside for Valeant as "there are minimal pipeline expectations, so if anything works, it is upside to the stock."
Upcoming, the Food and Drug Administration will consider approvals of three drugs — two psoriasis treatments and a drug to treat acne. It's also possible Valeant could unveil data from studies of medicines to treat acne.
Streaming music leader Spotify Technology ( SPOT) on Tuesday received its first sell rating since going public last month, sending its stock lower.
Its shares fell 0.8% to close at 158.71 on the stock market today. The stock hit an all-time high of 171.23 on May 2. It went public on April 3, starting at 165.90.
Loop Capital analyst Alan Gould initiated coverage of the Stockholm-based company with a sell rating and a price target of 120.
Spotify is the top streaming music company worldwide by subscribers and has been compared with streaming video giant Netflix ( NFLX). But Gould doesn't believe the comparisons hold.
"Spotify does not have as large a competitive lead as Netflix and the music oligopoly will make it difficult for music streaming to achieve the same margin as video, thus at the current valuation, we view Spotify as expensive," Gould said in a note to clients.
Apple Music Gaining Fast
The company ended the March quarter with 75 million paying subscribers. Apple's ( AAPL) rival service, Apple Music, has more than 50 million subscribers, Apple Chief Executive Tim Cook told Bloomberg Television on Tuesday.
Spotify also has a free, advertiser-supported streaming music service, which Apple Music doesn't offer. Spotify reported 99 million monthly active users of its free service in the first quarter.
The company expects to end 2018 with 94 million paying subscribers and 203 million total monthly active users, based on the midpoint of guidance.
Spotify Is Not The Next Netflix
"Streaming is now the largest revenue component of the $17 billion global recorded music business, grew 41% last year, and is responsible for growth returning to the recorded music industry," Gould said. "We look for Spotify's premium subs to grow 34% this year. The question inevitably then comes, is SPOT the next NFLX?"
Gould believes the answer to that question is no, at least not yet.
"We see differences," he said. "First, Spotify is licensing its content primarily from three music studios, and mostly offers the same 35 million tracks as its competition, whereas Netflix has exclusive content and increasingly owns its content. Said differently, Spotify is renting a library and Netflix is building one."
Also, Spotify does not have pricing power, while Netflix does. Plus, Spotify's gross profit margin lags that of Netflix.
Spotify faces stiff competition from Apple, as well as Amazon ( AMZN), Alphabet's ( GOOGL) Google and others.
Sony ( SNE) and Warner Music showed a lack of confidence in Spotify by selling much of their shares in the company, he said. Sony has sold 5.1 million shares, half its initial 5.7% stake, and Warner has sold 75% of its shares since the IPO.
Pressure on Tesla ( TSLA) shares continued to mount Tuesday as the maker of electric cars said it was temporarily halting work on its production line while an analyst who had been bullish on the stock slashed his price target on the company.
It was reported late Tuesday that Tesla is planning to pause production at its California factory for six days to work on fixes to its assembly line for its troubled Model 3 automobile. The vehicle is in mass production at more than 2,000 cars a week, and the company intends to eventually ramp that up to 5,000.
The production pause will begin on May 26, sources inside the company told Reuters. Tesla has been struggling to find solutions to manufacturing bottlenecks on the Model 3 assembly line.
Meanwhile, Morgan Stanley analyst Adam Jonas referenced those challenges in a research note to clients Tuesday, in which he cut his price target by 22% — to 291 from 376.
Chief Executive Elon Musk announced a " thorough reorganization" in a memo to employees. That news coincides with a broader exodus of top executives.
"The challenges in ramping up Model 3 production reflect fundamental issues of vehicle design, manufacturing process, and automation levels that can weigh against the profitability of the vehicle," Jonas wrote in a note to clients. "We are making material reductions to our earnings estimates to reflect lingering manufacturing issues with the Model 3."
Jonas sliced his long-term auto margin forecast to 27% from 34%. The change in his auto margin forecast drove nearly 90% of the price-target reduction.
He said movements in raw material prices and foreign exchange add further headwinds to prior expectations. Jonas also expects "marginally greater equity dilution."
Model 3 Production
Tesla reported first-quarter earnings on May 2 that topped estimates as the carmaker showed some consistency in Model 3 production. The company said Model 3 production hit 2,270 per week in the last week of April. That was its third straight week over 2,000.
Musk is also chief executive for rocket-ship company SpaceX.
Jonas expects Tesla will need to raise $3 billion in capital, up from a previous forecast of $2.5 billion, by the third quarter. Musk previously said Tesla would not need to raise cash this year and recently contended that the company will be profitable by the third quarter.
The company ended the first quarter with a cash balance of $2.7 billion. That's down from $3.4 billion in the fourth quarter. It plans to reduce capital expenditures to about $3 billion in 2018 from about $3.4 billion.
In January, when United Airlines ( UAL) announced a three-year expansion into middle America's smaller cities, Wall Street spiraled into despair. Analysts worried the carrier's plans were too aggressive. The plans, they said, would run up against rising fuel and labor costs, gutting margins along the way.
The stock still hasn't recovered. But now, one analyst says that expansion won't decimate the industry after all.
That analyst, Barclays' Brandon Oglenski, argued market concerns about United Airlines' plans, to offer more connecting flights from its airport hubs in Denver, Chicago and Houston, "seem overstated." And he said the data shows a "very tangible need" for airline expansion in smaller, connecting cities.
"Our analysis shows connecting markets have significant 'pent-up' demand, suggesting United's growth is unlikely to be materially dilutive to the industry," he said in a research note Monday. The analysis thus shows a "favorable outlook for depressed airline stocks," he said.
He added that United Airlines' plans "should help the carrier gain 'natural' share of higher yielding and likely higher margin traffic." Delta Air Lines ( DAL) and American Airlines ( AAL), he said, control a bigger share of connecting flights.
Oglenski's assessment echoes what United executives have said in defense of their expansion. United Airlines has said the move will help the airline regain what it says is its "natural" market share — territory it gave up to rivals following its merger with Continental in 2010. Management has also argued that the carrier can charge more for flight tickets in smaller cities, where competition isn't as intense as in bigger, crowded airports.
Management has also argued that expanding in one type of market won't wreck the airlines in all markets.
"All capacity is not created equal," United President Scott Kirby said at a conference in March, referring to an airline's supply of available seats and flight coverage.
United finished 2.1% higher in the stock market today, Delta Air Lines edged up 0.5%, and American Airlines climbed 1.7%.
Oglenski said that over the past eight years, domestic U.S. passenger demand for air travel has risen around 27% overall. Yields, or how much money a carrier can get out of a passenger for flying, were up 7.5% over that time.
However, in smaller connecting cities only, in which a flight connects to a hub airport, demand was up less than 4%. But yields surged 23%.
"While we understand connecting markets necessarily create higher costs to serve for the network airlines (given need for smaller aircraft and two departures)," Oglenski said, "it appears United's strategy to reduce domestic capacity in the past decade has at least added to demand constraints in small markets."
Whenever airlines expand, investors get flashbacks of the aggressive competition that came with it decades ago. Scores of airlines went bankrupt after overexpanding and discounting fares too heavily in attempt to lure customers.
Facebook ( FB), the esports industry and media companies like Disney ( DIS) could be in for a revenue boom due to the Supreme Court's decision to legalize sports betting.
Barclay's analyst Ross Sandler believes Monday's decision has massive implications for both the social media giant and the rapidly growing pastime of competitive video game playing. Tencent ( TCEHY), Activision Blizzard ( ATVI) and Take-Two ( TTWO) are all seen as potential winners.
"(The) ruling should pave the way for more widespread access to betting on professional esports, which is a clear positive for traditional sports betting sites, many of which have recently begun to offer esports betting," Sandler said in a research note.
"This news is also a net positive for video game publishers Tencent (Riot Games) and Activision (Blizzard), which operate several of the most-watched esports globally, as well as Take-Two, which recently launched an esport in partnership with the NBA."
While video game companies are perhaps not the most obvious beneficiaries from the ruling, the analyst expects them to get material gains in a variety of ways.
"As we think about how material greater access to esports betting could be in the next several years, we feel the direct financial benefit for video game publishers and esports leagues will manifest in the form of higher broadcast and/or sponsorship revenues as awareness, viewership and interest in esports draws greater investment in the space," Sandler said.
Meanwhile, social media giant Facebook is likely to rack up cash, both from increased advertising and a potential return to using the website as a gateway to gambling.
"Facebook actually was in the online casino space in 2012 with a third-party developer called Gamesys (that) launched Bingo Friendzy using cash for the first time instead of the popular virtual-goods purchases in other gaming apps like Farmville," Sandler said. "This trial didn't really get very far, but structurally everything is in place for users and developers to leverage Facebook as a gaming and sharing channel when online betting goes live."
The figures that could be funneled into online advertising are substantial, with Barclay's estimating the opportunity to be worth around $3 billion. However, it stressed there is precedent for the sums being even higher.
"However, if the same situation that happened in 2015 plays out whereby DraftKings and FanDuel spent 180% of revenue on customer acquisition (the scorched-earth land-grab phase), this figure could easily top $10 (billion) in digital ad (spending)," Sandler said.
Media Boom From Sports Betting
Meanwhile, Morgan Stanley analyst Thomas Allen believes media companies could also be in line to benefit from legal sports gambling, "including sports team and rights owners," such as Liberty Media ( BATRA) and Madison Square Garden ( MSG).
However, there will also be wider benefits, with the likes of ESPN parent Disney and MSG Networks, which will cash in "from increased advertising on live sports content."
"Online gaming companies typically spend 20%-30% of sales on marketing in order to consolidate share, and so TV networks and sports leagues could be beneficiaries," Allen said in a research note.
Congress Challenge To Sports Gambling?
Sports betting is not out of the woods yet, as Congress could step in, according to Cowen analysts.
But the firm pointed out that opponents to gambling lack the votes needed to enact a ban. In addition, states are eager to tap into the potential tax revenue, which the firm says could be as much as $3.4 billion per year.
And there is wide support at the state level, with sports gambling bills existing in some form in roughly half the 50 states.
Shares of Facebook closed down 1.2% on the stock market today, Tencent dropped 3.8%, Activision lost 2.1%, Take-Two dipped 0.8%, while MSG rallied 2.2% and Disney edged up 0.5%.