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Trina Solar announced its Q3 earnings earlier this week, reporting record panel shipments of 1.7 GW driven by growing demand in China, the U.S. and some emerging markets. Our earnings note discusses these results in more detail.

See Complete Analysis for Trina Solar
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Nokia continues to see growth in its patent licensing revenues, driven by the company's more aggressive stance with respect to its patent portfolio. Given the strength of its portfolio, we expect Nokia's licensing revenues to increase steadily going forward.

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    Despite A Lackluster Quarter, Guess's Recovery Seems To Be Underway
  • By , 11/25/15
  • Guess   (NYSE:GES) released its third quarter 2016 earnings results on November 24th. Despite its weak performance, the company had performed within the guidance given in its Q2 FY 2016 earnings . In some of the parameters, Guess’s performance even topped management guidance. For example, the company’s EPS, operating earnings, and operating margins surpassed the high end of the guidance. In its Q2 FY 2016 call, the company’s new CEO, Victor Herrero, spoke about the new roadmap that he had formulated to steer the ailing retailer towards a sustainable growth path. The third quarter earnings discussion focused on the progress the company has made in implementing those strategies. The company is also concentrating on Asia for the growth of its business. It has recently appointed two new directors in the region and has doubled store investments to boost Asia sales. Guess’s revenues for Q3 FY2016 stood at $521 million, depicting   around a 12% year-on-year decline (~4% decline in constant currency terms). The company’s net earnings for the quarter stood at $12.4 million reflecting a 40% year-on-year decline.  Guess’s diluted earnings per share decreased by around 38%, to $0.15, with currency headwinds accounting for an erosion of around $0.13. We’ll revise our $24 price estimate for Guess, shortly. See our complete analysis for Guess Guess Is Progressing With The Implementation Of Herrero’s Strategies   Sales And Merchandising Strategy: Introduced Workshops And Review Based Sales  Aim: The sales force is expected to have an exhaustive knowledge about the company’s products and the unique selling points for Guess. Progress: Towards that end, sales workshops and product related training sessions have been put in place. Additionally, a bestsellers’ report has been introduced so that the sales people can review it to maximize the sale of popular products. Digital Marketing Strategy: New Position Created As Director Of Social Media To Better Target The Millennials  Aim: The strategy proposed the portrayal of the brand as a unique lifestyle concept and to start targeting a younger audience group. Towards this end, digital media will play a pivotal role. Progress: The company recently hired a Director of Social Media because it believes that would be effective in spreading the new brand  image and in connecting with the millennials via fashion bloggers, social media, etc. Store Strategy: Better Visual Merchandising And More Rigorous Stock Replenishment Has Been Put In Place Aim: To gauge the performance of stores and enhance investments in commercially important stores and to better project the company’s new brand image. Additionally, the stores will be segregated into three performance-based categories. The stock checking would be made more rigorous to make more timely replenishments. Progress:  The company is currently striving to display a more diverse array of products in the stores along with the emphasis on the bestselling items. Also, better stock management and effective replenishment is being given the most importance in the stores. Yearly Retail Calendar: The Implementation Is Underway With An Eye To Capture Both Micro And Macro Events Aim: To maintain an annual retail calendar so as to better target sales opportunities during  mall events, promotions, or holidays. Progress: The plan is in the process of being implemented at the district and national levels. It aims to capture both macro events, such as a state or national holiday, and micro events that might occur locally. Increase Stock Keeping Units (SKUs) In Stores: On The Lookout For A Product Manager Aim:  The increased SKUs will point towards the more successful products and help in building the new and rapidly growing categories. Progress: The company is on the lookout for a product manager who would be the link between the stores and the headquarters, in order to provide customer feedback,  which can then be implemented in the merchandising, planning, and allocation process. Better Product Pricing To Optimize Value Creation For Customers  Aim: The product pricing will be adjusted as per the market sentiments. Progress: There were stores  within the EU where different retail stores had different prices for the same product. These differences have been removed and actions are being taken to realign some of the product pricing to provide optimal value to customers. Guess’s Focus On Asia Is Increasing Guess has been trying to revive its Asia business since 2013. After witnessing impressive growth in Asia for several years, Guess’s net sales in Asia rose by just 0.4% in 2013. In 2014, mainly due to the slowdown of the Chinese economy (which is Guess’s core market in Asia), Guess’s revenues in Asia fell by 4% to $281 million. However, CEO Herrero – who previously built a $4 billion business from scratch for Inditex in Asia – wishes to focus on Guess’s Asian business growth. You can read our previous article on how the revival of its Asian business can significantly raise Guess’s valuation. In Q3 FY 2016, Guess took a few steps to gain a better stronghold in its Asia business. The company hired a new Director for China and a new Director of the Middle East, India, and Southeast Asia. Both the directors are Mr. Herrero’s ex-colleagues from Inditex. This move suggests how the new CEO is serious about reviving Guess’s Asia business by working alongside colleagues with whom he is already familiar. Additionally, Guess’s capital allocation for stores in Asia has been doubled to improve business in the region. Finally, the e-commerce business in Asia has been ramped up through websites such as Tmall,, and Guess’s Regionwise Performance In The Third Quarter Americas Guess’s revenues in the Americas Retail division decreased by 7% year-on-year in terms of US dollars. The results came below the management’s expectation and was mainly due to the company’s promotional activities and the lower average unit sales. However, the e-commerce channel delivered an 18% top line growth in the region. The company is witnessing healthy demand for women’s clothing such as dresses, wovens, and knit tops.  However, the demand for accessories such as handbags, watches, and footwear has been persistently weak. Europe The revenues in Europe declined by 15% in terms of U.S. dollars. Though the comparative store sales were strong and exceeded the high end of the management’s expectation, the growth was offset by the lower shipment of wholesale products. Asia The Q3 revenues in Asia declined by 17% in terms of U.S. dollars. Like the previous quarter, the performance in China showed significant growth in comparative store sales, but this was more than offset by a shift of wholesale shipments to the fourth quarter. Guess’s business in Korea witnessed sequential improvement with the phasing out of the G by GUESS business. Guidance For Full Fiscal 2016 Net revenues: 0.5% to 1.5% decline in constant currency and an additional 8% decline due to currency headwinds Operating Margin: 5.5% to 6% (including currency headwinds of 130 basis points) Diluted EPS: $0.93 to $1.02 (with a currency headwind impact of around $0.40) View Interactive Institutional Research (Powered by Trefis): Global Large Cap |  U.S. Mid & Small Cap |  European Large & Mid Cap |  More Trefis Research
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    What Is Stalling Tata Motors' Growth In India?
  • By , 11/25/15
  • While  Tata Motors ‘ (NYSE:TTM) continual light commercial vehicle (LCV) sales decline is dragging down the brand’s India sales, passenger vehicle sales also haven’t risen as expected. Tata’s domestic sales through April-October have remained flat compared to the year ago period. This is still better than the de-growth the automaker was witnessing in the last couple of fiscals (April-March), but in the present context, where the Indian automotive market is growing at a brisk rate, Tata’s performance is seemingly weak. Trefis’ price estimate for Tata Motors is $35, which is above the current market price. See Our Complete Analysis For Tata Motors   Let the numbers speak. While passenger vehicle sales rose 8.5% year-over-year in the April-October period in India, commercial vehicle sales increased 8%. Conducive market conditions and rising disposable incomes are supporting growth in the passenger vehicle segment in the country. Although Tata registered an impressive 14% sales growth for its passenger vehicle portfolio in the seven month period, this growth is still less than was previously anticipated. Much was expected from the launch of the Genx Nano, Zest, and Bolt models. Following the launch of the sub 4-meter compact sedan, Zest, in August of last year, the automaker’s monthly car sales in the country rose in each successive month (over 2013 levels), after many consecutive months of decline. Zest and the hatchback Bolt are a part of the company’s Horizonext initiative, announced in 2013, which is an aggressive strategic plan for its passenger vehicle business unit to reverse the trend of flagging sales. However, the Zest and Bolt, dubbed as the comeback vehicles for Tata Motors, have failed to revive sales as strongly as expected. Although passenger car sales for Tata rose over 25% year-over-year in the April-October period, the compact sedan Zest and the hatchback Bolt are performing weaker than expected. After more than a year after launch, Zest is selling one-tenth the volume that its chief competitor, Swift Dzire, is selling in its segment. On the other hand, the Bolt is losing out to even the less popular foreign hatchbacks, such as the Volkswagen Polo, in its segment in India. Tata’s market share in passenger vehicles had fallen to less than 6% in the last fiscal, hurt by poor customer perception and lack of new and attractive models in its portfolio. The Zest and Bolt, and the Genx Nano — which is faring well in its do-over stint, were launched as ‘impact’ products, and although sales are sequentially improving for Tata’s passenger vehicle segment,  growth seems to have decelerated in recent months.   On the other hand, Tata is looking to improve sales of its commercial vehicles, and sees this segment growing by 10-15% this fiscal year. The group launched new models in the Prima LX and Ultra range, and along with the expected uptick in India’s infrastructure and real estate sectors, commercial vehicle sales for Tata could improve dramatically, after falling 16% year-over-year in fiscal 2015. This decline was mainly due to the falling sales in the LCV segment, and in the April-October period, while medium and heavy commercial vehicle (M&HCV) sales rose 26.7% in India for Tata, sales of LCVs declined 22%. LCVs form over one-third the net domestic volumes for the automaker, and thus, the continual decline in this segment is weighing on the overall volume performance. Much of the weakness in LCVs is associated with the low demand. Industry-wide sales have declined by 5% in the last seven months, as demand for these vehicles used for intra-city transport remains tepid. Within this segment, Tata Motors has also lost some of its stronghold. In fact, Mahindra & Mahindra surpassed the automaker this year in terms of unit sales of LCVs, raising its market share to over 42%, compared to Tata’s share of roughly 37%. The loss in volume share for Tata seems even more dramatic when we consider that the company held an almost 50% share in this segment in fiscal 2014 (ended March). But Tata is looking to stimulate demand going forward with the launch of the new smart pick-up Tata ACE Mega, with a rated payload of one ton. This will help the company improve competitiveness in one of the new segments within LCVs that has arisen and is drawing more customers. And then there is the new launch Magic Mantra, on the public transport side. Tata is also looking to expedite expansion of its dealership network and improve its general presence in South India, where the company faces stiff competition from Ashok Leyland.   The LCV segment continues to decline in India, but things could soon change, as soon as the second half of fiscal 2016, in fact. The uptick in the infrastructure sector has caused a rapid rise in sales of M&HCVs, which are used for inter-city transport. Once goods arrive at certain key hubs through trucks, they are transported to surrounding areas in LCVs. The growth in M&HCVs is expected to trickle down to the LCV segment soon, which should bode well for Tata Motors as well. Tata Motors is sequentially improving its volume sales in India, however, the growth rate still lags expectations due to the slower growth in passenger vehicle sales and sustained low demand for LCVs. View Interactive Institutional Research (Powered by Trefis): Global Large Cap |  U.S. Mid & Small Cap |  European Large & Mid Cap More Trefis Research  
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    Here’s The Reason Behind Salesforce’s Unabated Growth
  • By , 11/25/15
  • Leading customer relationship management (CRM) software vendor (NYSE:CRM) continued its relentless streak of strong revenue growth in the third quarter of fiscal 2016. (Fiscal years end with January.) We have reflected on the recently reported quarter at length and offer the following analysis.  Salesforce’s farsightedness in expanding its portfolio beyond CRM has paid off in a big way. The unabated growth can be attributed to the success of its products even outside the CRM category, which has long been dominated by Salesforce. Until last year, the Sales Cloud accounted for over half of the company’s total revenues. This status quo is now changing rapidly with the Service Cloud outperforming the other divisions by a wide margin.  It is set to catch up to the Sales Cloud gradually. The strong adoption of not just the Service Cloud, but also the Marketing Cloud and new Analytics Cloud, is clear from the consistent double-digit growth rate achieved each of these offerings. Thus, we believe that the primary reason behind the company’s continued success is  the it anticipated key growth drivers well ahead of time and expanded its product portfolio to leverage them. Here is a snapshot of Salesforce’s fiscal 2016 third quarter performance: Revenues grew by 24% year on year (27% in constant currency terms) to reach $1.7 billion Non-GAAP operating margin improved by 221 basis points year on year to 13.3% Non-GAAP diluted EPS was $0.21 compared to $0.14 in the prior year period Fiscal 2016 revenue guidance was raised by $25 million, to $6.64 billion to $6.65 billion Our price estimate of $60 for is about 25% lower than its current market price. See our complete analysis for here A Well-Rounded Product Portfolio Salesforce has come a long way from being a pure-play CRM company. Its erstwhile exclusive reliance on the Sales Cloud has given way to a well-rounded product portfolio, including the Service Cloud, Marketing Cloud, Apps Cloud and others. A major new growth driver, the Analytics Cloud is already making waves and is set to join the ranks of the above categories once it achieves sufficient scale. The notable point here is that each of these Clouds are pulling their weight and consistently achieving double-digit year on year growth every quarter. This is in contrast to other software majors like Oracle (NYSE:ORCL) and SAP SE (NYSE:SAP), which have one underperforming division or the other pulling down their revenue growth. Source: Salesforce Annual Investor Day 2015 Presentation As the above chart depicts, Salesforce expects the Sales Cloud to be a small part of the markets it intends to address. The company is currently banking upon the Wave Analytics Cloud to usher in the next phase of growth. We believe that it is moving in the right direction by integrating the Analytics Cloud across its entire portfolio, which could lead to better discovery and adoption. (Read: The One Theme Underpinning Salesforce’s Dreamforce 2015 and Its Entire Future ) Separately, the Service Cloud and the Marketing Cloud have shown no signs of slowing down. Consequently, the trio of Service, Marketing, and Analytics Cloud could well help Salesforce maintain revenue growth of over 20% in the medium term. The only downside in Salesforce’s current revenue trend is its concentration in North America. Salesforce derives almost three-quarters of its revenue from North America alone. This exposes it to saturation and heavy competition in the market, while missing out on the opportunity in international markets. To be fair, the company is gradually expanding its presence in international markets like Europe . Still, its focus undoubtedly remains in North America. For maintaining its historical pace of growth, Salesforce could do well by stepping up its expansion in Europe and Asia Pacific. Margin Expansion a Good Sign In the third quarter, Salesforce’s non-GAAP operating margin improved by a commendable 221 basis points year on year to reach 13.3%. Given that the company’s revenue is no longer growing at the historical rates of over 30%, it is encouraging to note that margin improvement has come into focus. Salesforce is targeting a non-GAAP operating margin of over 30% in the long term. While this appears to be a tall task at the present, the inclusion of margin improvement among the company’s top priorities bodes well for long term performance. Most of the margin improvement so far can be attributed to the decline in Sales and Marketing expenditure as a percentage of sales. The figure has been on the decline since 2012 and fell to 47.8% in the third quarter. The reduction is because the expansion in sales has outpaced the increase in Sales and Marketing expenditure. Combined with tapering off of the aggressive promotional activity undertaken by Salesforce, the ratio is likely to decline further over the medium term. Additionally, Salesforce’s operational efficiencies program has proved to be quite effective in yielding cost savings, which could help the company further improve its non-GAAP operating margin over the medium term. Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap More Trefis Research
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    How A Happy Holiday Season Can Impact Amazon’s Valuation?
  • By , 11/25/15
  • tags: AMZN WMT TGT
  • A survey by Reuters conducted between November 12 and November 18 revealed that 51% of 3,426 adults surveyed are planning to do most of their online holiday shopping this season at Amazon (NASDAQ:AMZN) compared to 16% at Walmart. Although the survey size is a very small sample of Amazon’s shoppers, it shows the company’s popularity and ability to grab a higher market share through various deals and incentives. While traditional retailers such as Walmart and Target have a dual challenge of competing in the online market and attracting consumers to their stores, Amazon’s efforts are totally focused on e-commerce. Its stock price jumped more than 4% in the last week, and a 200 basis points increase in the U.S. EGM (electronics and general merchandize) market share can lead to nearly 4% increase in our price estimate. Attracting Prime Memberships Through Deal Advantages Can Increase Market Share Amazon slashed its Prime membership subscription charges in the U.S. for a single day on Sep 22, 2015. and  it dropped is membership rates by £20 in the U.K. ahead of the Black Friday sales.Prime members will also get access to the Black Friday deals almost thirty minutes before guest customers. Amazon plans to announce the launch of one new deal every five minutes as opposed to ten minutes last year. A new feature called “Watch A Deal” has been added which allows shoppers to pick the deals they are interested in and receive a notification on their mobile device once the deal is live. In addition to expanding its same day delivery territories, Amazon is offering one hour delivery to its Prime now customers. Traditional retailers such as Walmart and Target might find it difficult to compete with both these offers and their convenience to customers. As a result, these initiatives should drive memberships and increase Amazon’s market share. We expect Amazon’s market share in the General Merchandise category to increase from approximately 14% in 2015 to around 20% the end of our forecast period. A 200 basis points increase in this figure where the market share increases to nearly 22% at the end of our forecast period can lead to 4% upside to our price estimate. As Amazon introduces new initiatives this holiday season, it could attract more memberships and increase revenues, further threatening traditional brick and mortar retailers. View Interactive Institutional Research (Powered by Trefis): Global Large Cap |  U.S. Mid & Small Cap |  European Large & Mid Cap
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    Hewlett-Packard Companies Earnings: Decline In Revenue Continues Post Split
  • By , 11/25/15
  • tags: HPQ HPE MSFT IBM
  • Hewlett-Packard  Inc. (NYSE:HPQ) announced results for Hewlett-Packard companies, i.e. HP Inc (HPQ) and HP Enterprise (HPE), on November 24 th . (Fiscal year end with October.) The company reported that the full-year combined revenues for HPE and HPQ declined by 7% (2% in constant currency) to $103.4 billion. For the combined entity, the company reported fiscal year 2015 non-GAAP diluted net earnings per share of $3.59, within the previously provided outlook of $3.59 to $3.65 per share. For Q4, the net revenues declined by 9% to $25.7 billion and non-GAAP diluted net earnings per share of $0.93 were within the guidance range of $0.92 to $0.98 per share. In this note, we explore the segment result of each company (HPQ and HPE). See our full analysis on HP Guidance For Q1 FY16 HP Inc. (HPQ) projects first-quarter earnings per share in a range of 33 to 38 cents. Hewlett-Packard Enterprise estimates earnings per share within a range of 37 to 41 cents. Hewlett-Packard Enterprise (HPE) Results During the earnings announcement, the company stated that the segments that comprise HPE have now had two consecutive quarters of constant currency revenue growth. The company reported following results for each segment (constant currency results below):- Enterprise Group revenue grew by 2% year over year (9% in constant currency). The division was able to buck the headwinds of currency appreciation and reported revenues at $7.4 billion. While there was a 5% year-over-year (13% in constant currency) revenue growth for ISS, the company continued to experience a decline in its Business Critical Systems division as revenues declined by 8% year over year (2% in constant currency). The company reported that the growth in ISS revenue was driven by demand for servers  from tier 1 service providers. Going forward, the company expect server momentum to continue next year but at a moderated pace. The storage division revenues declined 7% (flat in constant currency) to $819 million, even as converged storage systems continued to gain traction.  Revenues from converged storage grew by 17% in constant currency during the quarter. The trend in each segment is as follows:  Industry Standard Servers (ISS) revenue was up 5%, Storage revenue was down 7%, Business Critical Systems revenue was down 8%, networking revenue was up 35% and Technology Services revenue was down 11%. Enterprise Services division reported a 9% year-over-year decline (2% decline in constant currency) in revenue to $5 billion. The company was able to stabilize revenues due to  increases in new signings. Furthermore, its cost actions also delivered strong margin expansion. Profitability was up 1.4 points year over year to 8.2% for the quarter, the highest it’s been since the second quarter of 2011. The trend in each segment is as follows: Infrastructure Technology Outsourcing revenue declined by 11% (4% in constant currency). Application and Business Services revenue declined 5% (1% in constant currency). This is the strongest constant currency result in over three years. This result is especially encouraging since ABS carries the highest operating margins within Enterprise Services. Software revenue declined by 7% year over year (2% in constant currency) to $958 million. Within this segment, License revenue declined by 6%, support revenue declined by 9%, professional services revenue was declined by 3% and software-as-a-service (SaaS) revenue declined by 2%. Software division revenues were impacted by the shift in its portfolio and operating model to SaaS and subscription-based offerings. HP reported double-digit revenue growth in its cloud, security and big data services. We believe that cloud services are potentially the biggest new revenue source for HP in FY2016. HP Financial Services revenue was down 11% year over year with a 2% increase in net portfolio assets and a 4% decrease in financing volume. Hewlett-Packard Inc (HPQ) Results The HP Inc. continued to report a decline in revenues as hardware sales across printer and PC declined. The trends in the division are as follows: PC sales division:  According to Gartner, worldwide PC shipments experienced a decline of nearly 7.7% in the third quarter of 2015. HP’s personal systems division performed inline with the industry as both the number of shipments and revenue during the quarter declined. The company reported 12% decline in total units shipped during the quarter. While consumer revenues declined 12%, commercial revenues declined by 15%. As a result, the company reported 14% year-over-year decline (7% decline in constant currency) in revenues to $7.7 billion. Operating profit declined to $294 million or 3.8% of revenue, indicating the intense price competition in the industry. However, the company outperformed the market in calendar Q3, gaining 0.3 points of share in Consumer and 1.6 points of share in commercial. The printer division reported 14% year-over-year decline (7% in constant currency) in revenues to $5 billion in the quarter as supplies revenues declined by 10%. The channel inventory for supplies decreased during the quarter. This also suggests that demand will increase in the future. Furthermore, declines in low-end home and single function laser hardware units drove overall consumer units down 14% year over year. Additionally, aggressive pricing from Japanese competitors in the printing business, primarily due to the weakness of the Yen, continued to challenge HP’s market share. We are in the process of splitting our HP model and are waiting for 10-K to report the restated financial statement for each of the entity. Understand How a Company’s Products Impact its Stock Price at Trefis View Interactive Institutional Research (Powered by Trefis): Global Large Cap  |  U.S. Mid & Small Cap  |  European Large & Mid Cap   More Trefis Research  
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    From Content Factory To Internet of Things (IoT), L’Oreal Is Going Digital All The Way
  • By , 11/25/15
  • tags: LRLCY EL REV
  • After a beauty product is sold, the company loses its connection with the customer. It is impossible for the company to find out if the product caused an allergic reaction to the user or did it provide the expected results? Can beauty products connected to the internet be the answer?  L’Oreal  (OTC:LRLCY) seems to be exploring this idea. At a cosmetic conference in Paris, Feeligreen, a start-up, exhibited a newly developed skin care device based on the Internet of Things, that tracks usage and sends data back to the manufacturer to feed into product development and marketing. According to an article published by Marketing, L’Oreal is interested in this product.. See Our Complete Analysis for L’Oreal Here L’Oreal has undergone a digital transformation in the past few years and its e-commerce sales are surging.  It is already ahead of the game in its digital initiatives which include launching beauty apps, developing flexible wearable electronics to collect and transmit data from the body, and extensive use of social media marketing. Linking its products via the Internet of Things (IoT) could be a game changer in the beauty industry, since it provides a crucial link with the user after the product is sold. The technology can also provide skin care recommendations to the consumer, thus enhancing the customer experience. While this innovation is at a very nascent stage currently, it can help beauty companies in both marketing and product development by tracking the usage of their products. Reminding consumers to use their products, tracking frequency of usage, and feedback on the impact of the product on the user could be valuable features,  and L’Oreal’s interest in this technology demonstrates its keenness to take its digital initiatives to the next level. On November 13, L’Oreal celebrated the official opening of its first worldwide Content Factory in Canada.. This studio, which provides professional lighting, photography, and video equipment, would be open to all employees where they can create original content for their brands, such as make up tutorials, how-to videos, product shots, and other customer related material for digital platforms.  L’Oreal aims to use this content to increase digital engagement with its consumers. We believe digital initiatives could be a key driver of L’Oreal’s growth in the future, and the company is showing a strong commitment towards a digital future, ahead of its competition. View Interactive Institutional Research (Powered by Trefis): Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap More Trefis Research
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    VMware Shareholders Unhappy With Virtustream Cloud Joint Venture With EMC
  • By , 11/25/15
  • VMware’s (NYSE:VMW) stock has plummeted by about 25% in over a month following the announcement of the  Dell-EMC deal . There have been a few points of concern for VMware’s shareholders since the deal was announced. EMC initially had an 80% stake in VMware, with 97% of voting rights. With Dell acquiring EMC (NYSE:EMC), it has effectively taken the 97% voting rights but floated over 50% of VMware’s stock as “tracking stock” with no voting rights. Under the conditions of the deal, Dell would have a 28% stake in VMware with 97% voting rights, while existing VMware shareholders retain the 20% ownership with 3% voting rights, and over 50% ownership lies with former EMC shareholders in the form of tracking stock and no voting rights. Moreover, Dell faces a massive debt of about $60 billion, with almost $50 billion added due to the EMC acquisition. However, VMware’s management reassured shareholders that VMware’s cash flows or debt capacity will not be used to finance the transaction. After the Dell-EMC deal was announced, EMC released a statement announcing its intention to partner with VMware on a joint venture for a new hybrid cloud service business that uses capabilities of its recent acquisition Virtustream . In a recent development, some of VMware’s institutional shareholders have demanded that VMware pull out of the joint venture mainly because Virtustream’s global expansion efforts in 2016 could drag down VMware’s earnings. In addition to expected operating losses for Virtustream, VMware announced that it expects CapEx to rise to over $620 million for 2016, up from about $350 million expected through 2015. Below we take a look at VMware’s hybrid cloud business and how the joint venture might impact VMware.
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    The State of The Chinese Wireless Market In October
  • By , 11/25/15
  • tags: CHL CHA CHU
  • The three Chinese carriers recently published their October customer metrics, indicating that the Chinese wireless market (excluding MVNOs) expanded by roughly 2 million subscribers, with subscriber migration to high-speed data services (3G and 4G) coming in at a strong 18 million. While China Mobile (NYSE:CHL) and China Telecom (NYSE:CHA) posted their second-best number of high-speed customers adds since the launch of their respective 4G networks, China Unicom (NYSE:CHU) – the second largest carrier – continued to see some headwinds, with subscriber attrition and a moderation in the rate of its high-speed additions. Here’s a quick round-up of the state of the Chinese wireless market in October.
    Why Square’s IPO Flop Is Good for Investors
  • By , 11/25/15
  • tags: SQ MTCH
  • Submitted by Wall St. Daily as part of our contributors program Why Square’s IPO Flop Is Good for Investors By Louis Basenese, Chief Technology Analyst The alarm bells were blaring in Silicon Valley last week when digital payments processor Square Inc. ( SQ ) priced its IPO at $9. That’s a 25% discount to the midpoint of the proposed $11 to $13 per share range – and a hefty 42% lower than its latest private equity funding round at $15.46 per share. Okay, so what? The IPO missed the mark – it happens. Well, the news had tech analysts fearing that it would set a dangerous precedent. Namely, that it would prevent more than 140 unicorn companies from going public. What are “unicorn companies”? Basically, they’re private tech startups with valuations north of $1 billion. Heck, the most apocalyptic pundits went as far as suggesting that Square’s IPO flop would bring about the complete extinction of tech unicorns. Puh-lease! If anything, Square’s IPO pricing is a healthy development and a potential blessing for everyday investors like us, not a harbinger of some Techpocalypse . Here’s why . . . Hitting the Valuation Reset Button As Bloomberg View’s Matt Levine points out, “ valuing companies is hard .” That’s especially true for fast-growing, early-stage technology companies. We’ve recently seen a healthy debate rage over private market valuations for tech companies. The consensus sentiment is that companies are definitely skewed towards being overvalued. That’s fine . . .  but here’s the thing: An IPO is a check-and-balance in the system. It’s merely a pricing mechanism that provides an opportunity to hit the “reset” button on a company and its valuation, if necessary. That’s clearly what happened with Square. But it’s not the only one. I expect the trend to continue, too. I know  . . .  I’m suggesting that a bout of rational behavior is actually going to sweep over capital markets, which is admittedly atypical. However, evidence is piling up in support of it. At least in the tech sector. Mutual Funds Cutting Back Not only are IPOs like Square and Match Group Inc. ( MTCH ) getting priced at lower valuations, large mutual fund investors are pre-emptively marking down the value of their private holdings, too. For example… Earlier this month, Fidelity Investments wrote down the value of its stake in Snapchat by 25%, according to Morningstar. The $13.3 billion T. Rowe Price Global Technology Fund and the $1.4 billion Hartford Growth Opportunities Fund are also proactively marking down their tech investments. These actions speak louder than any of my predictions. For the record, though, I’m not the only one who expects saner times ahead. Survival of the Funded Ken Polcari, Director at O’Neil Securities, says, “You’re going to see some of them [tech unicorns] become more conservative in their pricing because it makes sense.” I couldn’t agree more. Remember, the goal of an IPO is to raise money in order to expand and continue operations. Postponing a deal prevents that from happening. So even if it means pushing ahead at a lower valuation, companies are going to just do it. Or as famed venture capitalist Fred Wilson puts it, “Sometimes, you just need to get the deal done. When you’re burning through cash and need to finance your company, the terms might suck, but the cash doesn’t. So you do the deal and live to fight another day.” We’re not at a point where early investors are going to vehemently oppose such behavior, either. Thanks to liquidation preferences, they’re still guaranteed to get their money back, and then some. In fact, law firm Fenwick & West LLP estimates that at least 30% of unicorn companies have agreed to some form of ratchet with investors – basically, a form of protection that allows early investors to retain their initial stake and value if subsequent funding rounds are lower. In Square’s case, the last round of private investors were guaranteed a 20% return, so they’ll receive an extra 10.3 million shares of the company. Here’s how this could end up benefiting us… This Is the Beginning, Not the End As I’ve written before, IPOs are rigged to maximize value for existing owners and private investors . As for everyday investors like us? We’re counted on to be the bag holders – the naïve, unsophisticated ones, rushing in to scoop up newly minted public company shares so the former groups can realize handsome profits. When valuations get stretched, the financial risks to us only increase. And that’s why I typically recommend avoiding hot IPOs – like I did with Groupon and Zynga . However, if we’re entering a period of saner valuations, tech IPOs are bound to be less risky and, dare I say it, could ultimately become compelling opportunities for everyday investors. So the skepticism over tech company valuations and the corresponding IPO resets like Square’s are anything but the end of the world. Instead, they could actually mark the beginning of a profitable investment trend for us. Rest assured, I’ll be following the situation closely and will alert you of any irresistible opportunities. Ahead of the tape, Louis Basenese The post Why Square’s IPO Flop Is Good for Investors appeared first on Wall Street Daily . By Louis Basenese
    Farmland: a Growing Investment Option
  • By , 11/25/15
  • tags: LANDS FPI AFCO
  • Submitted by Wall St. Daily as part of our contributors program Farmland: a Growing Investment Option By Tim Maverick, Senior Correspondent The last 20 years have seen a new asset category grow in popularity… farmland. And it’s easy to see why, because farmland is profitable. In fact, the National Council of Real Estate Investment Fiduciaries’ (NCREIF) Farmland Index had an average annual return of 12% over 20 years. That beat the NCREIF’s Commercial Property Index and the S&P 500’s return of about 9%. It also topped investment-grade corporate bonds, which had returns in the 7% range. Institutional Money Going Country Not surprisingly, farmland’s outperformance has caught the attention of institutional investors. In the past two years alone, institutional investment into U.S. farmland topped $2 billion, according to iiSearches, the data arm of Institutional Investor. And the trend seems to be continuing. In August, TIAA-CREF announced that it raised $3 billion for its second global farmland investment partnership. Institutions, however, still own less than 1% of the $2.4 trillion U.S. farmland market. And their share of farmland ownership is sure to rise in the years ahead. It’s the perfect investment for institutions with long-range investment goals, such as pension funds. It’s a real asset, not correlated with stocks and bonds. And it pays steady income, as farmers pay rent on the land. The average rent for U.S. farmland over the past 16 years rose about 5% annually. It was about $141 per acre in 2014, according to the U.S. Department of Agriculture . Farmland REITs Farmland is a real asset tied to a megatrend – rising global food demand. The middle class is expected to grow from 1.8 billion in 2010 to 3.2 billion in 2020 and 4.9 billion in 2030, with 85% of that growth coming from Asia. This real asset pays a steady income, making it suitable for mom and pop investors, too. And the good news for those looking to invest in farmland is that there are now three farmland real estate investment trusts, or REITs. These are equity REITs that lease the land to farmers. The three REITs, from the oldest to the most recent, are Gladstone Land Corp. ( LAND ), which IPOd in 2013, Farmland Partners Inc. ( FPI ), which IPOd in 2014, and American Farmland Co. ( AFCO ), which IPOd this year. Farmland REIT Breakdown Each REITs focuses on a different type of farmland: Gladstone Land began with fruit, vegetable, and berry operations mainly in California and Florida. It has since expanded to other states. Farmland Partners is focused on crops such as corn, wheat, soybeans, rice, and cotton in the central and southeastern United States. American Farmland’s acreage is roughly a third grapes, nuts, and specialty crops, a third in crops similar to Farmland Partners’, and a third in farmland being developed to grow grapes, nuts, and citrus. Thanks to University of Illinois professors Paul Peterson and Todd Kuethe, this graphic shows the geographic breakdown. The Outlook To date, none of these REITs have performed well – though, to be fair, American Farmland is new to the market. Perhaps the companies were overpriced when they IPOd. They’ve also been hit by Wall Street concerns over commodities in general. But in typical Wall Street fashion, investors are only looking at the short term. One thing is certain in farming, and that’s Mother Nature’s tendency to be fickle. This year may be great for growing crops, leading to oversupply and weak prices. But next year may bring vastly different conditions, leading to soaring crop prices. Investors should take the institutional perspective on these farmland REITs and hold them for the long term. The Wall Street Journal even quoted some institutional investors as saying that it’s like “gold with a coupon.” Good investing, Tim Maverick The post Farmland: a Growing Investment Option appeared first on Wall Street Daily . By Tim Maverick
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  • commented 11/24/15
  • tags: TGT BBY AMZN WMT
  • Cyber Monday's Growth: Will Sales Top $3B? Infographic for Your Blog.


    Are you geared up for Cyber Monday?
    Thought this infographic "CYBER MONDAY ONLINE SHOPPING TRENDS" might catch
    your eye.

    It features tidbits on milestones, overall spending, shopping trends, best-selling
    items and more since Cyber Monday was introduced in 2005. Did you know that online
    sales reached $2 billion in 2014? That's up from $1 billion in 2010. That may be
    because shoppers are now spending on average nearly $250 on home goods alone. The infographic
    also provides the average spend in Retail, Apparel, Health & Beauty categories.

    Interested in the stats compiled by Fat Wallet then view the IG here:

    Please be sure to embed this in a post on your blog if you'd like to share this infographic with your readers.
    If you have any feedback or questions, please let me know! Always happy to hear from terrific bloggers like yourself.

    Warm regards,

    Taylor Nagengast
    Foundation Digital
    Social Outreach Manager [ less... ]
    Cyber Monday's Growth: Will Sales Top $3B? Infographic for Your Blog. Greetings, Are you geared up for Cyber Monday? Thought this infographic "CYBER MONDAY ONLINE SHOPPING TRENDS" might catch your eye. It features tidbits on milestones, overall spending, shopping trends, best-selling items and more since Cyber Monday was introduced in 2005. Did you know that online sales reached $2 billion in 2014? That's up from $1 billion in 2010. That may be because shoppers are now spending on average nearly $250 on home goods alone. The infographic also provides the average spend in Retail, Apparel, Health & Beauty categories. Interested in the stats compiled by Fat Wallet then view the IG here: Please be sure to embed this in a post on your blog if you'd like to share this infographic with your readers. If you have any feedback or questions, please let me know! Always happy to hear from terrific bloggers like yourself. Warm regards, Taylor Nagengast Foundation Digital Social Outreach Manager
    Google Logo
  • commented 11/24/15
  • tags: GOOG
  • goog

    what is the estimate for google stock price in 5 years
    [ less... ]
    goog what is the estimate for google stock price in 5 years
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  • commented 11/24/15
  • tags: AAL
  • [ less... ]
    CLF Logo
    How The Potential Imposition Of Anti-Dumping Duties On Steel Imports Would Impact Cliffs Natural Resources
  • By , 11/24/15
  • tags: CLF RIO VALE MT X
  • Cliffs Natural Resources (NYSE:CLF) has faced an extremely challenging business environment in 2015. Like all iron ore producers, the company has been negatively impacted by the sharp decline in iron ore prices over the past twelve months (as indicated by the chart shown below), largely due to a global supply glut. However, in addition to subdued iron ore prices, the company has had to contend with weak demand from the North American steel industry, which has been negatively impacted by the sharp increase in steel imports to the U.S. As a result of weak demand, Cliffs has reduced production levels in 2015. Domestic steelmakers contend that steel imports are priced unfairly low and have filed anti-dumping duty petitions with U.S. trade authorities. Should these petitions be successful, not only will domestic steelmakers benefit, but also iron ore producers such as Cliffs. In this article, we will look at how such a scenario would impact Cliffs.   Impact of Imposition of Anti-Dumping Duties on Steel Imports For Cliffs The domestic steel industry is currently witnessing a slump in production and capacity utilization levels. Domestic crude steel production in the first nine months of 2015 stood roughly 9% lower on a year-over-year basis. Competition from cheap steel imports has eaten away at the market share of domestic steel producers, resulting in a reduction in domestic steel production. The penetration of finished steel imports in the domestic steel market rose to 28.1% in 2014, as compared to 23.2% in 2013, and is expected to rise further in 2015. The sharp increase in U.S. steel imports is largely a result of robust growth in Chinese steel exports. Chinese steel exports rose 27% year-over-year to 83.1 million tons in the first nine months of 2015. Imported steels are priced much lower than domestically produced steels, with a strong Dollar making imports cheaper still. Competition from imported steels has forced U.S. steelmakers and consequently, iron ore producers such as Cliffs, to scale back production. See our forecasts for Cliffs’ U.S. Iron Ore shipments The U.S. International Trade Commission and the Department of Commerce are expected to give their final rulings on the petitions of domestic steelmakers by mid-2016.  Should domestic steelmakers receive a favorable ruling, competition from steel imports is likely to dissipate and domestic steel production should revert to previous levels. Such a scenario would also positively impact Cliffs’ production and shipments, which have been scaled back in response to weak demand from the steel industry. In order to model this scenario, we will assume that Cliffs’ U.S. iron ore shipments rise to 21.6 million  tons by 2022, as compared to the base case scenario of 20.5 million tons by 2022. We will also factor in higher margins corresponding to higher production levels. If we factor in these assumptions into our model for Cliffs’ stock, our price estimate for Cliffs increases by 56% from $2.89 to $4.52. Thus, there is scope for a significant upward revision to Cliffs’ stock price, should domestic steelmakers receive a favorable ruling from U.S. trade authorities. See our complete analysis for this scenario here  View Interactive Institutional Research (Powered by Trefis): Global Large Cap |  U.S. Mid & Small Cap |  European Large & Mid Cap More Trefis Research  
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    How Focusing On Instore Experience And Omni Channel Retailing Could Be Key For Bed Bath & Beyond?
  • By , 11/24/15
  • tags: BBBY TGT
  • A weakening retail market, the slow growth rate of comparable store sales, and the after-effects of the West Coast port crisis have all been a concern for  Bed Bath & Beyond  (NASDAQ:BBBY)  investors. The company is now focusing on the enhancement of its e-commerce capabilities, the integration of its online and in-store channels, and improvement of  customer services, all to a better customers’ in-store experience.  We believe these will be the key drivers of growth for the company in future. Bed Bath & Beyond also remains focused on renovating, relocating and expanding stores based on customer preferences, which should attract new customers and retain existing ones in future. See our complete analysis for Bed Bath & Beyond Omni Channel Offers “Best Of Both Worlds” Several retail players are focusing on integrating the online channel with physical store experience and this appears to be driving more revenues.  According to Walmart, an average store-only customer spends approximately $1,400 a year at its stores, compared to $200 among online customers.  However, customers who shop through multiple channels spend $ 2,500 a year. This indicates how omni channel retailing can drive revenues for a retailer. For Bed Bath & Beyond, we believe the consumer preference is shifting from in store purchases to store browsing and online purchases. The company is leveraging this trend by strengthening its e-commerce channel with continued investments in technology. It invested heavily in e-commerce by upgrading its site, creating new mobile apps and installing a new data center. To integrate the in-store and online experience the company is offering options that include the ability to buy online and pick up and return in store. They also encourage customers to schedule appointments online, which should attract more customers to the physical stores. While the investments in technology have impacted the margins, these should drive higher sales growth in future. As the company achieves economies of scale in ecommerce, margins should eventually see an improvement. Enhancement of In Store Experience While Bed Bath & BeyondBBBY saw negative growth in comparable store sales (sales in stores open for at least an year), we believe this is an indication of shift in consumer preference towards online channels and not a sales slowdown. In its most recent quarter Bed Bath & BeyondBBBY’s comparable sales growth dropped to 0.7% versus 3.4% a year ago, comparable sales growth in the online channel ranged between 25-50% in the previous few quarters.  The company is now focusing on initiatives to attract more customers to its stores to improve product visibility, which can drive additional sales, by enhancing the in store experience. While customers could continue using online channels for the actual transaction, visiting stores to browse products and seek advice from qualified sales associates can provide better product visibility. While the pick from store initiative is aimed towards this, the company is also hiring local store managers to improve provide more region based customer service to enhance customer experience. The company’s coupon strategy and liberal return policy is aimed towards creating loyal customers and new initiatives to create a better in store experience which would integrate the online and in store experience would be key to drive its growth in future. View Interactive Institutional Research (Powered by Trefis): Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap More Trefis Research
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    Here Are The Three Key Growth Drivers For Nike
  • By , 11/24/15
  • tags: NKE RL
  • In October 2015,  Nike (NYSE:NKE)  announced a revenue target of $50 billion by the end of fiscal year 2020, of which $20 billion is expected to come from North America. The company expects a low double digit annual average growth rate from emerging economies in the next five years with Greater China growth in mid-teens. The company’s “Integrated Marketplace” will be another growth driver in the future where revenues are primarily expected to be driven by e-commerce sales which are projected to grow to $7 billion in the next five years. The women’s business is expected to be another key growth driver for the company, with revenues from this category expected to reach $11 billion by 2020. See Our Full Analysis For Nike Integrated Marketplace To Connect E-commerce and Store Sales Nike anticipates to achieve $16 billion in revenue from its direct to consumer (DTC) operations in 2020.. This is almost a 2.5 times increase in the next 5 years, up from $6.6 billion in fiscal 2015. Sales through this channel include sales from the company’s on-line stores, factory stores and through The company expects to have a total of 4 billion customers  in its markets by 2020 and provide mobile access to the Nike brand to all these customers by that year. The company has already taken steps to improve its mobile commerce experience by adding style guides, broadened assortments and improved performance. It now aims to serve its customers wherever, whenever and however they want by providing easy access to Nike products, services and environments. To achieve this goal, Nike is adopting a strategic approach called “Integrated Marketplace” which allows it to segment and differentiate the market place while enabling consumers to shop across a broad spectrum of channels. The marketplace will be connected through and catalysed by the Nike stores. We believe innovations in this space will drive Nike’s revenues in the future. Growth In  Emerging Markets Nike expects emerging markets to outpace the growth rate of its developed regions and grow at a low double digit rate. At the end of fiscal 2015, sales from its emerging markets (spread across 9 territories globally) doubled to $4 billion from approximately $2 billion in fiscal 2010. The company expects the running, football and sportswear categories to drive growth in these markets in the next five years, with women’s and young athletes’ businesses to be additional drivers. It expects to capture a higher market share in China and reach $6.5 billion in revenues from this region by the end of 2020. China could be the key growth driver for Nike in the emerging markets with its rapidly emerging middle class and the passion of Chinese consumers for sport. Women’s Products Segment In the next five years, Nike plans to increase focus on its women’s business with a target to generate $11 billion in revenues from this segment by 2020. The company recently opened a number of women’s only stores in California, Shanghai, and London and is looking to have as many as 1,000 premium spaces dedicated to women’s products, both within its owned stores and those owned by sporting goods retailers by fiscal 2020. According to the company, online penetration in this segment is relatively low and with fitness becoming a global lifestyle, there is a huge growth opportunity in this area. We believe this segment has been untapped and could be a key revenue driver for the company in the future. Understand How a Company’s Products Impact its Stock Price at Trefis View Interactive Institutional Research (Powered by Trefis): Global Large Cap |  U.S. Mid & Small Cap |  European Large & Mid Cap More Trefis Research
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    Three Things Which Will Drive Baidu’s Growth In Future
  • By , 11/24/15
  • tags: BIDU GOOG
  • Baidu ‘s (NASDAQ:BIDU) management is taking several initiatives towards building a “New Baidu” which would drive its growth in future. These include: 1) establishing a seamless user experience with search, location, service and payment in one platform; 2) generating more focus on localized search; and, 3) enabling merchants and fostering innovation for a better mobile search experience. We believe with mobile searches becoming the norm in future, Baidu’s efforts to compete effectively in this space with players such as Google will be instrumental for its growth. Furthermore, emphasis on tapping the large SME (small medium enterprises) market in China to provide local search could be another driver of growth in future.
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    Can Medtronic's Leadless Pacemaker Improve The Company's Share In Cardiac Rhythm Management?
  • By , 11/24/15
  • tags: MDT BSX
  • In a recent clinical trial, Medtronic’s ( NYSE: MDT) wireless pacemaker, the “Medtronic Micra Transcatheter Pacing System (TPS)”, was  proven to be significantly more effective than current options with a high degree of efficacy.  Data from the findings will be used to seek approval from the U.S. regulatory authority, the FDA. Unlike the traditional pacemakers that use a lead wire to connect to the heart, the Micra pacemaker is leadless and eliminates the complications that can arise if a lead wears out or breaks. Moreover, the device is very small and can be implanted endoscopically, rather than through conventional surgery.  By reducing the surgery costs, decreasing lead-related complications and easing the process of implantation, Micra can see increased adoption among heart patients, who depend on pacemakers to control their heart-beat. With the release of the study, moreover, and The Journal of the American Medical Association described the benefits of leadless devices on their respective website and publication .  The outlook for Medtronic’s cardio vascular group is all the more positive, suggesting the company can stabilize and even reverse the decline in its cardiac rhythm management market share with the strong adoption of leadless Micra. Our price estimate of $70 for Medtronic is about 10% below the current market price. See our complete analysis for Medtronic here Micra Can See Widespread Adoption Medtonic’s expects Micra to decrease the number of complications involved in using a pacemaker by taking lead out of the system and decreasing the size considerably, which eases the process of implantation. Unlike the traditional pacemaker that is implanted through surgery, the Micra pacemaker can be implanted through a catheter, eliminating the need of a surgical process and reducing the costs involved in implantation. According to a Berkley report, the average cost of implantation is $14,920 and the complication rates involved in a pacemaker procedure varies between 0% and 16%, with an average rate of 5%. Also, there are fewer complications associated with Micra’s use given that it does not use lead wires, which further adds to its functionality. In fact, leadless pacemakers are expected to rapidly make their way in the U.S. and other markets are expected to follow. Due to significant advantages of Micra, Medtronic could price it higher than the traditional pacemakers, but overall cost of the process may come down due to simpler implantation and fewer complications. On the contrary, to boost volume sales and gain share in emerging markets, the company will likely position Micra competitively with the traditional pacemakers, on a total cost basis. However, Medtronic may see increased competition from St. Jude Medical’s Nanostim, which won the CE mark back in 2013, and is waiting for the U.S. regulatory approval.   Nanostim’s sheath is smaller in diameter than what is required for Medtronic Micra, which eases the process by which doctors implant the device into the vein. Nevertheless, Medtronic’s Micra is the world’s smallest pacemaker and is 30% smaller in size compared to Nanostim which can give Medtronic a competitive edge.  Potential Upside Medtronic’s share in the global cardiac rhythm management Market has come down from 35% in 2010 to 25.4% in 2014 due to negative reports regarding the use of ICDs (implantable cardioverter defibrillators) in the U.S. We currently forecast the company’s market share to decline marginally in the near term and then stabilize at around 24%.   However, with the launch of Micra pacemaker, which reduces implantation costs and requires less expertise from cardiologists, Medtronic can improve its share in the U.S. and can even target the underpenetrated markets, where cost and expertise play an important factor. If the company is able to improve its share in the global cardiac rhythm management market by three percentage points over the next six-seven years, there can be about 5% upside to our price estimate for Medtronic. Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap More Trefis Research
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    No Superfluous Expenditures For Volkswagen In The Near Term
  • By , 11/24/15
  • Volkswagen AG  (OTCMKTS:VLKAY) is smarting under the repercussions of the dieselgate scandal, and looking to curb extra costs. The emissions scandal was bound to be followed by investigation, a change in personnel, and cost cuts to meet with the new added costs of vehicle recalls, fines, and settlements. And in the last week, Volkswagen announced a €1 billion cut in its planned investments in property, plant, and equipment, investment property, and intangible assets, excluding capitalized development costs, for next year. The figure is now expected to be approximately €12 billion ($12.76 billion), which, although, is still quite sizable, gives the group more leeway to tackle the extra costs brought on due to the scandal. We have a  $32 price estimate for Volkswagen, which is above the current market price. See Our Complete Analysis For Volkswagen AG   The group had earlier stated its plans to cut investment by €1 billion ($1.06 billion) a year at its namesake brand, which contributes ~60% of the net volumes, and is weighing down the group’s net profitability, as high capital spending and R&D investments have kept operating margins below 3% at the brand. Through the first nine months of the year, capex stood at €7.34 billion, representing 5.3% of the sales revenue for the automotive division, whereas the figure stood at 5% last year. Operating margins remain a problem for Volkswagen, which reported its first net loss in 15 years in the last quarter, primarily hurt by the added expense of the emissions scandal. The group’s ambitions to stay ahead of its competition globally has the company spending large on new technologies — which could possibly be curbed, now that the German auto behemoth has to focus first on regrouping, following the dieselgate scandal. The group invested €11.5 billion in research and development last year, representing nearly 6% of the net revenues, more than any other company worldwide. Through September, the company’s automotive business has spent 6.5% of its sales revenue on research and development activities, compared to 3.6% of the sales revenues spent at competitor and compatriot Daimler’s automotive unit. Volkswagen has given examples on how the group is planning to go about its cost-cutting spree. These include halting construction of the planned new design center in Wolfsburg — saving approximately €100 million right there, while reviewing the construction of a paint shop in Mexico.  The pure-play electric model successor to the company’s ill-fated Phaeton is also being delayed. A cut in capex shows how the group is ready to let go of planned investments which aren’t absolutely necessary or crucial to growth, as of now, especially when the dieselgate scandal is expected to cause a big $20-$30 billion dent in Volkswagen’s kitty. However, the group has also maintained that it is not exactly ‘slowing down.’  The CEO Matthias Müller announced the intention to increase expenditure on alternative drive technologies by approximately €100 million next year. New developments in electric vehicles and autonomous driving are keeping Volkswagen on its toes, as well. CEO of the Volkswagen Passenger Cars brand, Herbert Diess, earlier stated how the brand’s focus is on building plug-in hybrid electric vehicles with greater range, high-volume electric vehicles with a radius of up to 300 kilometers, a 48-volt power supply system (mild hybrid), as well as ever more efficient diesel, petrol, and CNG concepts. Apart from helping the company cope with the added costs of the scandal, Volkswagen’s cost cuts might be good for the company’s future. The German group employs roughly 600,000 people and has 119 factories around the world, comprises 12 separate brands, ranging from mass market cars to luxury vehicles to commercial vehicles. The group’s chief rival Toyota, on the other hand, employs only around 330,000 people, delivering a comparable number of vehicles worldwide. The group needs a structural upheaval, one would think. The CEO said how “together with the works council representatives we will make every effort to keep our core workforce on board,” however, trimming the high employee costs could be beneficial to Volkswagen at this time. Labor costs in Germany are rising, boosted by fairly strong economic conditions and the government’s tightened grip on the labor market. This might be alarming for Germany, where wage moderation had earlier bolstered job growth and investment. Rising wage costs could now negatively impact the country’s competitiveness. Rising wage costs are also a major cost driver for automakers, and as over 45% of Volkswagen’s total workforce is in Germany, the incremental expenses are pulling down profitability for the group. The emissions scandal is expected to cost Volkswagen a couple of tens of billions, or even more, but the group’s ‘retrofitting’ program should help cover some of these costs, if not all. More importantly, the cutback on expenditure on certain pending projects will have a positive impact on the company’s margins. In addition, the emphasis on development of electric vehicles could help push the company in the right direction — where the millennial customer is probably heading. See the links below for more information and analysis: Volkswagen: volumes start showing the impact of the scandal Volkswagen emissions investigation: when it rains, it pours Volkswagen’s Q3 results reflect weakness that goes beyond the emissions scandal Volkswagen emissions scandal: what we can learn from history Volkswagen: could the cost of the dieselgate scandal be lower than expected? Volkswagen has started damage control The domino effect of Volkswagen’s emissions scandal What could the dieselgate scandal cost Volkswagen? Oh Volkswagen, what have you done! Volkswagen’s troubles run deep Trefis analysis: Volkswagen China and Affiliates Vehicles Sold Trefis analysis: Volkswagen Passenger Cars, SEAT, LCVs Revenues Trefis analysis: Volkswagen Audi Revenues View Interactive Institutional Research (Powered by Trefis): Global Large Cap |  U.S. Mid & Small Cap |  European Large & Mid Cap More Trefis Research    
    When The Fed Raises Rates…
  • By , 11/24/15
  • tags: SPY TLT
  • The U.S. Federal Reserve had announced the possibility of a rate hike this year after almost seven years. Interest rates had been kept at close to zero for the past few years, with the aim of stimulating growth in the U.S. economy, that had been stalled in deep recession, and widespread unemployment. Now that the U.S. economy has recovered, the Fed has been planning to start increasing short-term interest rates, with the aim of keeping inflation in check. While this has not actualized so far this year, the U.S. economy’s upbeat performance in this quarter, so far, has led a large majority of economists to anticipate the first hike to be instituted next month.  Now, what implications could a U.S. interest rate hike have on the global economy? 1. A U.S. interest rate hike could attract capital towards dollar denominated assets. Post the global recession, capital increasingly moved away from the U.S. towards riskier emerging markets in search of higher returns. As the U.S. prepares to start increasing interest rates over many rounds, this capital could come back to the U.S. This trend has already been witnessed, and the magnitude of the first round of rate hikes could perpetrate further capital flight away from emerging markets to the U.S.   2. As funds start moving towards the U.S., and away from other economies, the U.S. dollar could gain strength against a number of key currencies. This, in turn, could make imports costlier, leading to an increase in domestic inflation in countries whose currencies have weakened against the dollar. At a time when many markets are already dealing with economic trouble against declining commodity prices, dwindling investment flows, and weakness in China, the rate hike in the U.S. could further exacerbate the situation. 3. A number of nations across the globe have undertaken dollar denominated debt. Now, if the U.S. dollar gains more strength against speculative behavior on the part of investors in light of the rate hike, it could put pressure on the repayment ability of these nations.   4. As the U.S. increases interest rates, other developing and developed markets could also resort to rate hikes to avoid losing capital inflow to the U.S. This could be, in part, to mitigate inflation rates, which could rise in light of weakening currencies, and, in part, to attract capital to avoid further currency depreciation. However, as a number of countries resort to interest rate hikes, borrowing, spending, and consequently growth, could suffer.   5. Last, but not the least, savers within the U.S. could gain, since they would now get a higher return on savings. A change in short-term rates could very well feed into changes in rates offered on other financial instruments, including car loans, corporate bonds, mortgages, etc. This, in turn, could make borrowing more expensive. These aforementioned points are some of the effects that an interest rate hike could exert. However, the magnitude of the impact would depend on how quickly rates are increased, and the kind of expectations that economic agents form about the policy move. So far, the Fed has said that the rate hike would be slow and spread over a long time period, with the median rate increasing to ~3% by 2018. Regardless of whether the rate hike comes as a surprise or not, a rise in interest rates in a country like the U.S. is bound to exert an impact on the world economy. While some possible impacts are highlighted in this article, we will know how economic agents actually respond only when the first round of rate hikes is actually brought into effect. Sources: Capital flight darkens economic prospects for emerging markets When interest rates rise Fed Up with Low Interest Rates Fed Chair Janet Yellen: Interest rate hike to come ‘later this year’ View Interactive Institutional Research (Powered by Trefis): Global Large Cap |  U.S. Mid & Small Cap |  European Large & Mid Cap More Trefis Research
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    Trina Solar's Q3 Earnings Driven By Demand In China, U.S.
  • By , 11/24/15
  • tags: TSL JASO YGE
  • Trina Solar (NYSE:TSL), the world’s largest solar manufacturer, published its Q3 2015 earnings on Monday, reporting record panel shipments of 1.7 GW, driven by growing demand in  China, the United States and emerging markets. However, despite the strong growth, the company posted a GAAP net loss, owing to a $45 million one-time expense related to a legal settlement with Solyndra LLC.   Demand is expected to remain strong during Q4 as well, with the company raising its full year shipments guidance by about 10% to 5.5 GW to 5.6 GW. Below is a brief review of the results and what to expect going forward.
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