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Trefis Analysis

COMPANY OF THE DAY : 21ST CENTURY FOX

21st Century Fox recently reported earnings that were in line with expectations despite a weak performance by the studio business. The company saw steady top line growth at its cable networks and broadcasting business.

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FORECAST OF THE DAY : PANDORA'S TOTAL ACTIVE USERS

Pandora has had some struggles of late due to increasing competition from rivals such as Spotify. The company has been able to grow its user base, however, driven by a fast-growing market.

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RECENT ACTIVITY ON TREFIS

CMCSA Logo
How Has Comcast's Revenue Composition Changed In The Last Five Years?
  • By , 2/12/16
  • tags: CMCSA
  • NBCUniversal’s importance has increased while pay-TV’s importance has decreased for Comcast.   Have more questions about Comcast? See the links below: What’s Comcast’s Revenue & EBITDA Breakdown In Terms Of Different Products? Notes: Global Large Cap |  U.S. Mid & Small Cap |  European Large & Mid Cap | More Trefis Research
    CMCSA Logo
    What’s Comcast’s Revenue & EBITDA Breakdown In Terms Of Different Products?
  • By , 2/12/16
  • tags: CMCSA
  •   Have more questions about Comcast? See the links below: How Has Comcast’s Revenue Composition Changed In The Last Five Years? Notes: Global Large Cap |  U.S. Mid & Small Cap |  European Large & Mid Cap | More Trefis Research
    ADBE Logo
    By What Percentage Can Adobe's Revenues And EBITDA Grow In The Next 3 Years?
  • By , 2/12/16
  • tags: ADBE
  •   Have more questions about Adobe? See the links below.   What’s Adobe’s Revenue And Earnings Breakdown? What’s Adobe’s Fundamental Value Based On 2015 Results? By What Percentage Did Adobe’s Revenue And EBITDA Increase In The Last Five Years? How Has Adobe’s Revenue Composition Changed Over The Last 5 Years? Notes:
    HIG Logo
    What Is HIG's Revenue And Earnings Breakdown In Terms Of Operating Segments?
  • By , 2/12/16
  • tags: HIG AIG TRV PRU MET MFC
  •   Have more questions about HIG? See the links below: What Is HIG’s Fundamental Value Based On Expected 2015 Results? How Much Has HIG’s Revenue & EBT Grown In The Last Five Years? How Has HIG’s Revenue Composition Changed In The Last Five Years? Notes: Global Large Cap |  U.S. Mid & Small Cap |  European Large & Mid Cap | More Trefis Research
    HIG Logo
    How Has HIG's Revenue Composition Changed In The Last Five Years?
  • By , 2/12/16
  • tags: HIG AIG TRV PRU MET MFC
  • Have more questions about HIG? See the links below: What Is HIG’s Revenue And Earnings Breakdown In Terms Of Different Operating Segments? Notes: Global Large Cap |  U.S. Mid & Small Cap |  European Large & Mid Cap | More Trefis Research
    BSX Logo
    Transvaginal Mesh Lawsuits Haunts Boston Scientific Again
  • By , 2/12/16
  • tags: BSX
  • In a recent crackdown on the medical device companies, the FDA has classified transvaginal mesh devices to a high risk – class 3 category. Further, the FDA also requires the medical device makers to submit a premarket approval application (PMA) to prove the safety and effectiveness of these devices. Transvaginal mesh devices are used in the treatment of pelvic organ prolapse (POP) and stress urinary incontinence (SUI). With more than 300,000 women undergoing transvaginal surgeries each year since 2010, the market for these devices has grown considerably, inviting more companies to enter the lucrative market. However, the tightened FDA approvals and a classification of transvaginal mesh devices to a high risk category can affect the sales of the leading medical device makers such as   Johnson & Johnson (NYSE:JNJ)   and Boston Scientific (NYSE:BSX) that hold a major portion of this market. Further, due to the growing awareness among women about the potential high risks associated with the device, they may avoid the implantation of this device. Moreover, a law firm separately accused Boston Scientific for using counterfeit resin smuggled from China to manufacture the vaginal surgical mesh and also called for a ban on the sale of these devices from the company. The aforementioned factors together can weigh down the company’s profitability going ahead. Below we analyse the impact of the regulatory warning and the litigation charges on Boston Scientific’s stock price in detail: Our price estimate of $15 for Boston Scientific  is approximately 20% below the current market price. See our complete analysis for Boston Scientific  here Transvaginal Mesh Lawsuits A Long Standing Issue For Boston Scientific According to reports, transvaginal mesh law suit could be the largest in terms of the amount required to settle the charges. This seems quite evident as medical device companies such as Boston Scientific had more than 30,000 pending cases linked to transvaginal mesh complications against it by November 2015. Moreover, the company had paid more than $100 million in April 2015 to settle around 3,000 cases related to mesh complications. Further, the latest stance by FDA that classifies transvaginal mesh as high risk devices and requires a PMA for these products can affect the sales of these devices even more. In the past, FDA warnings have affected the sales of many companies. For instance, an FDA warning in 2014 about the use of power morcellators in surgeries affected the sales of the leading surgical robots manufacturer, Intuitive Surgical. Latest Allegations Quite Serious The transvaginal mesh lawsuit on Boston Scientific is not new and can drag on for years. However, the latest allegations that accused the company for importing counterfeit plastic resins from China to make vaginal mesh, if proven true, can induce a large drop in the sales for Boston Scientific. This comes from the fact that these devices are permanently implanted in a human body and patients are very particular about the efficacy of such devices. Moreover, users may question the efficacy of other products made by Boston Scientific, which can lead to a drop in the sales in other segments too. Furthermore, such accusations, if proven true, would cast serious doubts in the mind of investors about the ethical standards and business practices followed by Boston Scientific. A Drop In Transvaginal Mesh Sales Not A Major Concern Although there can be a drop in transvaginal mesh devices sales for Boston Scientific in the coming months, it must be noted that the transvaginal mesh revenues constituted a very small percentage of the overall revenues. Transvaginal mesh sales are a part urology and women’s health segment of the company, which constituted less than 7% of the overall revenues in 2014. In the worst case scenario, even if a ban is imposed on the sale of these devices, the company can suffer losses of only up to $542 million, assuming that transvaginal mesh accounted for the entire 7% of the urology and women’s health segment. We believe that Boston Scientific can suffer more losses from the litigation charges than the losses due to a potential ban on the sale of these devices. To illustrate the effect of litigation charges, it must be noted that the company paid more than $100 million in 2015 to settle around 3,000 cases and it still has around 30,000 cases outstanding for the same issue. View Interactive Institutional Research (Powered by Trefis): Global Large Cap   |  U.S. Mid & Small Cap   |  European Large & Mid Cap More Trefis Research
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    How Has Adobe’s Revenue Composition Changed Over The Last 5 Years?
  • By , 2/12/16
  • tags: ADBE
  •   Have more questions about Adobe? See the links below.   What’s Adobe’s Fundamental Value Based On 2015 Results? By What Percentage Did Adobe’s Revenue And EBITDA Increase In The Last Five Years? By What Percentage Can Adobe’s Revenues And EBITDA Grow In The Next 3 Years? What’s Adobe’s Revenue And Earnings Breakdown? Notes:
    F Logo
    Can Ford Afford To Wait It Out In Russia?
  • By , 2/12/16
  • tags: F GM TM
  • Ford  (NYSE:F) and General Motors (NYSE:GM) generally behave in a similar manner. Their performances in various geographies, save for China, are often broadly similar and they often tend to follow similar strategies to negotiate market conditions. However, their response to the threat the macroeconomic situation in Russia poses to their prospects in Europe could not be more different. The Russian economy has been struggling in recent quarters.  In 2015, GDP was down 3.7%, real incomes down 4% and unemployment higher by 7.4% on the back of falling oil prices and economic sanctions imposed by many countries in response to the country’s foreign policy in Ukraine. It was not long ago that Russia was set to overtake Germany as the biggest auto market in Europe. Russia is the most populous nation in Europe and its population is relatively under-penetrated in terms of vehicle ownership. Many predictions had the country as the fifth biggest car market by 2020. But now many companies are being forced to reconsider their strategy in the country. GM decided to stop selling Opel, its main European brand, and Chevrolet in the country in 2015. The Detroit based auto maker also shut down its St. Petersburg plant resulting in a $600 million special items charge for the company. In contrast, Ford isn’t pulling out of Russia. Even though sales fell by 41% in 2015, the company is undertaking some changes to the way its business in the country is structured. One of these changes involved the construction of a $275 million engine plant in the country earlier this year. The goal of this plant was to increase the percentage of manufacturing cost of arising in Russia to 60% for vehicles for intended to the market. This would allow Ford to qualify for lower import duties on a number of components used in its vehicles and equip many of its vehicles with locally built engines. It’s quite clear that Ford is banking on gaining market share in the country as it waits for the economy to recover. This could give the company an advantage over competitors like GM if they were to return provided the recovery happens. Russia As Export Hub Ford operates in Russia through a joint venture with a firm named Sollers. Mark Ovenden, head of Sollers, has stated that the company is looking at whether there is a possibility to export vehicles manufactured in Russia. In 2015, Ford sold 1.5 million new vehicles across 50 European markets, a 10% increase compared to its 2014 performance. 1.3 million of these vehicles were sold in the 20 traditional European markets, representing an 11% increase. Now Ford can produce as many as 350,000 units in Russia. It only sold 38,607 new vehicles in the country. Even if sales were to improve in 2016, there is still far more capacity in Ford’s plants in the country than demand for its products in the country. So Ford will have to sell these vehicles in the 20 traditional European markets, but it is hard to foresee the kind of demand in the near term needed to absorb excess capacity. In the near-term, the decision to keep manufacturing in Russia and use it as an export center is unlikely to be very profitable. In the longer term, the company is gambling on the sun shining on Russia the same way the markets thought it would in 2020 even if Ford might have to wait a little bit longer to realize the gains they expect. View Interactive Institutional Research (Powered by Trefis): Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap More Trefis Research
    TZOO Logo
    Travelzoo's Q4 2015 Earnings Review: Hotel Booking Platform Is Showing Promising Growth
  • By , 2/12/16
  • tags: TZOO PCLN EXPE TRIP CTRP
  • Travelzoo (NASDAQ: TZOO), the global internet media company, released its Q4 2015 earnings on February 11th. The company is following a two-way strategy of expanding its member base (while focusing on the quality of the users) and improving its product offerings. Travelzoo’s hotel platform is witnessing increased demand and conversion rates and the company believes that its key differentiating aspects provide it with opportunity for growth even in the presence of much bigger rivals. Travelzoo’s revenues for the fourth quarter stood at $32.1 million reflecting a 6% decline (3% in constant currency terms). The company had an operating profit of $976,000 and its Non-GAAP earnings per share stood at $0.03 as compared to loss per share of $(0.13) in Q4 2014. We will shortly update our price estimate of $8.24 for Travelzoo . See our full analysis of Travelzoo Two-Pronged Growth Strategy Travelzoo’s two-pronged growth strategy entails growing a loyal membership base and enhancing the product and service experiences on its website. The company is more focused on the quality of its members, in terms of purchases and loyalty, instead of just increasing the number of subscribers. Currently, after the reacquisition of its Asia Pacific business, the company boasts  a 28 million user base. In terms of the quality of its products, the company wants to ensure that it doesn’t merely send deals and offers through mails and social media, but it also tries gauging the pulse of its users as to what exactly are their requirements, like, a hotel on a particular date, and try providing them with the same. This demand based offerings are expected to improve the revenue per active member. Secondly, Travelzoo is trying to make its applications more mobile friendly and its search results richer and more relevant in content. The company has been investing along the same lines in 2015 and had seen the biggest improvement in its Europe business, where revenues have finally started increasing after several quarters of poor performance (revenues in Europe grew by 5% in constant currency terms). Currently, it is striving to make the hotel platform better suited for date specific hotel searches. This has been available in the U.S. for the last few quarters and the company is currently trying to promote the feature on a broader scale. Hotel booking Platform Is Growing Significantly Travelzoo’s hotel booking platform, introduced in 2014, started showing signs of growth only after it was reintroduced with richer content pertaining to specific places in the U.S. in February 2015. However, since then, the hotel booking platform has been gradually gaining traction and the management stated that the bookings on the platform have more than doubled over the last year and have been showing no signs of slowdown till now. The conversion rates are also demonstrating growth. However, the revenue growth is yet to be seen since the revenue recognition through this platform is a lagged process because the company recognizes the commission after the completion of the hotel stay. Instead Of Feeling Threatened, Travelzoo Finds Growth Opportunities From Its Bigger Competitors In the face of large competitors such as Expedia and Priceline, Travelzoo is holding its ground on the basis of its differentiating factors. Travelzoo’s platform contains around 2,000 hotels while Expedia (along with HomeAway) and Priceline’s Booking.com contain 1,508,000 and 855,000 accommodation listings on their platforms, respectively. Travelzoo’s management says that the company stresses  quality rather than the quantity of offerings. Hence, its carefully curated offerings are being well received as proven by the growth in conversion rates. Additionally, the hotels pay a higher commission to the bigger OTAs in order to be listed on their pages. Recently, with Expedia’s Accelerator model, which allows hotels to bid against each other to gain the top slot on Expedia’s search listings, the price to advertise on the popular OTAs is expected to rise even more in the future. Hence, many hotels welcome a more cost effective platform such as that offered by Travelzoo. In fact, in some of the locations where Travelzoo’s deals are popular, hotels have been very satisfied with the conversion rates on Travelzoo’s hotel platform.
    ADBE Logo
    By What Percentage Did Adobe's Revenue And EBITDA Increase In The Last Five Years?
  • By , 2/12/16
  • tags: ADBE
  • By What Percentage Did Adobe’s Revenue And EBITDA Increase In The Last Five Years? From 2010 to 2015, Adobe’s revenue grew 26%. EBITDA in turn grew by 27%. Have more questions about Adobe? See the links below.   What’s Adobe’s Revenue And Earnings Breakdown? What’s Adobe’s Fundamental Value Based On 2015 Results? How Has Adobe’s Revenue Composition Changed Over The Last 5 Years? By What Percentage Can Adobe’s Revenues And EBITDA Grow In The Next 3 Years? Notes:
    TWTR Logo
    Can A Strategic Buyer Turn Twitter Around?
  • By , 2/12/16
  • tags: TWTR FB GOOG
  • Rumors of a takeover sent  Twitter ‘s (NYSE:TWTR) stock soaring a while back, when it jumped more than 10% from an all-time low of $15.50. While the stock price is still struggling and takeover rumors have been dispelled, at the current price, the company’s market cap is around $12 billion which makes it an interesting target for cash rich companies, given its sizeable user base of 300 million.  In the last three months, Twitter’s stock price declined by more than 40% and our $35 per share price estimate  for the company is almost double its current stock price. We expect Twitter to grow its user base and ad revenue at a steady pace over our forecast period on the back of the initiatives being taken by the company management and its international expansion.  Yet the market, it appears, has yet to reflect these prospects and the share price remains in the doldrums. See our complete analysis for Twitter Will Initiatives To Expand User Base Pay Off ? While Twitter has been struggling to grow its number of users, company management has taken several initiatives in the recent past to address this issue.  Twitter started experimenting with a new order of timelines based on relevance rather than the reverse chronological order. The “Moments” feature was launched in 2015 which curates the best set of tweets around live events and news. It was reported that the company might do away with the 140 character limit for its tweets and allow longer tweets to improve user engagement.  According to a survey the average time spent by a user on Twitter is 17.1 minutes which is much lower compared to the 42.1 minutes on Facebook.. The company’s 320 million active users are dwarfed when compared to the 1.55 billion users of Facebook, which indicates that Twitter is less popular social medium. While in December 2015, the company finally announced its plans to tap the passive user base of nearly 500 million users who access tweets without logging into Twitter, growth in active users would be key to drive its revenues in future. Twitter has a 21% penetration in the U.S. and around 8% in international markets, compared to the 70% and 43% figures respectively for Facebook, indicating the huge growth opportunity. (Read How Does Twitter And Facebook’s Penetration Compare In Different Markets ). However, the company needs to take bold initiatives to grow its user base and increase user engagements. In Q3 2015 Twitter’s user base was 320 million compared to 316 million in the previous quarter, indicating a very slow rate of growth. For the past two years, Twitter has witnessed a declining rate of growth in its users, which is the major cause of concern for the company. Bleak Growth Prospects Leading To Market Discount While Twitter’s management appears to be working hard on driving user growth, a tangible advance in its prosepcts has yet to occur. The stock price reaction to takeover rumours indicates that the market does not have faith in Twitter’s current management’s ability to drive growth in the company.  Twitter’s market cap per user is almost 1/4 th that of Facebook, primarily because of its slow user base growth coupled with low margins and free cash flows. (Read Twitter’s Valuation : What is Its Current Discount In The Market Relative To Facebook And LinkedIn ).  Given its growth potential Twitter does appear to be an attractive buy for a strategic investor, at its current valuation. While the company management is working on user growth and ways to generate higher advertising revenues, the success of these initiatives will be key for Twitter’s revenues in future, inn our view.  If the management is unable to implement these effectively, a management change by way of a strategic buyer could offer an alternative solution. View Interactive Institutional Research (Powered by Trefis): Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap More Trefis Research
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    Factors Duke Energy Needs To Watch Out For In 2016
  • By , 2/12/16
  • tags: DUK KMP
  • Duke Energy (NYSE:DUK) had a bad year in 2015, with its stock falling by over 20%. The main reasons behind this decline were the falling demand for electricity among residential customers, declining profitability of its international business and uncertainty regarding the company’s future investments. Below, we take a look at each of these factors and what can be expected of the company in 2016. Diversified Asset Base Most of Duke Energy’s revenue in the past has come from the wholesale electricity market. However, the company has been trying to move away from the wholesale markets towards the regulated markets business and projects with long term contracts. The company’s acquisition of Piedmont Natural Gas for $4.9 billion in cash was consistent with that trend. As electricity demand growth has stalled, the U.S. economy is afloat with an abundant supply of natural gas. Demand for natural gas is also expected to be strong in the coming period, especially in the eastern regions, where natural gas pipelines are under construction.  In this region and others, natural gas is expected toreplace coal and oil for the production of electricity. Additionally, Duke has purchased renewable energy assets. This represents a shift away from the company’s traditional asset base of coal. The company has guided for the addition of  another 300 Mega Watts (MW) of commercial wind and solar assets to its portfolio. In addition, 20o more Mega Watts are expected to be added in 2016 and over the next four years around $2 billion worth of assets to its renewable energy portfolio. Duke also sold off its non-regulated Mid-West energy generation business. Wholesale markets have been in terminal decline so this was a good divestiture and using that money for the purchase of commercial wind and solar assets represents a good use of the money generated from those transactions. Importantly, Duke  has also filed 15-year plans for Duke Energy Carolinas and Duke Energy Progress with the regulators in North and South Carolina late last year. While Duke’s CEO Lynn Good stated that the company is serious about diversifying its assets and expanding into renewables, storage batteries and distributed generation, industry watchers content that the plan submitted to the regulators focused mainly on replacing the company’s existing coal assets with natural gas. A lack of clarity on this issue has also negatively impacted sentiment on the company. Slow Growth One reason for a decline in Duke’s stock price in 2015 was the slow growth in retail electricity demand in the year. Demand for electricity from retail customers only grew by 0.3% in the full year, with demand from residential customers actually declining by 0.2%. These customers form the core of Duke’s customer base and the trends impacting their demand are expected to continue in the near term. This makes Duke’s prospects somewhat lukewarm. The other factor responsible in Duke’s decline has been the impact of foreign exchange on its earnings. Duke’s international power business is expected to be its biggest growth driver. Compared to Duke’s commercial power business, the assets from the international business are much more productive, owing to higher retail electricity rates in South America. Moreover, per capita electricity consumption in the region is still far lower than that in the U.S., so there is considerable growing opportunity. But around 40% of the company’s international revenue comes from Brazil, an economy that has been in free fall. Brazil is majorly dependent on its exports, a major consumer of which is China. The slowdown in construction in the Chinese economy, coupled with the devaluation of the yuan and a shift towards the services industry have all impacted Brazilian exports heavily. Additionally, with the Federal Reserve raising short term interest rates in the U.S., demand for the U.S. dollar has grown considerably in comparison to the fall in demand for the Brazilian real. As a result, the exchange rates have decline considerably and this impacts Duke’s revenues from the region considerably. Understand how a company’s products impact its stock price on Trefis
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    How Much Has HIG's Revenue & Earnings Grown In The Last Five Years?
  • By , 2/12/16
  • tags: HIG AIG TRV PRU MET MFC
  •                               HIG’s revenues have remained largely flat over the last five years, while the company’s earnings before taxes (EBT) have seen substantial growth driven by property and casualty (P&C) revenue growth as well as margin improvement. Have more questions about HIG? See the links below: What Is HIG’s Revenue And Earnings Breakdown In Terms Of Different Operating Segments? How Has HIG’s Revenue Composition Changed In The Last Five Years? Notes: Global Large Cap |  U.S. Mid & Small Cap |  European Large & Mid Cap | More Trefis Research
    AMD Logo
    Can The New Product Lineup Help AMD Regain Its Share in PC Processors?
  • By , 2/12/16
  • tags: AMD INTC NVDA QCOM
  • The year 2015 was a challenging one for graphics processor manufacturer  AMD  (NYSE:AMD), with the company’s revenue base declining by 28% and its net loss expanding to $660 million, compared to $403 million in 2014. In addition to weak macroeconomic conditions and declining PC sales, AMD was hit by significant market share loss to  Intel (NASDAQ:INTC) in APUs (i.e., Accelerated Processing Units) and  Nvidia  (NASDAQ:NVDA) in GPUs (Graphics Processing Units). Notwithstanding a tough PC market and financial losses, AMD continued its multi-year effort to transition its business model by diversifying its revenue base and establishing a foundation for improved financial performance. The company is confident that its long term technology investments and sharpened focus have created a strong foundation for future growth. It expects revenue to grow in fiscal 2016, and believes that regaining share in the client compute market, driven by expansion in the commercial segment and a competitive product roadmap, will be an important growth driver for fiscal 2016. Earlier this week, AMD announced the increasing momentum for the 6 th Generation AMD Pro A-series mobile processors, based on the introduction of two new HP notebook design wins, new large-scale enterprise deployments, and the expansion of HP adoption of AMD FreeSync™ technology in its notebooks and displays. ( Read Press Release ) Launched last year, AMD PRO A-Series processors efficiently integrate extensive AMD CPU, graphics, security, and video processing IP into a single SoC design. So far, the company claims to be seeing a positive consumer and commercial response to the new APUs. AMD actually managed to make some progress in stabilizing its Computing and Graphics businesses (despite the continuing decline in PCs), and achieved 2% revenue growth in the second half of 2015 compared to the first half of the year. In Q4 2015, the company delivered its third consecutive quarter of sequential revenue growth in the channel and further reduced downstream product inventories based on improved demand for FX CPUs and A-Series APUs. AMD has lost significant market share to Intel in the last few years (see graph below). Whether the new improved product lineup will help the company regain share in the PC process market is yet to be seen. We forecast AMD’s PC processor market share to increase marginally over our review period. Toward the end of 2016, AMD plans to launch the first CPUs based on its new Zen microarchitecture. In terms of single thread performance, AMD’s Bulldozer architecture fell short of Intel products by a wide margin. AMD has stated that Zen will bring a 40% improvement in instructions per cycle, a measure of single-threaded performance, compared to Excavator, the latest revision of the Bulldozer architecture. This could improve AMD’s competitiveness in the PC market.                                      Source: PassMark Software Our price estimate of $2.25 for AMD  is at a 20% premium to the current market price. See our complete analysis for AMD View Interactive Institutional Research (Powered by Trefis): Global Large Cap |  U.S. Mid & Small Cap |  European Large & Mid Cap More Trefis Research
    ADBE Logo
    What’s Adobe’s Fundamental Value Based On 2015 Results?
  • By , 2/12/16
  • tags: ADBE
  •   Have more questions about Adobe? See the links below. What’s Adobe’s Revenue And Earnings Breakdown? By What Percentage Did Adobe’s Revenue And EBITDA Increase In The Last Five Years? How Has Adobe’s Revenue Composition Changed Over The Last 5 Years? By What Percentage Can Adobe’s Revenues And EBITDA Grow In The Next 3 Years? Notes:
    TTM Logo
    Tata Motors Earnings Review: Weak Product Mix And China Sales Slide Hit Jaguar Land Rover
  • By , 2/12/16
  • tags: TTM-BY-COMPANY TTM TM GM F VLKAY DAI DDAIF BMW
  • Tata Motors  (NYSE:TTM) reported a 3% rise in its Q3 fiscal 2016 (ending March) revenue, but profit before tax dropped 27%, mainly hurt by slowing sales in China and a weaker sales mix. China, once the growth driver for Jaguar Land Rover (JLR), which forms over 90% of the company’s valuation as per our estimates, is witnessing slowing economic conditions, which also impacted the automotive market during the early part of 2015. However, demand picked up during the latter half of the year, to boost passenger vehicle sales by 7.3% year-over-year for 2015 in the country. But JLR’s sales still lagged in China, where the automaker started local production of Range Rover Evoque and Discovery Sport SUVs in November last year. See Our Complete Analysis For Tata Motors   The spurt in volume sales towards the end of the year, especially in Europe and North America, offset the decline in China, helping JLR end 2015 with a 5.3% year-over-year increase in net volume sales. In fact, JLR’s retail sales grew a solid 23% in Q3 (the October-December period). The great upshot in the brand’s volumes also comes at the back of a sustained high demand for SUVs, boosting sales for Land Rover, which forms over 80% of JLR’s net volume sales. 2015 has been the year of SUVs. Land Rover managed to record a solid 37% rise in volume sales in the U.S., where the passenger vehicle market for the year rose 5.8% to 17.5 million vehicles. In fact, Land Rover outpaced the growth seen by the light truck lineups of Mercedes-Benz, BMW, and Audi in the country. Luxury SUV volumes rose by a strong 17% in the country last year, while luxury car volumes fell 4.4%. The sustained low oil prices, and the extra cash with customers, has further caused segment shifts to bigger, more spacious SUVs, which seems to have benefited Land Rover. On the other hand, Land Rover’s sales grew a strong 40% year-over-year in Europe in Q3, led by growth for the Defender and incremental sales from the Discovery Sport. Besides the large rise in the U.S., SUVs showed a massive 52.4% rise in China, as well, in 2015. The market for luxury SUVs in China, in particular, is expected to double to 1.2 million units by 2020, further boosting growth prospects of Land Rover in the country. Just for reference, less than 200,000 units of luxury SUVs were sold in China in 2010. JLR’s volume sales slid by a substantial 24% in China in 2015, as the slow ramp up of locally-produced vehicles remained a headwind. The rate of decline, however, declined in Q3, with retails falling by 10%. JLR’s volumes in China could improve going forward, since the demand is expected to remain strong. The shift in a service-driven economy from a manufacturing driven economy will see the rise of the upper-middle class. The number of upper-middle-class and affluent households is forecast to double to 100 million and comprise 30% of all urban households by 2020, compared with 17% presently, and only 7% in 2010. This should help boost sales of premium vehicles. Consumption of young-generation consumers (ages below 35) is growing at 14% annually, which is twice that of consumers older than 35. The newer generation also typically has a more sophisticated taste, and is more free-spending. The growth in the upper-middle class and the emergence of the new generation is expected to increase sales of high-value products, including automobiles. Jaguar will also launch its compact SUV F-Pace next year, which could boost unit sales for the British marquee car maker, seeing how the demand for SUVs and crossovers remains high. What hurt JLR’s results this quarter, apart from slower China sales, was an unfavorable mix. The compact saloon XE has sold over 27,000 units since its launch in March last year, and as expected, as compacts sell in bulk, it is the highest selling model for Jaguar, constituting close to 50% of the net volumes in each of the last five months. The XE is Jaguar’s response to the likes of the Mercedes C-Class, Audi A3 and A4, and BMW 3-series — all of which are among the highest-selling models for their respective automakers. This has kept the volume growth positive, despite the run out of the Jaguar XK, and decline in sales of the XF and XJ, as customers are anticipating the launch of their upgraded models this year. However, due to its lower price points, the XE, and other compacts, are dilutive to the average revenue per vehicle and, in turn, margins. Lower Losses For The India Business Tata Motors managed to extract 10% year-over-year growth in revenue from its standalone business in Q3, and cut its losses compared to Q3 fiscal 2015 levels, on the back of a solid 15% sales growth for medium and heavy commercial vehicles. However, Tata’s India business is still not performing as positively as expected. The Indian automotive market is back in full swing, backed by a stable government at the center, strong GDP growth (estimated at 7.6% for fiscal 2016), and increasing disposable income. In fact, India has overtaken China as the fastest growing major economy in the world with 7.3% GDP growth in the quarter ended December. India’s passenger vehicle market is also the fastest growing, with sales rising over 9% year-over-year through April-December. However, Tata Motors seems to have run out of steam after sales of its passenger vehicles temporarily rose following the launch of its compact sedan Zest and hatchback Bolt. Zest and the hatchback Bolt are a part of the company’s Horizonext initiative, announced in 2013, which is an aggressive strategic plan for its passenger vehicle business unit to reverse the trend of flagging sales. However, the Zest and Bolt, dubbed as the comeback vehicles for Tata Motors, have failed to revive sales as strongly as expected. Passenger car sales for Tata fell 9% in its Q3, despite the sustained large demand in the country. A bright spot for the company, however, is a possible comeback in the light commercial vehicle (LCV) segment. Although this segment of Tata’s suffered a 10% decline in retail sales in India in Q3, December and January retail growth has come in positive. LCVs form over one-third the net domestic volumes for the automaker, and thus, the continual decline in this segment is weighing on the overall volume performance, despite a strong growth in medium and heavy commercial vehicle volumes. Much of the weakness in LCVs was associated with the low demand. Industry-wide sales declined by 7.4% through April-September, as demand for these vehicles used for intra-city transport remained tepid. However, as was anticipated, LCV demand picked up in Q3, to reduce the overall decline in this segment to 3.5% through the first three quarters of this fiscal in India. The uptick in the infrastructure sector had caused a rapid rise in early 2015 in sales of M&HCVs, which are used for inter-city transport. Once goods arrive at certain key hubs through trucks, they are transported to surrounding areas in LCVs. The growth in M&HCVs was expected to trickle down to the LCV segment. Tata Motors’s India sales still remain subdued, as for JLR, which is hoping for a China comeback. In fact, China sales growth is back to positive for JLR, with Land Rover’s January sales rising 9% in the country. Q4 results could come in more positive for the company, with a rebound in JLR’s China sales. View Interactive Institutional Research (Powered by Trefis): Global Large Cap |  U.S. Mid & Small Cap |  European Large & Mid Cap More Trefis Research  
    QLIK Logo
    Qlik Sense’s Success and Domestic Market Drove Qlik’s Revenue Expansion in Q4
  • By , 2/12/16
  • tags: QLIK-BY-COMPANY DATA MSFT CRM AMZN
  • Business intelligence software vendor Qlik (NYSE:QLIK) reported its fiscal 2015 fourth quarter earnings on February 11th. The company’s 12% year on year revenue growth rate was primarily driven by strong adoption of Qlik Sense, which now comprises a quarter of Qlik’s total license revenues. Currency headwinds and continued softness in the Asia-Pacific market negatively impacted the top-line growth. Indeed, on a constant currency basis, revenues for the quarter grew 22%.  These trends, including good growth in Qlik Sense, currency headwinds and weakness in the Asia-Pacific market, are expected to continue in fiscal 2016. Consequently, revenue growth is likely to slow down slightly in the near to medium term. Qlik fiscal 2015 full year earnings snapshot: Revenue grew by 10% year on year to $612.7 million. In constant currency terms the growth was 23%. Non-GAAP operating margin expanded by 20 basis points year on year to 6.1% Non-GAAP diluted EPS was negative $0.40, compared to negative $0.27 in fiscal 2014 We are currently in the process of updating our price estimate for Qlik to reflect the latest results. See our complete analysis for Qlik here Steady Revenue Expansion Led by Domestic Growth In the fourth quarter, Qlik’s revenue grew by 12% year on year in as-reported terms, higher than the full year revenue growth rate of 10%. This suggests that its revenue is not at the verge of slowing down, unlike in the case of its competitor, Tableau (NYSE:DATA). Further, the company has guided fiscal 2016 revenue to expand by 13% to 15%, which indicates that revenue growth may pick up slightly next year despite increasing competition. Notably, Qlik achieved the double-digit revenue growth despite a contraction of 5% year on year in Rest of the World (markets other than the Americas and Europe) revenues. The slump in revenues from these markets is primarily due to elongated sales cycles, fueled by uncertainty in spending. For instance, Qlik stated that it was unable to close deals in the fourth quarter that are essentially won, which resulted in a loss of revenues in the fourth quarter. This trend is expected to continue in the near term as corporate spending  is likely to remain weak in several international markets. On the other hand, domestic growth remained strong as Qlik achieved 18% year on year growth in the Americas in fiscal 2015. This was driven by an aggressive marketing program as the company’s sales and marketing expenditure jumped by 12% year on year in fiscal 2015. The increase in marketing spend was especially notable in the fourth quarter, with a 20% year on year increase in dollar terms. The trend is expected to continue in 2016 as Qlik is likely to keep up its marketing drive to bolster Qlik Sense sales. Qlik is also stepping up its product release cadence, which has historically lagged behind that of rival business intelligence software vendor, Tableau. Qlik’s flagship product, Qlik Sense now accounts for a quarter of its revenues and is expected to take over as the company’s leading revenue maker by the end of 2016. Qlik Sense 2.2 and Qlik Enterprise 3.0 are scheduled to be launched fiscal 2016. In addition, the company has decided on an annual release schedule for updated versions of the new QlikView, which was released in December 2015. These new products are likely to help the company ward off rising competition from new, smaller players as well as entrenched rivals such as Tableau and Microsoft (NYSE:MSFT). View Interactive Institutional Research (Powered by Trefis): Global Large Cap |  U.S. Mid & Small Cap |  European Large & Mid Cap More Trefis Research
    ICE Logo
    IntercontinentalExchange: Growth Momentum In Volumes Continues In January
  • By , 2/12/16
  • tags: ICE NDAQ CME
  • IntercontinentalExchange Group  (NYSE:ICE) recently released its volume figures for the month of January. Continuing its momentum from last year, ICE reported a 15% year-on-year (y-o-y) increase in total futures and options volumes to 5.3 million contracts in January. Interest rate contracts, along with sugar contracts, saw the greatest gain in volumes at 30% and 40% y-o-y, respectively. Below we discuss these results in more detail.
    P Logo
    Pandora Reports Mixed Results As Rumors Of A Buyout Surface
  • By , 2/12/16
  • tags: P SIRI
  • Pandora Media (NYSE:P) reported its Q4 revenues just ahead of the market expectations but its profits failed to beat the estimates. And just before the earnings release, the New York Times reported that the Internet radio company is holding discussions to sell itself amid soaring losses, growing competition and waning investor confidence. Pandora reported revenues of $336 million for the quarter, which was $4 million ahead of the consensus estimates. Total listening hours hit 5.37 million, 3% higher than the year ago period. On the downside, total number of active users fell to 81.1 million in Q4 fiscal 2015 from 81.5 million in the same quarter last year. In Q4 fiscal 2014, the company had reported net earnings of $12.3 million but it reported net losses of $19.4 million this time around. Adjusted earnings per share came in at $0.04, three cents below the consensus estimates. Our current price estimate for Pandora stands at $19, implying a significant premium to the current market price. However, we are in the process of updating our model in light of the recent earnings release. See our complete analysis for Pandora Media Though Pandora’s revenues have been increasing rapidly, it has been unable to control its content costs, which has kept it in a net loss position. Lately, investors have gotten highly critical about the company’s performance as they are not satisfied with Pandora’s plans to grow revenues faster than expenses. Under such a situation, it makes sense to take the company away from investors eyes and work on the growth plans without the pressure of meeting defined quarterly targets. However, what doesn’t make sense is why the management would want to sell the company now, when it’s just worth $2 billion on the market, as opposed to $7 billion about a year ago. If the management is indeed looking to sell the company, it is likely an after thought considering that investors have lost patience with Pandora’s continuous losses. The New York Times reported that Pandora is working with Morgan Stanley to look for potential buyers, according to people close to the matter. However, they said that the talks were preliminary and may not lead to an immediate deal. Pandora’s biggest issue, which it has failed to resolve, has been its business model that is heavily reliant on advertisement. Moreover, the company has been facing tough competition from Spotify, which has kept a check on its advertisement and subscription revenues. Spotify, as a private company with better features and a larger music library than Pandora, Spotify has been gaining subscribers aggressively and attracting capital as well. In an attempt to bridge the gap on features, Pandora bought Rdio’s assets towards the end of last year. It even bought Ticketfly with the aim of diversifying its revenues sources. While the investor reaction was indifferent towards these acquisitions, we believe that they were valuable additions to the company. Pandora cannot expect to sustain its business based on the advertisement model. It either needs to move towards a model largely reliant on subscription or add a different business segment or both. And this is what the company is trying to do. With Rdio’s features and some direct deals with music publishers, Pandora intends to provide users an added incentive to subscribe to its services. And with Ticketfly, it plans to enter a different business segment altogether. While the company is moving in the right direction, investors may be getting impatient, which is why it may be looking to go private. View Interactive Institutional Research (Powered by Trefis): Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap | More Trefis Research
    ADBE Logo
    What’s Adobe’s Revenue And EBITDA Breakdown?
  • By , 2/12/16
  • tags: ADBE
  •     Have more questions about Adobe? See the links below. What’s Adobe’s Fundamental Value Based On 2015 Results? By What Percentage Did Adobe’s Revenue And EBITDA Increase In The Last Five Years? How Has Adobe’s Revenue Composition Changed Over The Last 5 Years? By What Percentage Can Adobe’s Revenues And EBITDA Grow In The Next 3 Years? Notes:
    NSC Logo
    By What Percentage Can Norfolk Southern's Revenue & EBITDA Grow In The Next 3 Years?
  • By , 2/12/16
  • tags: NSC CSX UNP
  • Norfolk Southern’s revenue and EBITDA can grow by 6% and 14%, respectively, over the next three years. Have more questions about Norfolk Southern? See the links below. What Is Norfolk Southern’s Revenue And EBITDA Breakdown? What Is Norfolk Southern’s Fundamental Value Based On 2015 Results? How Has Norfolk Southern’s Revenue Composition Changed Over The Last 5 Years? By What Percentage Did Norfolk Southern’s Revenue & EBITDA Grow In The Last 5 Years? Notes:   See More at Trefis | View Interactive Institutional Research (Powered by Trefis) Get Trefis Technology
    TWX Logo
    Time Warner's Q4 Earnings Bolstered By Subscription Growth At HBO
  • By , 2/12/16
  • tags: TWX DIS CBS FOX VIA
  • Time Warner’s  (NYSE:TWX) Q4 earnings were above street estimates led by better performance of HBO. While the media industry is facing  headwinds from declining subscribers, HBO continues to post solid subscriber growth. The network added around 2 million subscribers on television and 800,000 at its new streaming service – HBO Now – in 2015. HBO continues to be the driving force for Time Warner and will remain so in the coming years, led by its unparalleled content, in our view. (See – How Important Is HBO For Time Warner? ) The company’s management stated that HBO’s subscription revenues will grow at a high-single-digits rate in the coming years. For the quarter, segment revenues were up 6% while operating income was flat at $393 million. Turner Networks benefited from higher ratings at CNN and the Cartoon Network. CNN Q4 ratings were up 30% in key demographics while the Cartoon Network was the only kids network to post ratings growth in 2015. While the segment revenues grew 2%, operating income declined 15% due to higher programming costs. The company’s management stated that Turner has successfully renewed its carriage deal with its top 10 affiliates on higher rates, which will drive the revenue growth in the coming years. Subscription revenues for Turner Networks have grown at an average annual rate of 7% in the last five years to an estimated $4.6 billion in 2015. This can be attributed to strong performance in international markets and subscription pricing growth in the U.S. However, we expect the growth rate to slow over  the next few years, and estimate subscription revenues will be around $6 billion by the end of our forecast period (in 2022). This can be attributed to the rapid growth of alternative video platforms, which will likely impact Turner’s subscriber base. In fact,  TNT’s penetration among U.S. pay-TV households  has already come down from around 96% in 2010 to around 90% in 2015 while digital video platforms, such as Netflix have seen 3x subscriber growth. Accordingly, we estimate a slight decline in Turner’s subscriber base, which will be offset by continued affiliate pricing growth (also see – What Factors Can Drive Growth At Time Warner’s Turner Networks? ). Looking at the studio business, revenues declined 13% while operating income was down 5% in Q4. The decline in revenues was on expected lines due to a tough comparison with the prior year quarter, which included a big hit – The Hobbit: The Battle of the Five Armies .   The studio will likely do well in the coming years led by its solid DC Comics slate, which includes   Batman v Superman: Dawn of Justice and Wonder Woman,  among others. Also, the studio will surely benefit from its Harry Potter franchise. The studio is coming up with  Fantastic Beasts movie series, which is a prequel to Harry Potter series . In fact, yesterday, JK Rowling, the renowned author of Harry Potter, announced a new book on  Harry Potter series. However, the author clarified that it is not a prequel or sequel to the original series but stars the same Harry Potter  characters. The book is titled – Harry Potter and the Cursed Child and Warner could eventually come up with a movie series on the same. It should be noted that Harry Potter is an extremely popular franchise with more than 73 million followers on Facebook. If Warner does come up with a movie series on the new book in future, it is safe to assume that it will be a big hit. Previous installments of these movies have done well at the box-office and there are no signs of demand fading away. And this strengthens our view that the studio business will continue to provide a steady growth for Time Warner in the foreseeable future. See our complete analysis for Time Warner 
    NDAQ Logo
    NASDAQ OMX Group Witnesses Mixed Volumes In January
  • By , 2/12/16
  • tags: NDAQ CME ICE
  • NASDAQ OMX Group  (NASDAQ:NDAQ) released its monthly volume report for January, reporting varying trends in Europe and U.S. for cash equities and equity derivatives. While U.S. equity options failed to show growth in January, they saw increased volumes in Europe. On the other hand, cash equities performed impressively in the U.S, but fell in Europe. Below we take a look at NASDAQ’s metrics across various products for January and our full year forecasts.
    LUV Logo
    Will Southwest's International Operations Contribute A Significant Portion Of Its Revenue By 2020?
  • By , 2/12/16
  • tags: LUV DAL UAL AAL ALK JBLU
  • Yes, Southwest’s International operations are likely to contribute close to 5% of its total revenue by 2020 and will become crucial for its long-term growth. Have more questions about  Southwest Airlines (NYSE:LUV)? See the links below: What Will Be Southwest’s Value In 2020? What Factors Caused A Sharp Jump In Southwest’s 2015 Operating Margin? How Has Southwest’s Revenue And EBITDA Composition Changed Over The Last Five Years? Southwest Airlines: The Year 2015 In Review What Is Southwest’s Outlook For 2016? What Is Southwest’s Fundamental Value Based On 2016 Estimated Numbers? What Is Southwest’s Revenue And EBITDA Composition? How Has Southwest’s Revenue And EBITDA Grown Over The Last Five Years? Notes: 1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com 2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to  our complete analysis for Southwest Airlines View Interactive Institutional Research (Powered by Trefis): Global Large Cap  |  U.S. Mid & Small Cap  |  European Large & Mid Cap More Trefis Research
    DAL Logo
    What Will Be Delta's Value In 2020?
  • By , 2/12/16
  • tags: DAL UAL AAL ALK JBLU LUV
  • Delta’s value will be approximately $38 billion by 2020, representing an upside of 15% to its current market value. Have more questions about  Delta Air Lines  (NYSE:DAL)? See the links below: Why Did Delta’s Operating Margin Soar In 2015? Delta Air Lines: The Year 2015 In Review How Will Delta’s Revenue And EBITDA Grow Between 2015 and 2018? How Has Delta’s Revenue And EBITDA Changed Over The Last Five Years? What Is Delta’s Revenue And EBITDA Brekdown? What Is Delta’s Fundamental Value Based On Estimated 2016 Numbers? How Has Delta’s Revenue And EBITDA Composition Changed Over The Last Five Years? Notes: 1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com 2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to  our complete analysis for Delta Air Lines Limited View Interactive Institutional Research (Powered by Trefis): Global Large Cap  |  U.S. Mid & Small Cap  |  European Large & Mid Cap More Trefis Research
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