Trefis Helps You Understand How a Company's Products Impact Its Stock Price


HP announced on Monday that it was acquiring wireless networking company Aruba Networks in the largest acquisition that HP has made since it acquired Autonomy for nearly $12 billion in 2011. Aruba will be integrated into the proposed new HP Enterprise Company once HP completes the split of its PC and printer business from its corporate hardware and service operations later this year.

See Complete Analysis for HP
Screenshot of forecast demo
To use this tool, please upgrade Adobe Flash Player here.
Related Companies: IBM | Lexmark | Accenture | ADP
Sign up for the complete Trefis experience.
Your Email Address:

Want to learn more? View a Trefis Webinar.


HSBC's Advisory, Underwriting and Financing Revenues have been steadily increasing, as the company's has used its increasing geographic presence to take advantage of improving economic conditions in developed markets as well as growth in emerging markets. We expect the company's advisory revenues to exceed $5 billion annually by the end of our forecast period.

Screenshot of forecast demo
To use this tool, please upgrade Adobe Flash Player here.


Wireless Tech Giant on the Cheap
  • By , 3/4/15
  • tags: SPY QCOM
  • Submitted by Wall St. Daily as part of our contributors program Wireless Tech Giant on the Cheap By Chris Worthington, Editor-in-Chief of Income   Last week, I wrote about John Chambers, the CEO of Cisco Systems ( CSCO ), and his desire to be at the forefront of the so-called Internet of Everything . Indeed, the coming wave of internet-connected devices will change the world as we know it, while minting many fortunes along the way. For investors, that means we need to find the companies that are best-positioned to capitalize on this massive trend – and it doesn’t hurt if they’re paying a reasonable dividend in the meantime, either. Lucky for us, Cisco isn’t the only well-positioned tech giant that’s trading at a discount right now . . . In fact, a second large-cap technology company is looking like a solid “Buy” – Qualcomm Incorporated ( QCOM ). Qualcomm is an American global semiconductor company that designs and markets wireless telecommunications products and services. The company is the world’s leading patent holder in advanced 3G mobile technologies. Like Cisco, Qualcomm sports a massive market cap of over $100 billion, so it’s not exactly a hidden gem. Yet even though the company is a household name, many don’t realize that it’s been rapidly increasing its dividend in recent years. In fact, the company’s five-year dividend growth is a whopping 147%. Currently, QCOM pays a $0.42 quarterly dividend, good for a yield of 2.34%. That’s higher than the S&P 500, as well as the average for S&P 500 technology companies. What’s more, the company has consistently raised its dividend every four quarters – which means its next announcement, which will likely come in April, should include a dividend hike. A Favorable Settlement Of course, in our search for income opportunities, we want to keep our focus on cheap dividend growers. Fortunately, Qualcomm is also trading at a discount right now. Check out the chart below, which compares Qualcomm to other S&P 500 technology companies: As you can see, Qualcomm is trading at a significant discount across the board – plus it has a higher dividend yield than its peers. What’s more, Qualcomm is trading at a discount to its 10-year average for all of these metrics, as well, as demonstrated in the chart below: Now, there’s one big reason why share prices are depressed at the moment: Qualcomm was facing an antitrust suit in China for allegedly overcharging customers for licensing agreements. With news that the company could face a fine of $1 billion or more – plus the potential that China could limit Qualcomm’s licensing business in the future – it’s not surprising that investors were feeling uneasy. Luckily, it seems that the cost of even the worst-case scenario has been priced into Qualcomm’s shares, which are down about 4% in the last 12 months and down about 9% since their high on July 23, 2014. Better yet, the case was just settled on February 9, and Qualcomm got off relatively easy. The company will pay $750 million to the Chinese government (which is less than the anticipated fine), and it must also forfeit a portion of royalty revenue on its 3G and 4G devices. More importantly, it won’t face any sanctions that would limit its ability to grow revenue going forward. A Sunny Outlook for Qualcomm Ultimately, Qualcomm seems well positioned for the future. For now, it’s a cash flow giant, with $7.2 billion in free cash flow in the last 12 months. In that same period, QCOM paid $2.7 billion in dividends – which leaves plenty of room for stock buybacks or a dividend hike. And going forward, Qualcomm is set to take advantage of the Internet of Things. In the latest earnings report, CEO Steve Mollenkopf noted that the company has a “broad set of products and equipment” with Qualcomm solutions inside that will be used in smart homes, smart cities, mobile healthcare, and wearables. As the trend of internet-ready devices continues to grow, Qualcomm should be riding high. In the meantime, investors can buy shares at a discount and enjoy the rapidly growing dividend. Good investing, Chris Worthington Editor’s Note: Qualcomm is the perfect example of the incredible and timely opportunities we’re hunting down each and every day. Here’s another that you’ll want to see right away. Click here to see what I mean . The post Wireless Tech Giant on the Cheap appeared first on Wall Street Daily . By Chris Worthington
    Aluminum Is Back in the Can
  • By , 3/4/15
  • tags: SPY AA
  • Submitted by Wall St. Daily as part of our contributors program Aluminum Is Back in the Can By Shelley Goldberg, Commodity Strategist   Back in the summer, life was good for the aluminum market. Prices were increasing, and the market looked healthy . . . Futures spreads were narrowing . . .   Midwest premiums were rising . . . Still, I sent out a word of caution imploring readers to look past the commodity’s sunny disposition . Namely because the combination of rising global aluminum inventories – along with slowing growth worldwide and the strengthening of the U.S. dollar – indicated that the high prices were unsustainable at the time. Now, buried under a heavy winter, prices have indeed turned sluggish. And as a world superpower reawakens after a national holiday, prices will become even more unpredictable. Mountains of Metal Create a Price Rollercoaster Part of the reason for the drop in price is the piles of aluminum inventories around the world. You can see in the chart below how the price of aluminum has trended over the last couple of years. In fact, at Vlissingen – a large port in the Netherlands notorious for storing large quantities of light metal – aluminum is stuffed into every available space. Ingots are omnipresent, in outdoor sheds, in boats, on the docks, and just sitting outside! Plus, there are another 685,000 tonnes in Rotterdam. With those storage facilities, the LME currently has a whopping 1.7 million tonnes of aluminum sitting in their registered warehouses throughout the world. But that’s not all of the aluminum that exists . . . There’s still more stored in non-registered warehouses, including in forms like processed and scrap metal. In addition, China has stepped up exports of semi-manufactured products, which attract tax rebates and could also douse Asian premiums next year. But high and rising aluminum inventories aren’t a new phenomenon. In fact, they’ve been the stigma pressuring aluminum markets for years. New Data . . .  Same Old Story Anyone who follows the metals markets knows that large banks and financial institutions are holding metal as a financing vehicle and profiting from the yield, which is well over current interest rates due to aluminum’s steeper yield curve. You see, over time . . . the stores of aluminum built up, while the queues to get it out grew longer due to warehouse rules dictating the amount that could be released. In many cases, the warehouses setting those rules are owned by the fanatical institutions holding the metal. These limitations resulted in rising Midwest premiums, even as outright futures prices dropped. As controversy arose around these deals, regulatory authorities slowly stepped up to the plate. But while regulation has helped to reduce warehouse queues, the Dodd-Frank and Volcker rule has encouraged banks to wind down prop desks. Unfortunately, this also reduces liquidity in the marketplace. Today, though, we can see a different image forming. A New Reflection Yes, aluminum prices are still drifting lower, but so is the Midwest premium, which has lost 10% of its value just over the past few weeks as delivery queues have shorted. The spot premium, measured in cents per pound, peaked at $0.24 in early February, partly due the U.S. auto revival. But the premium dropped to $0.22 this week, according to Platts . What this likely means is that reality is setting in . . .  We have a colossal amount of aluminum inventories and a surplus of producers. And this trend isn’t likely to change course any time soon, as forward deals have been booked for under $0.20 per pound. Ultimately, spreads are likely to ease further once the short rolls are finished, as those holding warrants will need to be compensated for holding on to metal through the delivery queue. And the final kicker is how much it costs to produce the common metal. The highest input cost of producing aluminum is energy, which is getting cheaper by the day. And as input costs decrease, there is a greater incentive to produce. Thus we have a serious disconnect between the two. A pure-play is to short aluminum futures, bearing in mind that when China returns from its New Year’s holiday, the markets will be sensitive to any economic data released next week. Good investing, Shelley Goldberg Editor’s Note: If you’d rather not short the aluminum market, there are a few other killer opportunities our team is tracking at the moment. This one might be my favorite right now … The post Aluminum Is Back in the Can appeared first on Wall Street Daily . By Shelley Goldberg
    Straight Talk Money: What Warren Buffett Eats for Breakfast and the Passing of a Wall Street Legend
  • By , 3/4/15
  • tags: SPY TLT
  • Submitted by Sizemore Insights as part of our contributors program Straight Talk Money: What Warren Buffett Eats for Breakfast and the Passing of a Wall Street Legend by Charles L. Sizemore, CFA Warren Buffett, 84 years old and one of the wealthiest men to have ever walked the earth, survives on a diet of Cherry Coke, ice cream, and greasy potato chips. Actually, in his own words, he adopted the diet of a six year old because the actuarial tables suggested that a six year old has the longest life expectancy. It makes my own cravings for Whataburger and Dr. Pepper seem a lot less bad. Peggy Tuck and I discuss Mr. Buffett’s diet on Straight Talk Money. Check out this link:   Buffett reminds me of the father in Grumpy Old Men who subsisted on a diet of bacon and beer. We also pay tribute to a Wall Street legend that passed away this week at the age of 109. Irving Kahn was working on Wall Street when the 1929 Crash hit and was still actively investing money for clients at the age of 109. Rest in peace, Mr. Kahn. This article first appeared on Sizemore Insights as Straight Talk Money: What Warren Buffett Eats for Breakfast and the Passing of a Wall Street Legend
    Oh là là! Looking for Dividend Yield? Explore France
  • By , 3/4/15
  • tags: EWQ SPY
  • Submitted by Sizemore Insights as part of our contributors program Oh là là! Looking for Dividend Yield? Explore France by  Charles Lewis Sizemore, CFA This is scary time to be investing in Europe. With the Greek debt crisis kicked down the road for another four months and with most of the Eurozone dangerously close to slipping into deflation, investors have been parking their cash on this side of the Atlantic. But investors flocking to American shores for the perceived safety are setting themselves up for disappointment, particularly when it comes to dividends. The U.S. is one of the lowest-yielding markets in the world at today’s prices. An investment in the iShares Core S&P 500 ( IVV ) will get you a dividend yield of just 1.88%. Meanwhile, across the Atlantic, you can get a dividend yield 75% higher by investing in French stocks. The iShares MSCI France ETF ( EWQ ), a collection of the largest and most liquid French stocks, yields 3.3% at current prices. Let’s take a look under the hood at EWQ’s holdings. Though not all of EWQ’s holding are readily available to U.S. investors as ADRs, all of the top-ten holdings are available either on the NYSE or over the counter. iShares MSCI France ETF Holdings U.S. Ticker Name Weight (%) Dividend Yield SNY SANOFI SA 9.2% 3.9% TOT TOTAL SA 8.7% 5.1% BNPQY BNP PARIBAS SA 4.8% 2.9% LVMUY LVMH MOET HENNESSY LOUIS VUITTON 4.0% 2.0% AIQUY AIR LIQUIDE SA 3.5% 2.2% LRLCY LOREAL SA 3.5% 1.7% AXAHY AXA SA 3.4% 3.8% SBGSY SCHNEIDER ELECTRIC SE 3.3% 2.7% DANOY DANONE SA 3.1% 2.5% EADSY AIRBUS GROUP NV 2.7% 1.4% At the top of the list we have French pharma giant Sanofi SA ( SNY ) . As a global pharmaceutical company—and as a defensive stock that benefits from aging demographics—Sanofi is relatively unaffected by what happens to the Eurozone economy. It also carries a very modest amount of debt, implying that the company could ride out any turbulence in the credit markets due to a Greek exit from the Eurozone. Sanofi also sports a nice dividend yield of 3.9%. Unfortunately, we probably can’t expect a lot of the way of dividend growth in Sanofi, as it pays out about 90% of its profits as dividends. The highest yielder among large-cap French stocks is oil major Total ( TOT ) . Total sports a 5.1% dividend yield, making it one of the higher-yielding global majors. As a point of reference, ExxonMobil Corporation ( XOM ) yields only 3.0%. Total, like most of its oil major peers, has made its dividend a top priority, and I consider its dividend safe for the foreseeable future. But with all oil majors slashing investment and divesting assets in this era of low oil prices, I wouldn’t expect aggressive dividend hikes any time soon. Still, a 5.1% dividend yield, even with no growth, is attractive in a market where the 10-year Treasury yields just 2.0%. Moving down the list, the next big-yielder would be insurance giant AXA SA ( AXAHY ), with a dividend yield of 3.8%. Does buying individual French stocks make sense? Well, it certainly could. If you’re bullish on energy stocks, as I am, then Total is certainly a strong contender. But the better option might be to simply buy EWQ and get an entire basket of French stocks. Using data from Research Affiliates, French stocks are priced to deliver vastly superior returns over the next decade. French stocks are priced to deliver real returns of 5.1% per year compared to just 0.4% per year in American stocks. It’s worth noting that French stocks are priced well below their median CAPE valuations and are priced at about half of American valuations. It’s also worth noting that France—yes FRANCE—just pushed through a package of significant economic reforms. It wasn’t easy, and French President Francois Hollande had to ram the reforms through over objections from parliament. But any improvement in the French attitude towards business and commerce is a major step in the right direction. If you’re looking for diversification away from expensive U.S. equities, investing in French stocks via EWQ is a solid option. Disclosures: No current positions. Charles Lewis Sizemore, CFA, is chief investment officer of the investment firm Sizemore Capital Management and the author of the  Sizem ore Insights blog. This article first appeared on Sizemore Insights as Oh là là! Looking for Dividend Yield? Explore France
    CMG Logo
    Three Scenarios That Might Impact Chipotle Mexican Grill
  • By , 3/3/15
  • tags: CMG MCD QSR DNKN
  • Chipotle Mexican Grill (NYSE:CMG), the leader in the fast-casual segment, is one of the fastest growing restaurant brands in the U.S. The burrito maker has been able to attract customers and investors, with nearly 20% revenue growth every year for the last 5 years. Moreover, the company reported roughly 28% year-over-year (y-o-y) growth in net revenues and 16.8% growth in their comparable store sales in 2014, primarily driven by two key factors: an increase in the average check and an increase in customer visits. Chipotle’s business model is positioned somewhere between fast food restaurants and casual dining restaurants, providing counter service with customized, fresh, organic, and high quality food at slightly higher prices than the fast food chains. The new innovative concept attracted more traffic and as a result, the Mexican cuisine specialist was able to steal customer traffic from the top traditional fast food chains. We have a $673 price estimate for Chipotle, which is roughly the same as the current market price. See Our Complete Analysis For Chipotle Mexican Grill CMG’s stock rose from more than 25% from $531 to $667 in 2014, primarily due to strong financial results. Trefis’ estimate for the CMG stock price is $673, which is currently in-line with the market price. However, Trefis estimates the net revenues for the fiscal 2015 to be more than $5 billion, which is 6% above the general consensus. Taking the current market and industry trends, as well as probable future scenarios in mind, there are 3 catalytic factors that can impact the company’s stock price. Shift In Dining Habits In The U.S. Top quick service restaurants, such as McDonald’s (NYSE:MCD), Wendy’s, Yum! Brands, and Burger King (now Restaurant Brands International Inc), dominated the last decade in terms of customer traffic with its innovative new burgers, sandwiches, and other value meals. Moreover, the breakfast menu introduced by some of these chains attracted the morning working class group, adding to the customer count. These fast food chains provide low cost food and high speed service. There is no doubt that Americans love fast food, but the industry is facing its own challenges, ranging from rising food costs and increasing health concerns. Over the past few years, the U.S. restaurant industry has been witnessing a gradual trend shift in the customers’ food preferences. There have been increased concerns over the quality of food served in these quick service restaurants. Being labeled as junk food, these food items contain high quantity of fat, sugar, and oily additives that are believed to cause many health problems, including diabetes, obesity, and other heart and digestion problems. Consequently, a new concept of organic fast food service was introduced by the fast casual segment for people who not only need quick meal options, but also healthier alternatives. Chipotle Mexican Grill was one such food chain that was able to cater to the needs of the people. The company promises high quality and freshly prepared food to its customers with its ‘Food with Integrity’ campaign, that too gives reasonable prices and quick service. The Mexican cuisine concept took the industry by storm, as it delivered strong top-line growth at a time when the other  well-established brands were struggling. According to the  NPD ’s foodservice market research, the customer traffic growth in QSRs was considerably flat during the year ending June 2014, whereas the visits to fine dining restaurants rose 3% during the same period. Despite the flat overall customer traffic, Chipotle’s average annual number of visits per restaurant rose by 1.2% to 186,000. Trefis estimates the number to increase by 6% to 198,000 in 2015, and expects it to rise to 243,000 by the end of 2o21. If quick service restaurants, such as McDonald’s and Burger King, came up with organic alternatives at cheaper prices to attract customers in the next 2-3 years, we might see only a 4% increase in the average visits per restaurant to 194,000 in 2015, and there will be 3% downside ($652) to our price estimate. Food Prices Chipotle mostly requires meat products, such as pork, chicken, and beef, to prepare its food items. Last year, the company witnessed an increase in prices of all the meat products, due to several reasons. According to the USDA, retail prices of Ground beef rose nearly 22% and that of pork and hams rose 15% in 2014. Apart from this, prices of dairy products rose slightly during the last year. As a result, the food and beverage expenses were 34.6% of the revenues, highest in the last 5 years. To counter this, the company was forced to raise the prices of its steak burritos by 4%-6%, or 32-48 cents, whereas the overall menu prices went up by 6.5% on average. This offset the increase in expenses and resulted in an increase in average check for the company. According to Trefis estimates, average spend per visit rose 12.4% to $13.05 in 2014. According to the United Stated Department of Agriculture (USDA), meat prices will likely rise further in 2015, due to the Texas/Oklahoma drought and Porcine Epidemic Diarrhea virus (PEDv). Moreover, further disturbances in weather situations in those regions might drive up food prices. Trefis estimates the average check to rise 6% in 2015 to $13.83, and to reach above $16 by the end of our forecast period. On the other hand, food expenses are estimated to increase to 35.8% of the revenues in 2015. If meat prices rise more than the expectation, and food expenses reach 36.6% of the revenues in 2015, with nominal increase in the menu prices, we might see a 3.4% downside ($649) to our price estimates. However, if the menu prices are increased subsequently, so that the average check reaches $14.10 in 2015, the downside might reduce to 1.4% ($662). Store Expansions In 2014, Chipotle added 192 net new stores taking the total count to 1,783, including 1,755 Chipotle restaurants in the U.S. and 7 of them in Canada. The number of stores is still less than compared to that of McDonald’s and Burger King. Most of the Chipotle stores are located in California and New York, with a lot of scope for expansion in the less targeted areas. Moreover, outside the U.S., there are only 17 stores in Canada, France, U.K., and Germany. Chipotle can target international expansion, with high GDP countries in focus. Currently, the company plans to open 190 restaurants in 2015. Trefis estimates the company to open 190 stores in 2015 and to have a total of close to 3,100 stores by the end of our forecast period. If Chipotle aggressively expands in the next two to three years both domestically and internationally, with an average of 220 restaurants openings per year, we might see an increase in average visit per restaurant as well. This scenario will provide an 8% upside ($723) expansion to our price estimate. View Interactive Institutional Research (Powered by Trefis): Global Large Cap |  U.S. Mid & Small Cap |  European Large & Mid Cap More Trefis Research
    HOG Logo
    Three Scenarios That Could Change Harley-Davidson As We Know It
  • By , 3/3/15
  • tags: HOG HMC TM
  • Harley-Davidson (NYSE:HOG) is an iconic heavyweight motorcycle maker, only one of two American motorcycle manufacturers to survive the Great Depression. The company also went through recession in the last decade, but has since recovered well. Wholesale motorcycle shipments have increased by approximately 30% since 2010 to over 270,000 units, although still lower than the peak of 2006 (350,000 unit sales). We remain optimistic about Harley’s future business growth, and have factored in the anticipated increase in demand in the U.S. amid strengthening macroeconomic conditions, and further expansion in international markets, which has taken our price estimate to 3% above the current market price. However, there are some scenarios — three in particular, which could somewhat alter Harley’s valuation. Our current price estimate for  Harley-Davidson stands at $67 . The stock fell 5.4% in the last three months. See our full analysis for Harley-Davidson Impact Of The New Plug-In Motorcycle- Harley-Davidson has remained committed to evolving with shifting market trends, and one such example is the company’s concept plug-in motorcycle dubbed LiveWire. The electric motorcycle wrapped up its demo tour in the U.S. last year, and is now moving to Canada, Europe, and Asia-Pacific to gauge customer response to the all-new Harley. The high-performance electric bike market is still in its nascent stages, and not much can be said about how huge this market could be, especially with the entry of Harley which already carries a strong brand name and could leverage its vast distribution channels and marketing muscle to grow. Fuel prices are low as of now, but once the prices pick up, coupled with the positive perception associated with environmentally-viable vehicles, electric motorcycles could be a huge market opportunity. Assuming this project takes off and LiveWire goes into production next year, we made certain changes to Harley’s U.S. and European market sizes and shares. The company’s current U.S. market share is at 55.5%, which could improve to almost 60% by 2021 (up from our current estimate of 58.6%), if the incremental sales of LiveWire are added. Market size will also swell as we will now consider a wider customer base, extending beyond the 600+ cc motorcycle segment, and including potential buyers of lighter weight electric bikes. By incorporating the new estimates, which could be further tampered with on the Trefis website, the price estimate for Harley jumps to over $68, with a 9.4% increase in the 2020 net income figure from our previous base estimates. Increase In Number Of Buyers Due To Outreach Program- With an aging population of middle-aged Caucasian males in the U.S., which traditionally formed the core customer base for Harley, the company has looked to put more emphasis on sales to outreach customers (comprising young adults, women, Hispanics, and African-Americans). For the third consecutive year in 2014, Harley grew sales to outreach customers by more than twice the sales-growth to core customers, which however still form a bulk of the company’s U.S. sales. Outreach sales are growing, and could grow at an even faster rate than previously predicted, fueled by the high estimated sales for the Street 500 and 750 in their first full year in 2015. These are lighter weight and cheaper Harleys, and make the motorcycle maker’s portfolio more attractive to the millennial and outreach customer. Assuming that the Street pair has a massive impact on Harley’s U.S. sales, the company’s heavyweight motorcycle market share could rise to 65% by the end of our forecast period. This figure might seem overly ambitious, as it is generally considered tough to improve share once its already in the high double-digit percents. However, the Street bikes could form as much as 8% of Harley’s net shipments this year alone, a bulk of which will be in the U.S., which is why market share could grow further. These motorcycles are also bringing-in customers new to the Harley brand, which essentially increases the market size too. The estimated impact of Harley’s outreach program could see the company’s valuation rise to $67.82 and earnings per share for 2015 to $4.38. Although the EPS estimate is only 13 cents above consensus estimates, this is because the outreach program will have a long-term bearing on the company’s sales, rather than an immediate impact on revenues and EPS this year. Possible Weak Demand For Luxury Bikes In Emerging Markets- One downside scenario for Harley-Davidson could be subdued demand in emerging markets, which are currently estimated to drive growth. We currently estimate the manufacturer’s rest of the world (excluding U.S. and Europe) sales to grow at a CAGR of 6.7% through the end of our forecast period to over 80,000 units. However, demand in developing nations and especially for luxury heavyweight motorcycles might not be the same as seen in the U.S. in the early 2000′s. Volatile macroeconomic conditions in certain nations such as Brazil, Russia, and Turkey could mold customer perception and dissuade them from lavish expenditures, which includes heavyweight motorcycles. China is also slowing, even though the GDP growth rate is above 7% as of now. On the other hand, Harley’s revenue in Japan, which is its largest international market, declined 10% last year on flat volumes and negative currency translations, and the market could continue to stagnate in terms of volume growth. The future might not be as bright as first thought for the company in international markets. If we consider this hypothetical situation and forecast international sales to rise only at a CAGR of 2.3% over our forecast period, there could be a 4% downside to our current estimate of profits for Harley in 2020. View Interactive Institutional Research (Powered by Trefis): Global Large Cap |  U.S. Mid & Small Cap |  European Large & Mid Cap More Trefis Research
    SAP Logo
    Has SAP Bet The House With The Biggest Update to its ERP in Two Decades?
  • By , 3/3/15
  • SAP SE (NYSE: SAP) recently released the biggest update to its Enterprise Resource Planning (ERP) platform in over two decades. SAP claims that its latest release, named SAP S/4HANA, redefines the way its ERP works by introducing in-memory simplifications that will drastically improve speed and performance. The new platform will be offered in on-premise, as well as  software-as-a-service (i.e., Cloud) and hybrid variants. The company has also decided to continue simultaneous support and updates for the original SAP HANA Business Suite through 2025. The most notable update in SAP S/4HANA is that while the existing SAP HANA Business Suite runs on third-party databases like those offered by Oracle (NYSE: ORCL) and Microsoft (NYSE: MSFT), the new app suite and platform will run on HANA itself, an In-Memory technology where the entire data set is loaded and searchable in Random Access Memory. This will eliminate all interim steps like aggregates, indexes and other data redundancies that take up significant storage space and processing cycles in conventional database computing, thereby leading to much faster processing. The notoriously outdated SAP HANA user interface has also been revamped with the new ‘Fiori’ interface, which is designed to run seamlessly on mobile devices. In this report, we take a look at SAP’s latest product and why this is a crucial turning point for the company. We have a price estimate of $78 for SAP, which is around 10% higher than its current market price. See our complete analysis of SAP SE here Doing Away With Third Party Databases As mentioned earlier, the functionalities offered by SAP’s current ERP systems currently work on third-party databases like those offered by Oracle and Microsoft. SAP S/4HANA represents a massive change, because ERP systems based on the new platform will function on HANA alone. This removes the need to store interim steps like aggregates, indexes and materialized views on synced spinning disk drives, thus speeding processing. Now, thanks to in-memory calculation of virtual views, users will be able to preview what-if scenarios for major strategic, organizational and reporting changes almost in real time. SAP claims the magnitude of improvement in transaction performance from this update may be as much as 3x to 7x; the data storage footprint of an ERP-system may improve by a factor of 10. Unanswered Questions, Unclear Roadmap The immediate aftermath of the release announcement raised numerous questions regarding the transition from SAP HANA to SAP S/4HANA. For instance, SAP has clarified that its public cloud apps like SuccessFactors and Ariba will be integrated with and expanded in S/4HANA. However, it is unclear how the integration will take place in private-cloud or on-premises deployments. Perhaps more importantly, the company has remained vague regarding the roadmap and timeline for making the new offering production ready. Further, the S/4HANA Public Cloud offering for a number of functions will be released later this month. However, while the Public Cloud is configurable, it remains unclear how and when support for company-specific customizations and legacy interfaces in the Private Cloud will take place. Lastly, SAP has not yet provided detailed pricing information for the S/4HANA platform, and subscription cost for the cloud model has not been released at all. Further, SAP has a tendency to not provide itemized bills, which frequently holds back customers from upgrades. This factor will become all the more important if the company choses to provide separate add-ons for industry-specific functions, for which price clarity will be essential. Thus, we believe that pricing, especially in industry-specific private cloud models, will be a crucial factor if SAP is to successfully convince potential customers to switch from the comfort of familiar databases to SAP’s insofar untested offering. Has SAP Bet The House on S/4HANA? We believe that the success or failure of SAP S/4HANA rests not on the performance improvements, but on the quality and depth of industry-specific functionalities that the company will need to offer to support its latest product. It is pertinent to note here that SAP has previously stated that it does not have any major acquisitions planned in the near future. Therefore, its in-house development team faces an uphill battle in developing suitable replacements for the functionalities offered by Oracle and Microsoft. SAP S/4HANA has already spent two years under development and its release is touted as “the biggest update in 23 years, possibly in SAP’s history”. Given the level of resources that the company has dedicated to S/4HANA and the long way it still has to go before it becomes fully functional, it would seem that SAP is betting the house on SAP S/4HANA. SAP founder Hasso Plattner has gone so far as to admit that “If it doesn’t work, we’re dead. Flat out dead.” However, we believe that its decision to continue the SAP HANA Business Suite alongside the new version suggests that the company is hedging its bets. After all, full support and updates for the older suite for another decade doesn’t exactly spell “phasing out”, let alone “full transition”. If anything, it indicates SAP’s cognizance of the hurdles that it is going to face in getting users to move on from familiar, traditional databases like Oracle. Instead of pursuing a single, unified vision for the entire company, SAP has now forked its foreseeable future into two paths – the older SAP HANA and the new SAP S/4HANA. In other words, SAP may have a lot riding on S/4HANA, but it has not put all its eggs in one basket – yet. Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap More Trefis Research
    HPQ Logo
    How Will Aruba Acquisition Impact HP's Stock?
  • By , 3/3/15
  • tags: HPQ
  • Hewlett-Packard (NYSE-HPQ) announced on Monday, March 2 nd that it was acquiring the wireless networking company Aruba (NASDAQ-ARUN) for $3 billion in equity value ($2.7 billion net of cash and debt). This translates into $24.67 per share for the company, a 1% discount to Aruba’s close price on Friday. This is the largest acquisition that HP has made since it acquired Autonomy for nearly $12 billion in 2011. Aruba Networks will be integrated into the proposed new HP Enterprise Company once HP completes the split of its PC and printer business from its corporate hardware, software and service business later this year. Aruba, based in Sunnyvale, California, is a leader in the wireless networking and makes Wi-Fi networking systems for shopping malls, corporate campuses, hotels and universities. The company had revenues of $729 million in fiscal 2014, and has reported compound annual revenue growth of 30 percent over the last five years as more people are using mobile devices at work, school and elsewhere. In this note, we explore the opportunity this deal offers HP in the Wireless LAN (WLAN) Market, which is currently dominated by Cisco. See our full analysis on HP The Global WLAN Market Wi-Fi networks market has taken off in the past five years as the rapid proliferation of wireless devices has impacted the number of users who go online. As a result, Wi-Fi has become a necessity in the work space as well as at home. This has translated into a high growth rate for the sales of Wi-Fi hardware equipment. According to IDC, the global wireless LAN market has been growing over the past few years. In Q3 2014, Cisco with about 48.3% share dominated the market. Aruba, with a market share of 11.5%, was a distant second. Despite the acquisition of Colubris in 2008 and 3Com in 2010, HP has not been able to capitalize on its wireless technology portfolios, and its market share has been a paltry 4.5%. From a geographic perspective, the enterprise WLAN market is witnessing robust growth in Latin America (with 27.3% year-over-year growth) and Europe, Middle East, and Africa (EMEA) (15.0% year over year) in 3Q14, while enterprise WLAN market in the Asia/Pacific region grew more modestly at 4.5% year over year. However, North America, which witnessed a decline in 2Q14, grew 7.5% year over year in 3Q14. Going forward, as companies are transforming their internal business processes and improving employee productivity through WLAN-enabled cloud and multimedia applications, enterprise WLAN demand is expected to increase. The transformation in Enterprise IT is further accentuated by  the adoption of cloud, mobility, big data analysis and social media that have increased both network density and the requirement for advanced Wi-Fi technologies such as 802.11ac. Furthermore, public-facing enterprises such as government agencies, malls, retailers, etc., are realizing the importance of improved customer engagement through the wireless access and are investing to install WLANs. These factors are leading to a robust stream of brownfield (network upgrades) and greenfield deployments. These deployments are not only affected by the increase in number of smart mobile devices that can be connected, but also by the increase in the number of wireless endpoints such as printers, scanners and beacons. We expect that these trends will continue to play out for the foreseeable future. The HP-Aruba Deal While Aruba is a leading provider of next-generation network access solutions for the mobile enterprise, HP’s legacy networking solutions business has not been doing well, and its market share in WLAN has shrunk to 4.5% in Q3CY14. Through this acquisition of Aruba, HP hopes to create a leading competitor in the $18 billion campus networking sector, so as to become a significant player in the fast growing WLAN market. Aruba has a highly regarded innovation engine and specialized sales, marketing and channel model, complementing HP’s leading networking business and go-to-market breadth. Under the deal, Aruba is to become part of the HP Networking business within HP’s Enterprise Group. The enterprise networking division posted $2.62 billion in revenues for FY14. HP could leverage its Helion services and Converged systems portfolio (servers, storage and networking) to bring new clients to the Aruba’s fold. Furthermore, HP can use its global exposure and presence in various industry verticals such as education, healthcare and financials to expand Aruba’s business globally. If the combined entity could capture 20% of the WLAN market, which is 5% more than the current combined shares of each, the wireless networking revenue for HP can increase by over 100%, due to the synergy offered by each business. As a result, the Networking division’s contribution to HP’s estimated stock price would increase to 10% and should lead to 12% upside to our current price estimate. The new combined organization will be led by Aruba’s Chief Executive Officer Dominic Orr, and Chief Strategy and Technology Officer, Keerti Melkote, reporting to Antonio Neri, leader of HP Enterprise Group. With this move, HP will be uniquely positioned to deliver both the innovation and global delivery and services offerings to meet customer needs worldwide. The transaction is expected to close in the second half of HP’s fiscal year 2015, subject to Aruba stockholder approval, regulatory approvals in the US and other countries as well as other customary closing conditions. We presently have a  $31.33 price estimate for HP, which is 10% below the current market price. 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
    ANN Logo
    What Mexico Holds For Ann's LOFT
  • By , 3/3/15
  • tags: ANN ARO AEO GPS
  • Last year, women’s specialty retailer  Ann (NYSE:ANN) announced the opening of its first LOFT store in the second largest Latin American economy, Mexico. This was the retailer’s first venture in the country, which offers a huge pool of value and fashion conscious buyers. The company believes that its success in U.S. and Canada is an indicator that it can succeed in Mexico as well, if it targets the market properly. Given that LOFT is a relatively cheaper brand as compared to Ann Taylor, has a bigger casual apparel variety and encompasses a wider customer demographic, it was understandably the preferred brand for Mexico. Although we expect Ann’s management to talk about its debut performance in Mexico in its Q4 fiscal 2014 earnings call, we think it’s worthwhile to analyse LOFT’s long term prospects in the market. Mexico is the eleventh most populous country in the world and close to 60% of its population is in the 15-54 years age group, which is LOFT’s target market. The ‘middle class’ of the country is growing, which paints a pleasing picture for relatively expensive brands that are associated with a luxurious lifestyle. However, the market is getting competitive with a number of casual as well as luxury brands extending their reach in the country, and this can keep a check on LOFT’s growth. Our price estimate for ANN stands at $36.64, which is just ahead of the current market price.
    INTC Logo
    Intel Showcases New Mobile Technology At The 2015 Mobile World Congress
  • By , 3/3/15
  • At the ongoing 2015 Mobile World Congress in Bacelona, Spain,  Intel (NASDAQ:INTC) unveiled a series or new products and refreshes for its mobile processor and modem lineup, as well as new security software OEM deals and alliances with various telecom equipment vendors. The announcements made by the company include: -  Intel Atom x3 processor series (code-named SoFIA) - the company’s first integrated communications platform for low-cost tablets, phablets and smartphones. Combining 64-bit multi-core Intel Atom processors together with 3G or 4G LTE connectivity, the integrated communications Sytem-on-Chip (SoC) combines the applications processor, image sensor processor, graphics, audio, connectivity and power management components in a single system chipset. Intel claims that around twenty companies have committed to delivering its Atom x3 designs in the near future. - The  first 14nm Atom SoC – the Intel Atom x5 and x7 processor series (code-named Cherry Trail) for next-generation tablets  and small-screen convertible PCs. The processors will power a range of mainstream to premium devices. Acer, ASUS, Dell, HP, Lenovo and Toshiba have already committed to deliver devices on the Cherry Trail platform. - Intel also announced its  third-generation five-mode, LTE Advanced Category 10 modem, XMM 7360. The compact size and power efficiency enable the Intel XMM 7360 to accommodate a wide range of form factors, from smartphones and phablets to tablets and PCs. It also expands Intel’s portfolio of LTE solutions, giving device manufacturers a competitive option to quickly design and launch LTE devices in various market segments and geographies. - Brightstar Corp, Deutsche Telekom, LG Electronics, Prestigio and Samsung selected Intel’s Security technologies to help secure personal data. - Intel is partnering with Alcatel-Lucent, Ericsson, and Huawei on creating a variety of network management and radio network hardware running on (Intel-powered) servers. See our complete analysis for Intel Intel’s Expanding Presence In Mobile Can Spur Future Growth; Contra Revenue To Decline In The Future Despite significant decline in revenue and heavy operating losses from the segment (the mobile business reported an operating loss of $4.2 billion in 2014), Intel’s mobile business is showing considerable momentum. Although Intel’s Mobile and Communications Group revenue declined drastically last year, the company in fact  gained market share in the segment. Intel had set a target to ship 40 million tablets in 2014 but ended up shipping 46 million tablets, becoming one of the industries largest merchant silicon providers in tablets. For much of last year, the ramp up in its tablet volumes is being offset by an increase in contra revenue dollars — hence the decline in revenues. With contra revenue, Intel is paying tablet makers to cover the additional bill of materials (BOM) costs of switching from ARM-based processors. The goal was to establish Intel architecture in the marketplace and scale the supply chain and the chart developers. For 2015, Intel’s key goal is to improve its profitability in the mobile segment as the company believes that it has done a good job establishing itself as one of the top producers of silicon in tablets. As Intel’s SoFIA SoC ramps, it will progressively reduce the building material cost that have adversely affected the company’s gross margins in the mobile business. Intel believes that it will no longer have to pay the subsidies for the SoFIA products. The bill of materials cost for a Broxton tablet is estimated to be $20 less than for Bay Trail, and SoFIA, with its greater integration and smaller die size, is expected to cost even less. In sum, Intel is leveraging  its advance along the technology road-map to lower the price and eliminate the subsidy. Intel’s LTE technology, which was originally developed for phones, is becoming increasingly valuable in tablets and even PCs, as wireless wide area network connectivity becomes increasingly common. Intel estimates the rate of baseband attached to tablets will roughly double and that of PCs will rise to over 15% by 2018. We believe the above developments can help the company expand its footprint in the smartphone and tablet market. Intel targets to drive $800 million out of its mobile business in 2015. Our current price of $34 for Intel is in line with the current market price. View Interactive Institutional Research (Powered by Trefis): Global Large Cap |  U.S. Mid & Small Cap |  European Large & Mid Cap More Trefis Research
    ZNGA Logo
    Zynga Through The Lens Of Porter's Five Forces
  • By , 3/3/15
  • tags: ZNGA EA FB
  • Zynga’s (NASDAQ:ZNGA) business  under-performed during 2014 owing to a drop in its user base, a surge in losses, and a lack of new major game launches. Its fourth quarterly results also came in disappointing, with weaker-than-expected sales growth and a soft outlook driving its share price over 15% lower since the earnings report. In this article, we stack up Zynga’s business against Porter’s Five Forces to assess where it could gain or lose going forward. We think the industry dynamics are clearly unfavorable for Zynga, as many of the Porter Five Forces indicate a high level of threat. Although already intense, the competitive rivalry within the industry could further intensify in the future due to the low barriers to entry in the mobile gaming business. Coupled with high bargaining power for customers as their expectations continue to magnify, we think these factors will put an upward pressure on development and customer acquisition costs over the coming years. Suppliers of traffic, including Facebook, Google and Apple, can impact Zynga’s business by changing their terms of service unilaterally. In addition, the sheer number of mobile apps that keep emerging every day  can threaten Zynga’s business, as they compete for the time and money spent by Internet users.
    BMY Logo
    Bristol-Myers Squibb's $1.6 Billion On New Drug Deals Is Well Spent
  • By , 3/3/15
  • tags: BMY MRK PFE
  • Bristol-Myers Squibb (NYSE:BMY) recently entered a couple of agreements worth $1.6 billion to bolster its immuno-oncology drugs portfolio. The first was its decision to acquire Flexus Biosciences, which is involved in the development of novel oncology drugs, for $1.25 billion. Out of this, $450 million is contingent upon Flexus achieving certain development milestones. With this acquisition, Bristol-Myers Squibb will get rights to Flexus’ top drug under development - F001287, as well as access to its IDO/TDO discovery program. IDO/TDO inhibiting drugs decrease the production of kynurenine, thus empowering the body’s immune system to target tumors with higher efficacy. The second deal is essentially a research collaboration with Rigel Pharmaceuticals. With this move, Bristol-Myers Squibb will gain development and marketing rights to Rigel’s TGF beta receptor kinase inhibitor pipeline. The crux is that the company is making some significant moves to expand in a market with strong growth potential. Cancer drugs have traditionally been much less effective as compared to drugs catering other therapeutic areas. Besides, there are numerous types and sub-types of cancer which warrant development of very specific drugs. These factors indicate that there is a huge untapped market provided R&D efforts result in novel and effective techniques. It makes sense for the company to invest in this area. Immuno-oncology, in particular, is where most of the funding is likely to go. Let’s take a look at how this market is expected to shape up. Our current price estimate for Bristol-Myers Squibb stands at $52.70, implying a discount of about 15% to the market.
    ANF Logo
    Abercrombie & Fitch Earnings Preview: Weak Portfolio And Traffic Decline Will Subdue Growth
  • By , 3/3/15
  • tags: ANF AEO ARO
  • Abercrombie & Fitch (NYSE:ANF) has been struggling for a long time now, initially due to its over reliance on logo merchandise and lately due to its strategy of aggressively phasing out basic logo products. Amid all of this, a consistent decline in foot traffic on account of the ongoing online shift has made things worse for the company. When the retailer comes out with its Q4 fiscal 2014 earnings on March 4th, we expect its results to be bogged down once again by the aforementioned factors. In fact, during its third quarter earnings call, Abercrombie slashed its full year EPS guidance to $1.52-$1.65 from its earlier outlook of $2.15-$2.35. This was an alarming revision and it confirmed that the company was itself unsure of its performance during the holiday quarter. Abercrombie’s fashion inventory remains limited and its portfolio has been weakened by the absence of logo merchandise. While the management believes that this strategy is necessary for the revival of its brand image, it is weighing heavily on Abercrombie’s overall results. During the third quarter of fiscal 2014, the company’s comparable sales fell a very sizable 10%, and it might report a similar figure yet again. Our price estimate for Abercrombie & Fitch stands at $37.30, which is about 50% above the current market price. See our complete analysis for Abercrombie & Fitch Weak Product Portfolio There was a time when Abercrombie’s logo on basic t-shirts and jeans was enough to attract customers, but it is no longer the case. Over the past two to three years, U.S. shoppers have shown great interest in fashion-forward products from Zara, Forever 21 and H&M, but little affinity towards logo branded basic products from Abercrombie. As a result, the company’s revenues have declined significantly, since it persistently relied on the logo business hoping that its iconic brand image would eventually bring customers back. However, given that U.S. buyers have shunned basic logo products altogether irrespective of the brand, Abercrombie decided to aggressively transition its portfolio from basic logo products to non-logo fashion products. Last year, in an earnings announcement, the management stated that they will reduce their logo business to “almost nothing” within 12 months and replace it with fashion-forward inventory. Although the change appears too drastic, we believe that this was a much needed step. However, this strategy has resulted in significant revenue decline so far and we believe this trend continued in the recently concluded quarter. Traffic Decline Over the past couple of years, there has been a notable decline in foot traffic across the retail and apparel industries, as shoppers increasingly have moved online. While this has boosted growth for pure play online players, retailers such as Abercrombie that rely on store sales for the bulk of their revenues have been on the receiving end. During the three month period ended January 31, foot traffic across the industry was down significantly, which likely contributed to Abercrombie’s comparable sales decline. During the holiday season, industry-wide foot traffic fell a sizable 8.3% year over year, according to data compiled by RetailNext. In the subsequent month, the foot traffic decline remained intense at 7.7%, implying that store based retailers such as Abercrombie had a tough time during the quarter. View Interactive Institutional Research (Powered by Trefis): Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap More Trefis Research
    C Logo
    Q4 2014 Bank Review: Credit Card Charge-Off Rates
  • By , 3/3/15
  • An important factor behind the notable increase in profitability for the credit card industry over recent years has been the marked reduction in loan charge-off rates from the highs witnessed in late 2010. In the aftermath of the economic downturn, many cardholders defaulted on their obligations. The situation for card lenders was exacerbated by the restrictions imposed by the Credit CARD Act of 2009 as well as several Federal Reserve rules which capped interest rates and fees. But as economic conditions improved, the volume of bad loans began to shrink steadily – allowing card lenders to report credit card charge-off rates that are near historic lows over the recent quarters. In this article, which is a part of our ongoing series detailing the country’s largest card lenders -  JPMorgan Chase (NYSE:JPM),  Bank of America (NYSE:BAC),  Citigroup (NYSE:C),  U.S. Bancorp (NYSE:USB),  Wells Fargo (NYSE:WFC),  American Express (NYSE:AXP),  Discover (NYSE:DFS) and  Capital One (NYSE:COF) - we discuss the trend in their credit card charge-off rates over the last twelve quarters and also detail what to expect in the near future.
    CSCO Logo
    Cisco's WLAN Dominance Unlikely To Be Affected By HP's Aruba Acquisition
  • By , 3/3/15
  • tags: CSCO HPQ JNPR
  • Hewlett-Packard (NYSE:HPQ) is set to acquire wireless LAN (WLAN) provider Aruba Networks (NASDAQ:ARUN) for $2.7 billion. This acquisition will help HP boost its share in the global WLAN market and position it as the second largest Wi-Fi player after networking giant Cisco (NASDAQ:CSCO). In addition to boosting HP’s market share, the acquisition makes sense for the WLAN industry as a whole, considering that Cisco is a very dominant player and the HP-Aruba combination could take advantage of cost and revenue synergies and challenge Cisco’s position. The global WLAN market is currently dominated by Cisco with about a 52% share followed by Aruba (~13%) and HP (4-5%). In this article, we talk about the impact of HP’s acquisition on the WLAN industry as a whole and Cisco in particular. We have a  $26 price estimate for Cisco, implying a discount of about 10% to the current market price.
    UPS Logo
    UPS’ Margins To Improve With Increased Operational Efficiency
  • By , 3/3/15
  • tags: UPS
  • United Parcel Service ’s (NYSE:UPS) fourth quarter results were severely impacted by a surge in its operating expenses. The company invested significantly in its network in order to cater to the growing e-commerce package volumes, causing its operating expenses to overshoot and margins to decline. Since then, UPS has been looking to ensure that such an increase in operating expenses is avoided. We believe that there are three key strategies that will help UPS improve its margins and reduce operating expenses in the future. Most prominent is the implementation of dimensional weight pricing for e-commerce package volumes. The accelerated launch of UPS’ On-Road Integrated Optimization Navigation (ORION) system will help reduce expenses and improve margins. Another factor is the implementation of a peak-based surcharge.
    TSL Logo
    Trina Solar Q4 Preview: Revenue Growth Will Continue, Margins Could Decline
  • By , 3/3/15
  • tags: TSL SPWR YGE
  • Trina Solar (NYSE:TSL), China’s largest profitable solar panel manufacturer, is slated to release its Q4 2014 earnings on March 4, reporting on a reasonably strong quarter for the broader solar industry that saw panel revenues soar to three year highs. For this quarter, we expect the company’s revenues to grow on a year-over-year basis on the back of strong demand for panels (the company has guided shipments of over 1 GW for the quarter), although margins could decline slightly owing to a smaller mix of project sales and a possibility of higher sales to China. During Q3, the company saw revenues grow by 19% sequentially to $617 million, while gross margins expanded to 16.7% from 15.4%. Here is a brief look at what to expect when the company reports earnings Wednesday.
    Five Stocks the Billionaires are Buying
  • By , 3/3/15
  • tags: GT BUD
  • Submitted by Sizemore Insights as part of our contributors program Five Stocks the Billionaires are Buying by  Charles Lewis Sizemore, CFA It’s that time again. The  Direxion iBillionaire Index ETF ( IBLN ), which follows the trading moves of billionaire investors, is doing its quarterly rebalancing. Eleven of the ETF’s 30 stock positions are getting the boot. What’s in? Consumer discretionaries and tech, each of which will now make up 30% of IBLN’s portfolio. Getting kicked to the curb are energy and financial stocks. After the rebalancing, energy will make up just 7% of the portfolio, and financials will not be represented at all. While I would never recommend blindly following the moves of other investors, I’m a big fan of guru-following strategies and consider them a great starting point for further research. The brains at iBillionaire have their own unique take on guru following. They start with narrowing their pool of gurus to the 10 billionaire investors whose public, S&P 500 -listed stock positions have generated the highest returns over the past three years. They then build a portfolio of the 30 “highest conviction” S&P 500 stocks owned by these 10 billionaires and rebalance quarterly. This makes IBLN a high-quality subset of the S&P 500. And, unlike most guru ETFs, which are often invested in small and mid-cap stocks, the S&P 500 is actually the appropriate benchmark. Year-to-date, IBLN is up about 2.7%, keeping pace with the S&P 500. With no further ado, let’s take a look at five hot stocks the masters of the universe are buying. Google ( GOOGL ) Apple Inc ( AAPL ) has been an IBLN holding for a long time, due in no small part to Carl Icahn ’s massive, high-conviction investment in the company. But now archrival Google Inc ( GOOGL ) joins the portfolio too, due mostly to a high-conviction buy by David Tepper . Tepper runs a concentrated portfolio of 28 stocks at Appaloosa Management, of which Google is one of the largest. Tepper owns both the A shares ( GOOGL ), which have voting rights, and the C shares ( GOOG ), which do not. Between the two share classes, Google is Tepper’s second-largest holding. Only General Motors ( GM ) — which is also an IBLN holding — has a larger allocation. I’ve never been the biggest fan of Google, as the company is notorious for burning shareholder money on quixotic projects that rarely pan out. I prefer Apple and Microsoft Corporation ( MSFT ), both of which have evolved into disciplined, shareholder-friendly companies over the past decade. But given his conviction, Mr. Tepper clearly sees value here. Yahoo! Inc ( YHOO ) Also joining the portfolio is Yahoo! Inc ( YHOO ), a company that has really struggled to compete in recent years with search rival Google. Value investors have long been attracted to Yahoo’s large cash position and its stake in Alibaba Group Holding Ltd ( BABA ) . Yet the question remains open as to what Yahoo intends to do with its Alibaba windfall. Yahoo makes the cut due to high-conviction buying by David Einhorn of Greenlight Capital. Einhorn made a major new purchase of Yahoo last quarter, and Yahoo now makes up about 1.4% of his portfolio. Einhorn has 42 publicly-traded hot stocks in his portfolio, 56% of which is in the tech sector. Like Icahn, Einhorn also owns a lot of Apple, which makes up about 13% of his portfolio. Time Warner Inc ( TWX ) Another recent Einhorn pick is Time Warner Inc ( TWX ) . This pick surprises me, as I see paid TV as a sector ripe for upheaval. I expect Dish Network’s ( DISH ) introduction of Sling TV, an internet-based “Netflix-like” cable service, to be a major disruptor in the coming years, encouraging cord cutting and pushing down the prices paid to all content providers. Yet Einhorn clearly sees value here, as Time Warner has quickly become his sixth-largest portfolio holding. And he’s not alone. Leon Cooperman and Steve Cohen were also busily buying shares last quarter. I should point out that Time Warner Inc. is a media company, not a cable company — the cable company is Time Warner Cable ( TWC ) . TWX owns, among other properties, HBO, Cinemax, CNN, TBS and TNT. And the successful introduction of HBO GO as a standalone paid service could very well be the catalyst that sends this stock higher. (Interestingly, TNT, TBS and CNN are all included in Dish’s basic Sling TV package.) Whether all of this compensates for the slow decline in cable news and marginal cable channels remains to be seen. Mohawk Industries, Inc ( MHK ) Americans will put some of the money they’re saving on gas into improving their homes. At least that seems to be the rationale for flooring manufacturer Mohawk Industries’ ( MHK ) addition to the IBLN portfolio. Brazilian billionaire Jorge Lemann has been a high-conviction buyer of Mohawk. You might not be familiar with Lemann, but you should be. He’s the wealthiest man in Brazil and is ranked by Forbes as the 34 th richest person on the planet. Bloomberg also called him “the World’s Most Interesting Billionaire,” in a tongue-in-cheek comparison to the “Most Interesting Man in World” of Dos Equis beer commercial fame. The title is deserved on two counts. Not only is Lemann a fascinating man of the world — a five-time national tennis champion who splits his time between Brazil and Switzerland — he’s also in the beer business. Lemann and his partners at 3G Capital dominate Anheuser-Busch Inbev SA’s ( BUD ) Board of Directors. Ironically, Dos Equis is not a BUD product; it is owned by rival Heineken ( HEINY ) Goodyear Tire & Rubber Co ( GT ) And finally, we have one last consumer discretionary pick from David Tepper, Goodyear Tire & Rubber Co ( GT ) . Goodyear joins General Motors as a play on falling gasoline prices leading to more spending and more driving by American consumers. We’ll see if the American consumer comes through; I’m personally a little skeptical on that front. Still, Goodyear trades at a very reasonable 13.5 times earnings and 0.4 times sales. Goodyear has seen better days; its per share revenues have been declining for years, even while its debt burden has continued to grow. Still, Tepper seems to see something in the company he likes. Tepper owns a 3.7% stake in the company that accounts for fully 7.2% of his assets under management. Charles Lewis Sizemore, CFA, is the chief investment officer of investment firm Sizemore Capital Management. As of this writing, he was long AAPL, GM and MSFT. Click here to receive his FREE weekly e-letter covering top market insights, trends, and the best stocks and ETFs to profit from today’s best global value plays. This article first appeared on Sizemore Insights as Five Stocks the Billionaires are Buying
    CBI Gives Investors False Hope
  • By , 3/3/15
  • tags: CBI SPY
  • Submitted by Wall St. Daily as part of our contributors program CBI Gives Investors False Hope By Richard Robinson, Ph.D., Equities Analyst   Stocks rallied during Janet Yellen ’s testimony on February 24. Yet two of the three major indices gave up some of their gains the next day. Chicago Bridge & Iron ( CBI ) kept on trucking, though. The stock jumped 14.2% after it beat analysts’ estimates for Q4 earnings. Wednesday’s move helped push the stock into positive territory year to date after hitting its 52-week low in January. If you’re worried you missed out, don’t be. As you’ll see, the optimism is totally misplaced. Let’s take a look at what investors perceive, versus the real hindrances that CBI faces . . . Examining Q4 and FY 2014 Results Investors see the surface numbers of Q4 2014, along with the full-year 2014 results, and they’re hoping the stock goes higher. For the three months ended December 31, 2014, the company reported a total revenue of $3.37 billion – a 12.3% increase over the same quarter in 2013. However, the higher revenue didn’t trickle down to the bottom line. CBI reported an adjusted net income of $161.3 million, a 22.8% decline against in Q4 2013 results. And while the company’s earnings per share (EPS) of $1.47 beat analysts’ expectations of $1.43, the company still saw an EPS decline of 23% against the same quarter a year ago (due primarily to falling oil prices). Looking to the company’s full-year results . . . Chicago Bridge & Iron reported a 16.9% increase in total revenue to $12.9 billion. Adjusted net income for 2014 was $568.6 million, or $5.21 per diluted share. That represents a 7.8% increase over the previous year’s total of $527.4 million, or $4.91 per diluted share. This may sound like music to shareholders’ ears, but here’s something to think about . . .  CBI shares have woefully underperformed the broader market indices, declining more than 42.3% in the past year. (This includes Wednesday’s price spike.) Avoid CBI Like the Plague If you’re still on the fence, consider these two roadblocks that are keeping CBI behind the curve, proving why I’m so bearish on the stock. Challenge No. 1: Troubled Nuclear Power Plant. CBI faces serious headwinds caused by continued construction delays on a troubled nuclear power plant for Southern Company ( SO ) near Waynesboro, Georgia. You see, the Plant Vogtle reactor sites 3 and 4 were originally expected to begin commercial operations in 2016 and 2017, respectively. But pending lawsuits over delays, as well as cost increases between the principals, could delay commercial operations to Q2 2020. Adding more pressure, it could take another 18 months to resolve the dispute between both parties. And with each month, CBI is shelling out another $40 million. Challenge No. 2: Declining U.S. Oil Rig Count. A more pressing concern for CBI is the declining U.S. oil rig count, which fell by another 37 units last week. This marks the lowest number of rigs in production since July 2011. With capex budgets being slashed almost to the bone with no end in sight, CBI will experience a serious decline in its cash flow. And with an anemic quick ratio of 0.43, the company demonstrates weak liquidity to meet short-term needs. For now, CBI shares are a bridge too far, and investors should stay clear. Good investing, Richard Robinson Editor’s Note: CBI’s headwinds aren’t affecting this company one bit. It’s benefiting from its dominant position in a fast-growing market… a market that could save the lives of countless Americans. Click here to see what I mean . The post CBI Gives Investors False Hope appeared first on Wall Street Daily . By Richard Robinson
    Famous PC Maker Exposed in Shocking Scandal
  • By , 3/3/15
  • tags: SPY TLT
  • Submitted by Wall St. Daily as part of our contributors program Famous PC Maker Exposed in Shocking Scandal By Greg Miller, Senior Technology Analyst   Another day . . .  another appalling spying scandal. One that would even shock infamous whistleblowers, Julian Assange and Edward Snowden. But we’re not talking about the government skimming through a few emails or phone records, or snapping your photo with a surveillance camera and adding you to a database. This was an egregious act of corporate larceny perpetrated by one of the world’s biggest companies. The effects of this threat are so widespread, the Department of Homeland Security was compelled to release a special alert to consumers. You may have even unwittingly brought its nasty scheme into your very own home . . . The World’s Nastiest Fish . . . Think of Lenovo ( LNVGY ), and you probably picture a company renowned for designing and manufacturing personal computers. And you’d be absolutely right. The Chinese firm is the biggest PC manufacturer in the world. But there’s a dark side to the company, too. Indeed, if you bought a laptop from Lenovo in the past six months or so, you may have a tiny bank robber installed on it. Seriously. Since September 2014, Lenovo preinstalled a nasty piece of spyware called Superfish VisualDiscovery on many of its laptops. Lenovo and Superfish, a startup based in Berkeley, California, ostensibly intended to provide targeted advertising to Lenovo users. This isn’t necessarily a crime, but it’s akin to sticking you on a cold-call marketing list without your permission. Here’s where the real problem lies . . . Superfish was so invasive to computers that it exposed all actions a user made. That includes users entering sensitive information like banking data and passwords. And not only did it expose this information to Superfish, but also to any curious person sharing a Wi-Fi network with the user! So how did this utter calamity occur? Give It up for the World’s Worst Apology Simply put, it interfered with the secure connection between a laptop and any site the user accessed. In doing so, it created a phony “certificate” of trustworthiness in order to learn what words a person types, where he/she surfs the web, and other personal information. But once removed from the secure stream, the information becomes accessible to anyone determined and knowledgeable enough to steal it. As I mentioned, it’s so serious that the Department of Homeland Security has issued an alert about it, stating: “All browser-based encrypted traffic to the internet is intercepted, decrypted, and re-encrypted to the user’s browser by the application – a classic man-in-the-middle attack. Because the certificates used by Superfish are signed by the CA installed by the software, the browser will not display any warnings that the traffic is being tampered with. Since the private key can easily be recovered from the Superfish software, an attacker can generate a certificate for any website that will be trusted by a system with the Superfish software installed. This means websites, such as banking and email, can be spoofed without a warning from the browser.” What’s the Chinese word for “panic”? Having been caught, Lenovo is backpedalling fast. But it’s made perhaps the most pathetic, insincere apology in the history of corporate confessions . . . The company said that the “user experience” of Superfish was “not positive.” Really? Exposing bank passwords to everyone at the local Starbucks ( SBUX ) was “not positive”? Worse yet, removing the program isn’t an easy task. Bizarro World Virus Removal Superfish is so insidious that simply removing it using normal methods won’t do the trick. If you still trust Lenovo, you can get its own removal tool. Alternatively, because almost all Lenovo laptops are shipped with a Windows operating system, Microsoft ( MSFT ) will help you remove Superfish and the bogus security certificate via the Windows Defender program. Other anti-virus software may follow suit. But as of now, if you have a different anti-virus program, you’ll have to disable it in order to get Windows Defender to disable Superfish. Yes, you read that right. Lenovo and Superfish messed up computers so badly that you have to disable your anti-virus program to remove the virus. Alas, that’s just the tip of the iceberg . . . Going Rogue: How PC Makers Pad Their Paltry Profits Needless to say, the press is focused on the security threat from Superfish. But even if Superfish never interfered with secure communications, it still tracks users’ information in order to bombard them with ads that neither the users, nor the sites they visit, approve of! Superfish isn’t alone here. Dozens of companies are trying to get access to your computer to track your actions and send ads, no matter whether they’re customized to you or not. Most companies use sly methods to get on your computer, such as hiding in a toolbar, sneaking in with programs you install, or fooling you into clicking a link. But increasingly, they’ll be shipping with your computer. How is this possible? The problem is that PCs and laptops aren’t very profitable for manufacturers, except for Apple ( AAPL ), of course. They’re commodities. And with most manufacturers buying the same components from the same vendors, there’s no significant difference from one brand to another. Consumers know this, so they seek the lowest-cost computer to fit their needs. This leads to very low margins. Case in point: Lenovo’s operating margin in the United States is a paltry 0.8%. But one way to goose returns is to include software that your customers don’t ask for. Some software companies have decided that the way to make money is to lurk right in front of you. And that one way to do that is to pay PC makers to place their software on machines during the manufacturing process. These programs can range from benign to useful . . .  to annoying. For example, your computer probably came with a free trial of anti-virus software. As you use it, it nags you to pay for the complete installation. Similarly, many computers ship with direct links to Amazon ( AMZN ), Netflix ( NFLX ), and other popular companies. They know you won’t pay for the software, so they make it easy to access their paid services by paying PC makers to put it on the computer for you. How nice! You’ve probably seen similar “preinstalled” applications on your smartphone. Despite much higher profit margins, big cellphone providers still want to collect a little more money by including these applications whether you want them or not. Feeling Bloated? There are many (unpublishable!) terms for these programs, but “bloatware” is an appropriate one. They’re usually from companies that need to gain consumers’ trust, so they have an incentive to police themselves as to how annoying or intrusive they become. But not always – and Superfish is the latest offender. They know most sane people won’t intentionally install software to make it easier to see ads – after all, there’s a whole industry dedicated to hiding them. So they pay PC makers and wireless companies to put it on without your consent instead. And since the money per installation is small, it doesn’t benefit these providers to spend much time vetting these programs. But they should – because Lenovo just became the “carrier” for the Superfish scandal. And when they cause spying and data theft issues like Superfish, it triggers a firestorm. In less severe cases, this software can also be incompatible with other programs you’ve installed, or spy on you in less obtrusive and obvious ways than Superfish. For instance, they can interfere with your search results or serve you ads that you don’t want. Since the Lenovo scandal broke last week, Facebook ( FB ) has found dozens of programs and apps that use the same kind of certificate fraud that Superfish does, and dozens more that are suspicious in other ways. Again, most of them snuck onto users’ machines covertly. Others shipped with their computers. And you can bet that unless Lenovo pays a very heavy price for its wrongdoing, this trend will continue. Now, if you bought a Lenovo laptop in the past six months or so, you can find out if you have the Superfish bug here . And if you do, you can get Lenovo’s Superfish removal tool . (If you still trust Lenovo, that is.) To living and investing in the future, Greg Miller Editor’s Note: While Lenovo’s days might be numbered thanks to this unfortunate oversight, we’ve uncovered an unusual opportunity that’s showing serious signs of growth. Click here to learn more .   The post Famous PC Maker Exposed in Shocking Scandal appeared first on Wall Street Daily . By Greg Miller
    Why You Should Look At These 16 Stocks With Cheap Free Cash Flows
  • By , 3/3/15
  • tags: ACE TRV
  • Submitted by Dividend Yield as part of our contributors program . Why You Should Look At These 16 Stocks With Cheap Free Cash Flows When you put money into the market, you should be aware of the market valuation. One of the major problems in valuation is definitely to predict future cash-flows. Nobody of us has a crystal-ball and no one can predict the future. The second problem is that there are companies that must invest massively into the business model in order to boost growth or to replace old machines or buildings. Investors often calculate with free cash flows. Those are the real income of the company, available for dividends, buybacks or mergers and acquisitions. Today I like to introduce the cheapest Dividend Achievers with a low price to free cash flow of less than 15. 16 companies fulfilled my criteria of which four have a dividend yield over 3 percent. The most of the results come from the property and casualty insurance industry. Insurer generates massive cash but they have also big problems with decreasing premiums and increasing competition. There are always good reasons why some companies are cheap. You may also like my article about the best dividend stocks from the title insurance industry. I still prefer, like Warren Buffett, the fastest growing companies from the insurance sector. Those are ACE, UNH and TRV. What do you think about the screen? ACE Limited — Yield: 2.28% ACE Limited ( NYSE:ACE ) works within the Property & Casualty Insurance industry, a part of the Financial sector, and has a market capitalization of $37.82 billion. The Financial company employs 20,000 people, generates revenue of $19,283.00 million and has a net income of $3,758.00 million. Sales grew in average 5.60% per year over the past 5 years. ACE Limited’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $7,205.00 million. The EBITDA margin is 37.36 percent (the operating margin is 22.97% and the net profit margin 19.49%). Financials: The total debt represents 6.37 percent of ACE Limited’s assets and the total debt in relation to the equity amounts to 20.87%. Here are some return ratios: Return on Assets: 3.40% Return on Equity: 11.10% Return on Investment: 11.30% Quick Ratio: - Current Ratio: - Twelve-trailing-months earnings per share reached a value of $9.65. Last fiscal year, ACE Limited paid $2.00 in the form of dividends to shareholders. Market Valuation: Here are the price ratios of the company: The P/E ratio is 11.81, the P/S ratio is 1.94 and the P/B ratio is finally 1.27. The dividend yield amounts to 2.28%. P/E: 11.81 Forward P/E: 11.81 PEG: 1.88 P/S: 1.94 P/B: 1.27 P/Cash: 16.84 P/Free Cashflow: 10.26 Earnings Growth: ACE Limited’s expected earnings growth for the next year amounts to 2.89% while earnings growth for the next five years is estimated at 6.28%. EPS this year: 38.20% EPS next year: 2.89% EPS next 5 years: 6.28% EPS past 5 years: 25.80% Sales past 5 years: 5.60% Ownership: Insiders of the company own 0.50% of the outstanding shares. The position changed -7.74% over the recent six months. The second important group of the company is institutional. Those investors own 92.50% of the company’s shares. The value moved -0.76% over the past half year. Also important for the stock price are short sellers of the company. The amount of short-selling transactions in relation to the total outstanding and floating shares amounted to 1.19%. In relation the latest trading volume, the ratio was 2.95. High values show that a huge amount of shares being shorted. Investors hope for declining prices and showing a kind of sentiment of the stock. – See more stocks here: Why You Should Look At These 16 Stocks With Cheap Free Cash Flows…
    CHU Logo
    China Unicom Earnings Preview: Wireless ARPU, Broadband In Focus
  • By , 3/3/15
  • tags: CHU CHL CHA
  • China Unicom (NYSE:CHU) is expected to release its fourth quarter earnings on Tuesday, March 3. In the previous quarter, the second largest wireless carrier in China reported strong results with net profit rising over 26% year-over-year (y-o-y) to RMB 10.6 billion ($1.73 billion) in the nine month period ending September 2014. This was driven by consistent subscriber gains in mobile and fixed-line broadband as well as lower costs. Mobile broadband service revenue from high-speed subscribers (3G and 4G) grew by 24.3% y-o-y to about RMB 80.4 billion ($13.1 billion) driven by a net addition of over 34 million high speed subscribers in the one year period prior to September 30, 2014. Although the company registered robust bottom line gains, the government’s recent decision to impose a Value Added Tax (VAT) on telecom services negatively impacted its revenue and profit growth. When the company releases its fourth quarter results, we expect its wireless business to continue to show strong growth on account of an expanding subscriber base and an improving 3G-4G mix. However, it is likely to be impacted by the company’s comparatively lackluster performance in adding new wireless subscribers in the last few quarters compared to the same period in 2013, as well as the introduction of value added tax (VAT) on telecom services by the government. In the wake of aggressive expansion in the 3G/4G space by market leader  China Mobile (NYSE:CHL), China Unicom reported an increase of just 8.3 million high speed wireless subscribers in the six-month period ending December 2014, compared to over 22.6 million in the same period in 2013. We also expect the company’s average revenue per user (ARPU) for wireless services to be slightly lower y-o-y on account of the company’s focus on low-cost smartphones in recent quarters. In the fixed-line broadband business, we expect China Unicom to report robust revenue growth on the back of a solid increase in the number of subscribers in 2014. China Unicom has around a 34.5% share of the total fixed-line broadband market (by subscribers) in China, with the largest share (53.5%) being held by  China Telecom (NYSE:CHA).  Our current  price estimate for China Unicom is $16, which is slightly below the market price.
    PCLN Logo
    Weekly Online Travel Agency Notes: Priceline, Expedia, TripAdvisor, Travelzoo, Ctrip
  • By , 3/2/15
  • The online travel agencies (OTAs) started the year on an acquisition spree. It seems all the market players want a bigger share of the $1.3 trillion global travel market pie. Priceline (NASDAQ: PCLN) has recently announced the intention to acquire Rocketmiles, a hotel-booking startup. Priceline is also raising $1.13 billion (or 1 billion euros) through a public offering of senior notes for acquisition and other related purposes. Expedia (NASDAQ: EXPE) started the year by acquiring its erstwhile marketing partner, Travelocity, and is currently on its way to acquire Orbitz Worldwide, the third largest OTA in North America. TripAdvisor recently acquired the personal journal application provider, ZeTrip and launched a new feature called “Neighbourhoods” to help travelers better navigate in popular tourist destinations. Below we give a quick rundown on the most notable events in the last week related to these companies. See Our Complete Analysis for These Companies Here Priceline Adding on to the recent spate of acquisitions on the online travel space, Priceline (NASDAQ: PCLN) has expressed the intention to acquire hotel-booking startup, Rocketmiles, for around $20 million. The deal will enhance Priceline’s consumer experience by allowing users to book lodgings via Priceline’s network, as against booking directly with hotels. Rocketmiles aids customers in gaining frequent flier miles by booking through its mobile application or website. These miles in turn can be redeemed for bookings for an array of around 12 airlines. The online travel agency leaders seem to be stressing on loyalty programs for expanding their customer base. Earlier on February 12, Expedia announced its intention to acquire Orbitz Worldwide. One of the advantages which Expedia would gain from Orbitz is the Orbucks loyalty programme. The rewards programs would allow the OTAs to gain a competitive advantage against airlines and hotels who in turn try attracting customers to their own websites. Rocketmiles is backed by $8.5 million in venture capital and the company claims to have a user base running to hundreds of thousands. On February 24, Priceline announced its decision to raise $1.13 billion (or 1 billion euros) through a public offering of senior notes. It intends to use the fund for general corporate purposes, including share repurchases, paying down debt and making acquisitions. Priceline spent around $2.5 billion net of cash acquired, on acquisitions in 2014. The leading OTA also invested more than $900 million in China’s OTA leader, Ctrip in 2014. Priceline had around $8 billion cash on hand in the end of 2014, and the senior notes will add on to that fund. We are in the process of updating our  price estimate of $1108 for Priceline . Expedia On February 12, Expedia (NASDAQ:EXPE) announced its intention to acquire Orbitz Worldwide for an enterprise value of $1.6 billion (or $12 per share). This represents a premium of around 29% “over the volume weighted average share price” up to February 11, this year. Though the boards of directors of both the companies have agreed to the deal, the companies are awaiting regulatory approvals. Given Expedia’s recent spate of acquisitions, the antitrust authorities might create problems about the deal. Expedia expects the deal to close by the second half of 2015 in case all the approvals are achieved. As a result of the Orbitz acquisition, Expedia might own up to 75% of the U.S. online travel market, according to the 2013 market shares provided by PhoCusWright. The chief rivals on the U.S. online travel space till now were Expedia, Priceline, Travelocity, and Orbitz. Now only two rivals, Priceline and Expedia, remain as separate entities. However, online travel agencies together account for 16% of total gross bookings from the U.S. In a  merger agreement filed with the Securities and Exchange Commision, Expedia has agreed to pay Orbitz, a $115 million termination fee, in the event of the fall-out of the deal due to legal issues. Our  price estimate of $90 for Expedia is slightly below the current market price. We forecast the company to report revenues of approximately $6.5 billion for FY 2015. Our GAAP and non-GAAP diluted EPS estimates stand at $3.60 and $4.69, respectively. TripAdvisor On February 26, TripAdvisor (NASDAQ:TRIP) announced the launch of a new feature called “Neighbourhoods” to aid travellers in finding out and exploring neighborhoods within popular tourist destinations. This would ease the user’s efforts in finding restaurants, attractions and accommodations in their place of travel. The feature, currently available in Barcelona, Berlin, Dubai, Hong Kong, London, Los Angeles, Madrid, New York City, Paris, Prague, Rome, San Francisco, Singapore and Tokyo, is expected to be rolled out to more destinations in the future. Earlier, towards the beginning of February, TripAdvisor announced the acquisition of ZeTrip, Inc., a personal journal application which aid travellers in logging their travel related activities and photographs. ZeTrip employees have presently integrated with the TripAdvisor mobile application development team. (Read press release  here ). Our valuation of $87 for TripAdvisor is marginally below the current market price. Our 2015 revenue estimate for the company stands at $1.7 billion. Our GAAP and non-GAAP diluted EPS estimates stand at $2.59 and $3.02, respectively. Ctrip Analysts surveyed by Bloomeberg forecasted that in 2014, Chinese OTA leader,  Ctrip ‘s (NASDAQ: CTRP) growth rate will be lagging behind significantly, when compared to that of its rival, Qunar. Qunar, a major Chinese search engine and online travel information provider, is expected to grow sales by over 71% in 2015. Qunar’s growth rate is expected to be more than double of what will be achieved by Ctrip in 2015. This growth rate difference is attributed to the differing revenue strategies undertaken by the two companies. While Ctrip’s travel-agency approach allows it to make commissions on bookings, Qunar lets users view inventories from a wide array of suppliers, and gets paid by directing traffic on the supplier websites. Our  Ctrip price estimate to $43 is almost in line with the current market price. For FY 2014, we forecast a revenue of approximately $1.27 billion. Ctrip is yet to release its fourth quarter 2014 earnings report. View Interactive Institutional Research (Powered by Trefis): Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap More Trefis Research  
    TXN Logo
    Weekly Tech Update: TXN, QCOM, FFIV, BRCM, AMAT, AMD
  • By , 3/2/15
  • The semiconductor industry was one of the strongest performing sectors in 2014, driven by the continued strength in personal, network and service provider communications, and increasing electronics adoption around the world. According to The Semiconductor Industry Association (SIA), the global semiconductor industry posted record sales of $336 billion in 2014, a 9.9% increase from 2013. Annual sales increased in all the regional markets for the first time since 2010. The semiconductor industry has achieved record sales in two consecutive years, and the SIA believes that the market is well-positioned for continued growth in 2015 and beyond. Below is a weekly update for some of the technology companies that Trefis covers.
    PG Logo
    Factors Driving Our $83 Price Estimate For P&G
  • By , 3/2/15
  • tags: PG UL KMB CL EL
  • Procter & Gamble (NYSE: PG) is the world’s leading consumer products company and manufactures world-renowned brands like Tide, Pampers, Olay and Braun, among others. It currently has a market price of $85.50 with a market capitalization of $230.89 billion. P&G’s shares have gained 10% year to date and touched a 52-week high of $93.89 in December last year. We recently revised our price estimate for Procter & Gamble to $82.54 following its poor performance in the second quarter of fiscal 2015 (fiscal year ends in June). The company’s scale played against it in the second quarter as its outsized presence in emerging markets exposed it to severe currency headwinds, which pushed revenues down by 4% year on year. Likewise, cost saving programs could not preclude a year on year decline of 40 basis points in gross margin due to unfavorable geographic and product mix. (Read: Falling Volumes Compound P&G’s Problems as Currency Headwinds Dampen Q2 Results ) P&G has stated that these hostile conditions are expected to persist through calendar year 2015, leading to a slight devaluation in our price estimate for P&G. In this report, we discuss some of the key trends driving our price estimate for Procter & Gamble. See our complete analysis of Procter & Gamble here Declining Market Shares Due to Dipping Volumes According to our estimates, Procter & Gamble’s calendar 2014 market share declined in nearly all the product categories that it competes in. The decline in market share is a direct result of weakening volumes, which have recently taken a beating due to P&G’s rising prices. The company has resorted to higher prices to counter adverse foreign exchange movements, but the strategy may be pushing customers towards lower priced products of its competitors. This is evident from the fact that P&G’s volumes declined and prices increased in all but one of its business segments in the second quarter of fiscal 2015. Its Fabric Care and Home Care business was the only unit that achieved volume expansion of a marginal 2% year on year. However, even the 2% volume expansion was not sufficient to prevent a decline of 2% in 2014 in P&G’s global market share for Fabric Care and 0.4% decline in its global market share for Surface, Dish Care and Air Care. P&G has stated that the adverse economic conditions are expected to persist in 2015 and more price hikes are planned in emerging markets to counter this trend. This may result in further deceleration in volumes in the near future, not just in the Fabric Care and Home Care Divisions, but also other major business units like Baby Care & Family Care, and Beauty segments. We have accordingly adjusted our forecast for P&G’s global market share in these segments to reflect the same. Lower EBITDA Margin Expansion in Near Term Procter & Gamble’s overall EBITDA margin has remained stable at 22.9% since 2011. This is because decline in EBITDA margin of Fabric & Home Care, and Healthcare segments has been offset by the improvement in the EBITDA margin of the other business units. In recent years, Procter & Gamble has been undertaking major cost saving and restructuring program. The implementation of these programs, especially the brand consolidation program and the supply chain improvement plan, has resulted in substantial restructuring charges. These charges are expected to depress the benefits arising out of these programs in the near term. Perhaps more importantly, currency headwinds are expected to play spoilsport in the near future on the bottom lines as well. P&G’s heavy exposure to countries whose currencies have weakened is expected to result in an unfavorable geographical mix, thereby offsetting the benefits from cost savings to a large extent. P&G’s predominantly centralized supply chain is also resulting in lower margins, as price hikes are not sufficient to offset the increasing cost of imported products due to currency headwinds. Consequently, we have revised our forecast for EBITDA margin of the Baby Care and Family Care segment to grow at a slower rate than previously expected. Our original 2015 projection of EBITDA margin of 24.4% for Baby Care and Family Care segment has now been revised to 23.5% due to the aforementioned factors. The earlier projection for the Fabric & Home Care segment has been retained because of the sale of major low-margin businesses like Duracell. The sale of such businesses, expected to be completed by summer of 2015 (Read: P&G Expects Brand Consolidation to be Over by Summer ), may adequately prop up the margins of Fabric & Home Care segment. However, none of the major brands in the Baby Care, Feminine Care and Family Care segment are known to be up for sale, so margin improvement through this avenue is out of question for this segment. We believe that any improvement in the EBITDA margin will be minimal in 2015, but it will gradually pick up going forward as the impact of P&G’s restructuring efforts kicks in. Lower Capex Due to Brand Consolidation Procter & Gamble has reigned in its unchecked expansion over the last decade with its brand consolidation program. No major acquisitions are planned in the near future and the only major capital expenditure is expected to be on account of the ongoing supply chain restructuring. P&G is redesigning its supply chain in the U.S. and is building local manufacturing facilities to battle the negative impact of currency headwinds. Further, the sale of 100 brands is also likely to bring down maintenance capex thereof. This is especially true in the case of the sale of billion dollar brands like Duracell. Therefore, we believe that capital expenditure as well as capital expenditure as a percentage of EBITDA will continue to gradually decline in the future. It may be noted that our revised 2015 forecast for Capital Expenditure as a Percentage of EBITDA of 20% is higher than our original forecast of 19.6%, yet actual capital expenditure is lower. This is because the revised total EBIDTA of P&G is lower than the original forecast which included EBITDA from the Duracell brand. View Interactive Institutional Research (Powered by Trefis): Global Large Cap |  U.S. Mid & Small Cap |  European Large & Mid Cap More Trefis Research
    Find us on Facebook


    Every month, Trefis analysts create a model for the most requested company. Cast your vote today!


    You can also view our Full Coverage List.


    How much of Citigroup's value comes from its Sales & Trading operations?
    1. 31%
    2. 36%
    3. 41%
    4. 48%




    "Aims right at individual investors,
    giving them sophisticated models"

    "an easy tool for understanding what
    makes a company tick"

    "change the underlying assumptions by
    simply dragging lines on charts"

    "a very cool, very intelligently
    designed financial analytics tool"


    Rigorous & Quantitative

    Led by MIT engineers and former Wall Street professionals, the Trefis team builds a model for each company's stock price.

    Fun & Easy-to-Understand

    In a single snapshot we show you the relative importance of products that comprise a company's stock price.

    Play with Assumptions

    You can personalize any forecast using your local knowledge or expertise to build conviction in your own stock price estimate.

    Consult with Experts

    You can ask questions and vet your opinions on specific forecasts with experts and friends.

    Interact with other experts

    Stay abreast with opinions and predictions from peers.

    Predict Trends

    Share your own opinions, identify and predict trends.

    Monetize Your Expertise (coming soon!)

    Get paid for sharing your opinion.

    Attract the best investors, employees, and business partners.

    Want Trefis to provide coverage of your company? Contact us at with email subject - "Interest in coverage"

    Sign Up for Trefis for FREE

    Get free access to core companies and features.

    Sign Up for Trefis Pro!

    Get access to additional companies and features.

    Already a Member?

    Log in to your Trefis account.


    By using the Site, you agree to be bound by our Terms of Use. Financial market data powered by Consensus EPS estimates are from QuoteMedia and are updated every weekday. All rights reserved.

    Terms of Use

    NYSE/AMEX data delayed 20 minutes. NASDAQ and other data delayed 15 minutes unless indicated.