Trefis Top 5 – June 2 Insights (VALE, SIRI, GM, NFLX, BP)
In today’s article roundup we highlight our coverage launch for Brazilian mining giant Vale (NYSE:VALE). As the largest iron ore producer in the world, investors watch this stock because iron ore is a read on emerging markets demand for steel, and hence growth, especially for large markets like China. We also look at Sirius XM Radio‘s (NASDAQ:SIRI) agreement with Hyundai for a 3-month introductory subscription for N. American customers. GM (NYSE:GM) reported solid Q1 results, and we assess the drivers to its N. America business. We explore why high flying Netflix (NASDAQ:NFLX) is investing heavily in its marketing efforts to grow its subscribers base, which we think is unlikely to meet the market’s expectations. Finally we note that BP (NYSE:BP) is close to hitting its $30 billion divestment targets it set to cover the costs of the Gulf of Mexico oil spill.
Coverage Launch – $42 Trefis Price Estimate for Vale
Vale (NYSE:VALE) is one of the world’s largest mining companies and the world leader in iron ore and iron ore pellets production. Headquartered in Brazil, the company also has access to the world’s largest nickel reserves. Apart from iron ore and nickel, Vale also produces bauxite, alumina, aluminium, copper, precious gems and minerals and other base metals. Vale operates a large logistics network based in Brazil that includes railroad, maritime terminals and a port. Vale’s nickel operations are carried out under the name its Vale Inco Limited, which is a wholly owned subsidiary of the group. Vale competes with other metals and mining giants like Rio Tinto (NYSE:RIO), BHP Billiton (NYSE:BHP) and Alcoa (NYSE:AA).
How Much Does Hyundai Partnership Add to Sirius XM Stock?
Sirius XM Radio (NASDAQ:SIRI) recently announced its alliance with Hyundai (SEO:005380) Motor America wherein consumers across the United States will receive a 3-month introductory subscription to XM when they purchase Hyundai Certified Pre-Owned vehicles equipped with XM. We believe that this will help Sirius expand its automotive subscriber base and add significant upside to its stock value. Sirius is a satellite radio company in United States and is mainly distributed through automakers and retail locations as well as through Sirius’ own website. Sirius XM has ties with major automobile manufacturers such as Ford (NYSE:F), GM (NYSE:GM) and Toyota (NYSE:TM), which help drive its presence in the U.S. automobile space.
Factors Underlying GM’s Revenue Growth in North America
GM (NYSE:GM) reported a 15% year-on-year increase in total revenues for Q1 2011. GM’s North America (NA) operations is the largest contributor to its total revenues, accounting for almost 60% in Q1. In this article we take a look at major trends that emerged in the past quarter that affect revenue generation in North America. GM competes with other global automakers like Ford (NYSE:F), Daimler AG (NYSE:DAI), Honda (NYSE:HMC), Toyota (NYSE:TM), Hyundai (SEO:005380) and Nissan (PINK:NSANY).
Maintaining Subscriber Growth Will Be A Challenge for Netflix
Netflix (NASDAQ:NFLX) added 3.3 million net subscribers for Q1 2011, up by 94% compared to same period last year, marking its highest growth rate so far. [1] The growth mainly came from the marketing efforts taken up by Netflix for which it incurred a whopping $104 million, an increase of 39% from last quarter. The rising advertising and marketing expenses clearly suggests that Netflix is striving to maintain its turf in a competitive landscape with players like Apple’s (NASDAQ:AAPL) iTunes, Hulu, video on demand (VoD) providers like Comcast (NASDAQ:CMCSA) and Time Warner Cable (NYSE:TWC) and Google (NASDAQ:GOOG). We believe that continuously updating content will be crucial for Netflix to maintain its subscriber growth rate.
BP Poised to Reach $30 Billion Divestment Target in 2011
BP (NYSE:BP) has successfully managed the unwanted challenge of raising $30 billion through divestments in the current year. The third largest of the six oil & gas ‘supermajors’ set a difficult goal to raise enough cash to cover all expected costs as a result of the Gulf of Mexico oil spill. The company estimates costs will exceed $40 billion due to the world’s biggest oil spill to date. [2] BP competes with other oil & gas heavy-weights including Exxon Mobil (NYSE:XOM), Royal Dutch Shell (NYSE:RDS.B), Chesapeake (NYSE:CHK), Anadarko (NYSE:APC) and Chevron (NYSE:CVX).
Notes:- Netflix Q1 Earnings Up 88%, Adds 3.M Subscribers, SeekingAlpha, April 25, 2011 [↩]
- BP leak the world’s worst accidental oil spill, The Telegraph, Aug 3 2010 [↩]