Trefis Week in Review

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The Week in Review

Below is a summary of the activity on Trefis during the past week that we thought you would find interesting.

Insights from the Week

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Technology Media & Telecom

LinkedIn provides advertising solutions to online marketers on LinkedIn.com. These online marketers pay LinkedIn to develop these products in-house and publish these advertisements on LinkedIn.com …

Juniper reported its earnings last month and based on continued strong performance in routers and switches, we have upgraded our price estimate to $36.95 …

The average number of corporate clients for LinkedIn has increased rapidly over the past few years from 450 in 2008 to more than 2,700 in 2010 …

In a situation where Atom’s pricing is maintained and Intel gains a quarter share of the total market over the course of our forecast period, our price estimate could jump above $30 …

There could be 7-8% upside to the Trefis price estimate if ADP’s payroll processing operating margins continue to increase in the future reaching 30% by the end of our forecast period …

The move will boost the number of employees using Paychex’s retirement plan services as more people choose to go online to manage their retirement needs, which adds more control and added flexibility to this process …

Our valuation is in line with the company’s earlier IPO guidance and slightly higher than the implied valuations at which LinkedIn traded previously on services such as SharePost and SecondMarket …

The advent and growing popularity of tablet PC’s, especially Apple’s iPad, is now posing a serious threat to the conventional notebooks and ultra-small “netbooks”– a mainstay of both HP’s and Dell’s PC business …

In addition to the risk that existing revenues might drop, the uncertainty in Japan also limits the potential for growth in this market for the near-term at least …

By our estimates, subscriber growth needs to rise to near 70 million by 2013 and maintain that trend to reach the current market price …

During its recent earnings announcement, CBS management mentioned that it recently sold Hawaii Five-O TV series to TNT. CBS thinks that this show will grab about $5 million per episode from domestic and international syndication agreements …

The acquisition continues the trend of storage company mergers that have changed the landscape of the industry in the last 3 months. We expect Pliant to become SanDisk’s enterprise NAND flash division …

This follows a trend of online travel agencies offering hotel bookings on airlines’ websites, and now Expedia will provide hotel bookings at each of the 35 destinations served by SAA …

This launch will steal some of Google’s thunder as Netflix will compete with and slow the adoption for Google’s movie rental app. That said, the adoption for Android based devices should continue to take off which bodes well for both companies …

CBS recently released Q1 2011 earnings and based on continued improvement in margins and a better outlook for the advertising market, we have upgraded our price estimate for CBS stock to $27.49 …

What Google appears to be influencing consumer behavior, similar to what Netflix has done in the past, by making it easy and convenient for Android users to rent and watch movies …

We believe the main focus of the earnings will be how the company’s newer cloud-computing products are faring, and we will keep an eye on the company’s operating margins as expenses have been steadily outpacing revenue growth in the past couple of years …

HBO recently released its HBO Go app for mobile devices and reportedly had 1 million downloads in the first week of its launch. his is yet another move by Time Warner aimed at preserving HBO’s value …

IBM has built the world’s leading analytics practice, with world’s premier nonacademic mathematics function, leading-edge software and offerings integrated by industry …

Apple’s move away Samsung would take a fair amount of time, and for the time being would be a small portion for Intel, which we could include in the ‘other businesses’ segment that Intel reports …

Higher Android adoption benefits Google by enabling more searches from Google’s platform, as Google search is the default search engine on Android-based phones and tablets …

According to a recent report from DigiTimes, Apple’s supplier Foxconn Electronics is facing a shortage of both labor and material at its plants in China, and that these issues are likely to affect shipments of the iPad 2 and iPhone …

According to a recent mobile threat study from Juniper Networks, the security threats on mobile devices are growing at a rapid rate, with Android platform saw an increase of 400% over the last one year …

We agree with the premise that the major risk facing Motorola Mobility and other licensees is the commoditization of Android platform; however, we don’t agree with the timing here …

The company mentioned that the Devil ads performance are substantially better than average Internet ads. The click-through rates and the time spent by users on Devil ads are substantially higher than the industry average …

(Trefis Pro Exclusive) Consumer & Retail, & Automotive

With Coach planning to cut production in China to 40-50% from 85% at present and open new factories in countries where wages are lower like Vietnam, Philippines and India, it could lead to significant increase in the firm’s capital expenditure …

While GM has managed to restructure its business after bankruptcy and is posting impressive earnings growth, Toyota has seen a variety of problems since its massive vehicle recalls in the U.S. last year …

Chipotle reported impressive Q1 numbers driven by a 12.4% increase in comparable restaurant sales. Comparable restaurant sales growth was primarily driven by increased traffic in the quarter …

Amid the concerns of rising food costs for major food companies around the world, McDonald’s reported a 9% increase in its revenues over the same quarter last year …

As Lowe’s looks ahead, the company hopes that improvements in its hardware & seasonal division will pick up as the economic improves, in part driven by rising demand for LED lighting and online sales …

We currently forecast the daily revenues from the sale of handbags at Coach stores will almost double about $8.4 K in 2010 to $16K by the end of the Trefis forecast period …

Revlon has not only posted positive sales growth in its latest earnings, but also improved gross margins, which partly funded an expanded marketing and advertising budget …

In France and Southern Europe, McDonald’s is equipping an additional 250 restaurants with self order kiosks to provide a more convenient ordering experience for customers …

An increase in the number of high net worth individuals (HNIs) in Asia is one of the key drivers behind this growth, and this will drive Singapore’s VIP table game wages …

As compared to Ann Taylor stores, LOFT stores offer more relaxed fashions, for both work and home, in the more affordable “upper moderate” priced category offering style and value to customers …

(Trefis Pro Exclusive) Financial Services

The company had 8.1 million active brokerage accounts, 1.4 million corporate retirement plan participants, and 719,000 banking accounts at the end of the Q1 2011 …

E-Trade’s revenue per trade has already fallen from $11.38 per trade in Q1 2009 to $11.32 per trade in Q1 2010. And the trend is expected to continue in the future with little differentiation among the more prominent companies in the market …

Principal transactions consist primarily of revenue from market-making activities – in which E-Trade acts as an intermediary to match buyers and sellers of securities …

We currently forecast BNY Mellon’s AuM will increase from $1.2 trillion in 2010 to over $2.25 trillion by the end of our forecast driven by rising inflow of funds from emerging markets …

After the major setback to its operations during the global economic downturn of 2008, Barclays has been focusing its efforts to ensure stable and sustainable sources of revenue …

If the fee as % of wealth management assets decreases to around 0.6% by the end of our forecast period, there can be a downside of nearly 10% to our current price estimate …

Wells Fargo earns revenues on CRE loans  in the form of interest on outstanding loans balances as well as charges and fees on loan originations and late payments …

Contrary to popular belief, revenues earned by online brokerage firms per trade carried out by their customers is not their biggest source of value …

In 2010, Discover generated about $1.1 billion in revenues from card transaction and execution fees. Going forward, we expect 3-5% annual growth in revenues over our forecast period …

While the company indicated that it was difficult to determine the expenses it would need to incur because of this decision, it has decided to set aside a £1 billion ($1.6 billion) provision in Q2 2011 for PPI payments …

(Trefis Pro Exclusive) Energy & Natural Resources

Our analysis shows that the sale of iron ore through its North American and Asia-Pacific divisions contributes to almost 80% of the value for Cliffs’ stock. The company’s value is hence directly linked to the demand and price of iron ore in the global market …

Cliffs Natural Resources closed its acquisition of Consolidated Thompson Iron Mines, which gives the company yet another reason to celebrate in the wake of the company being added to the Fortune 500 list for 2011 …

According to EIA data for OECD refinery utilization rates, utilization declined from 88% in November 2007 to 77% in August 2009. Low utilization rates still seem to be continuing and we can expect more refinery shutdowns to ease off margin pressure …

While Chevron’s consolidated crude oil production amounted to 1,617 thousand barrels per day in 2010, its share of equity affiliate production stood at 306 thousand barrels per day …

Major players in the steel industry are expecting to see a 8-9% rise in demand in South East Asia within the next year and an overall 4% increase in demand from Asia …

Exxon Mobil has been dealing with a storm of negative PR lately as the company’s record profits in times of rising fuel prices are unjustified, and politicians are putting pressure on Congress to look at tax subsidies provided to oil and gas companies …

The global consumption and supply of aluminum could double from its 2010 figures by the year 2020. This growth is expected to be fueled by an increasing demand for “more efficient infrastructure and transportation solutions …

The mine, which contributes between 0.9 million tons and 1.4 million tons of metallurgical coal to the company’s North American coal business segment, saw significant damage to its preparation plant and overland conveyor system …

In 2010, it sold 439 million barrels of crude oil and NGLs at an average realized price of around $65 per barrel by our estimates generating $28 billion in revenues …

(Trefis Pro Exclusive) Industrials & Transportation

Alaska Air Group carries more than 23 million passengers per year to more than 90 destinations and provides freight and mail services, primarily within the state of Alaska and along the West Coast …

Due to the vast array of products and their applications, the global demand (in real US dollar terms) for specialty chemicals was worth over $445 billion in 2010 …

With increased capacity additions underway outside the U.S., we expect both demand and supply of DuPont’s key operating divisions to shift to emerging economies …

As the U.S. and world economies continue recovering from the recent economic downturn, the aviation sector will make a strong contribution towards revitalizing the job market …

Summaries of Trefis Members’ Recent Forecasts

There is abundant speculation on who gets to be the lead underwriter for the highly anticipated IPO of Groupon, which could be anywhere in size from $15 billion and $25 billion …

While we estimate Lexmark’s laser printer market share will gradually rise to 4% by the end of our forecast period, Trefis members predict a slightly higher share of 4.6%, translating into just under 10% upside to our LXK stock price estimate …

RIM has an opportunity to rebound with Blackberry 7 OS, its latest operating system for its smartphones and the two new phones based on the upgraded OS …

We forecast that as market uncertainty related to European sovereign debt crisis, the unrest in the Middle East and the Japan crisis eases in 2011, Schwab’s average number of annual trades per account will reverse the trend …

Unlike most of its competitors, Southwest does not impose additional fees for items such as seat selection, fuel surcharges, curb side check-in and telephone reservations, and this attracts customers …

We see around 15% upside from current levels, but if China market share maintains or grows for GM, we could see additional 10% upside from our estimates …

Apple maintains that demand for the iPad 2 is staggering and that it has a heavy backlog. It expects sales to almost double next quarter as manufacturing ramps up …

 

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