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The Month That Was: Automotive Stocks
  • By , 8/31/15
  • tags: DAI TTM-BY-COMPANY VOLKSWAGEN-AG TTM VLKAY DDAIF GM TM F
  • It has been an eventful August. Earlier in the month, China devalued the renminbi against the U.S. dollar, the biggest one-day currency move in over two decades, in a bid to spark an increase in exports and boost economic growth. And then the country cut interest rates, flooding its banking system with liquidity. Concerns over the contagion effect of the China slowdown on the rest of the world, signs that the U.S. economy might not be doing as well as previously thought, and uncertainty over interest rate hikes, saw the Dow Index plummet 1,900 points, and the S&P 500 Index decline more than 10%, before the six-day losing streak ended last week. The stock market has rallied since, but uncertainties still remain. The Chinese slowdown has impacted many companies, especially the likes of  Volkswagen AG (OTCMKTS:VLKAY),  Daimler AG, and  Tata Motors (NYSE:TTM), who previously looked at the huge potential of China to derive growth. The world’s largest automotive market has suffered a substantial hit this year, with sales of passenger vehicles declining in both June and July by 3.4% and 6.6%, respectively. Overall, automobile sales are up only 0.4% year-over-year through the first seven months. And volumes are braced to decline again in August. Amid the normalization of the Chinese automotive market, we look at how these companies are placed. Volkswagen China forms over one-third the net vehicle deliveries for the entire group, a group that delivers over 10 million vehicles annually across the globe. Hurt by the slowdown, Volkswagen’s vehicle deliveries declined by 5.3% year-over-year through July in the country, more than the 0.4% decline in overall automobile sales. The company is not only losing volume sales due to the lowering demand, but is also surrendering market share to both foreign and domestic manufacturers. We have a  $46 price estimate for Volkswagen AG, which is above the current market price. The stock has declined 6% in the last month. See Our Complete Analysis For Volkswagen AG   The price sensitivity of consumers has increased amid the slowdown and crashing of the stock markets, and the domestic makers have considerably lower price-points when compared with the foreign automakers who import their vehicles, which has benefited them. A tough pricing environment in China, and slight reduction in disposable incomes, has impacted the financials of key foreign automakers, which have lost approximately 3.7 percentage points of market share to domestic manufacturers so far this year in the country. On the other hand, the luxury juggernaut owned by Volkswagen, Audi, has also struggled in China this year, with sales declining 0.3% year-over-year through the first seven months of the year. More of the same could continue this month. Daimler A stark contrast to Audi’s downtrend in China has been Mercedes’ growth. Mercedes-Benz has defied the China slowdown and posted a 14.7% year-over-year rise in global vehicle deliveries through July, with a solid 22.7% rise in deliveries in China. The brand expects this trend to continue through the rest of the year, and might not look to increase discounts despite the increased economic volatility. This could protect profitability. In addition, while Mercedes had for around two years trailed its compatriots in terms of operating margins, as of Q2, it has the highest margins among the German big three. Compared to BMW and Audi’s 8.4% and 9.7% operating margins, respectively (the figure for Audi doesn’t include China results), Mercedes’ margins stood at 10.5%. We have a  $91 price estimate for Daimler AG, which is above the current market price. The stock has declined 8.3% in the last month. See Our Complete Analysis For Daimler AG   Why the August results might be pivotal for Mercedes is because the brand could very well overtake Audi as the second highest-selling luxury automaker in the world, behind BMW, this year. Mercedes trails Audi by less than 300 units and has the growth momentum. Tata Motors The contribution of China to Jaguar Land Rover’s (JLR) net retail sales has decreased from 28% in Q1 fiscal 2015 to 18% this Q1 quarter (ended June), due to a large 33% fall in retail volume sales in the country. The impact of the fall in China demand is also apparent in Tata Motors’ financials. Net revenues fell 6% and profit after tax was almost half of what it was in the last June quarter, hurt by the decline in China sales at JLR, which forms almost 90% of the group’s valuation as per our estimates. Trefis’ price estimate for Tata Motors is $37, which is above the current market price. The stock has declined a considerable 13% in the last month. See Our Complete Analysis For Tata Motors Volumes continue to be down in July, and could decline again in August. The case with JLR might be bad timing due to the problems in ramping up sales of the Evoque, which is rolling out from a completely new manufacturing facility in China, the first time JLR is building vehicles from scratch outside the U.K. It might take time for the company to speed up production. In order to boost its retail sales, the brand cut the starting price of its China-produced Evoque, is also launching the new Jaguar XF and XJ models this year, and running out the Freelander, which will be replaced by the Discovery Sport. Once the reach and availability of the new locally-built models increase in the country, the company’s sales might begin to turn around, seeing how demand for premium SUVs and Crossovers remains strong. More color would be provided by the August volumes. 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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    Monthly Notes On The Coffee Industry: Starbucks & Dunkin' Brands
  • By , 8/31/15
  • tags: DNKN
  • On account of last week’s news of the Chinese slowdown, many commodities took a plunge in the market, as many risk-averse investors pulled out from a majority of the stocks and some of the commodities. With fear that the slowing Chinese economy could drag the world towards a new recession, the Bloomberg Commodity Index dropped to further lows. The September 2015 futures for coffee touched 117 cents/lb further lowered by the strong dollar. On the other hand, Arabica prices for the December contract dropped to 124 cents/lb. Here are some updates related to coffee companies covered by Trefis: Starbucks In the latest quarter earnings (June-ended), Starbucks reported a massive 18% year-over-year (y-o-y) increase in revenues to $4.9 billion, driven by 7% growth in comparable store sales. Mobile payments, the introduction of ultra-premium coffee through its Reserve stores, and an increase in customer traffic with improved average spend, are some of the reasons for Starbucks’ knockout performance in the quarter. The introduction of premium and ultra-premium reserve coffee positively drove the average transaction by 4% y-o-y, resulting in a 120 basis points improvement in operating margins. The highlight of the earnings was the rapid growth of the company’s mobile payment and ordering initiative, which is now available in 4,000 of Starbucks’ U.S. company-operated stores. Starbucks has roughly 10.4 million active My Starbucks Reward members, up 28% y-o-y, with 6.2 million Gold members, up 32% y-o-y. This resulted in an increase in average transactions during the quarter. SBUX stock traded between $56 and $59 for the major part of August before falling to $50 on news of the Chinese slowdown. Our price estimate for SBUX is $55, which is roughly the same as the current market price. Dunkin’ Brands Dunkin’ Brands reported strong comparable store sales growth in the domestic market in the second quarter but witnessed a dull performance by its international segments.  Dunkin’ Brands’ net consolidated revenue for the quarter rose more than 10% year-over-year (y-o-y) to $211 million, with diluted EPS of $0.44. The company mentioned that its business in South Korea, which accounts for a major portion of sales for both brands internationally, was affected due to the outbreak of the MERS virus and are expecting some lingering impact in the third quarter as well. DNKN stock gradually dropped from $55 to $50 during the first three weeks of August before rising back up to $51.70. Our price estimate for DNKN stock is $57, which is roughly 4% above 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
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    Can The New GPU Lineup Help AMD Regain Its Share In Discrete GPUs?
  • By , 8/31/15
  • tags: AMD INTC NVDA QCOM
  • AMD’s  (NYSE:AMD) stock has lost approximately 40% of its value in the last six months as the company has seen a steep decline in its top line in the last few quarters. In addition to being the worst hit by the sluggish PC demand this year, AMD has suffered market share losses to  Intel (NASDAQ:INTC) and Nvidia (NASDAQ:NVDA). AMD has undertaken a number of restructuring initiatives in the last two years, but its efforts have so far failed to provide a continuous growth momentum to its top line. In 2014, the company saw marginal growth in its revenue as it successfully ramped up a diverse set of new products in non-PC growth markets, primarily the gaming industry. AMD believes that Q2 2015 will be a revenue trough for the year.  Management looks forward to seeing improvements in the back half of the year as the company ramps semi-custom wins and its newest APU and GPU products. Last week, AMD launched its third “Fiji”-based product this summer (Radeon R9 Nano), the first two being AMD Radeon R9 Fury and R9 Fury X graphics cards. Radeon R9 Nano is the fastest Mini ITX graphics card ever to enable 4K gaming in the living room through ultra-quiet, ultra-compact PC designs. The Fury graphics family marks a turning point in PC gaming with the implementation of High-Bandwidth Memory (HBM) to deliver extreme energy efficiency and performance for ultra-high resolutions, unparalleled VR i.e., Virtual Reality) experiences, and smoother gameplay. Offering a number of variants ranging from $199 – $649, the Radeon R9 Series claims to meet virtually every need and budget for anyone who demands a premium gaming experience. Whether AMD’s new Radeon GPU lineup can help the company regain its lost market share from Nvidia, only time will tell. Our price estimate of $2.43 for AMD is at a 30% premium to the current market price. See our complete analysis for AMD The PC Gaming Graphics War Between NVIDIA and AMD In March 2013, AMD devised a unified gaming strategy to drive the gaming market across consoles, cloud platforms, tablets and PCs. The strategy has clearly paid off well so far, as the company now powers all major next generation consoles including Sony’s PlayStation 4, Nintendo’s Wii U and Microsoft’s Xbox One. However, when it comes to discrete graphics cards, Nvidia still has an upper hand over AMD, as far as the current market share is concerned. PC gaming account for a large chunk of the worldwide gaming market, higher than consoles, phones, tablets or any other individual gaming segment. The PC gaming market is expected to grow from $26 billion in 2014 to $35 billion by 2018. Following AMD’s acquisition of ATI in 2006, AMD has been one of two key players in the discrete graphics cards market, along with Nvidia. The two companies account for almost 100% of the GPU market. The market shares of the two companies have fluctuated a lot between quarters, but Nvidia still manages to retain its lead over AMD in the discrete GPU market. Nvidia has pursued architecture updates aggressively and more quickly placed them in products while AMD, strapped for resources as it tries to compete with Intel in CPUs and Nvidia in GPUs, has fallen back on re-branding existing chips in many of its cards. In the past, AMD has often resorted to slashing its prices in order to better sell its graphics chips. During its financial analyst meeting in May, AMD highlighted that its larger gaming efforts include not only consoles, but everything from casinos to PCs.  And it will leverage GPUs, CPUs, software, as well as its semi-custom chips. Plans for AMD’s Graphics Core Next architecture include high-performance capabilities with twice the power efficiency of current GPUs and a FinFET 3D transistor architecture. AMD has launched a number of new products (CPUs, APUs and GPUs) with added features and improved efficiency so far this year. There are indications that AMD might enjoy an upswing in popularity as DirectX 12 games start to emerge. The only DX12 game benchmarked so far seems to show that AMD’s R9 390X offers performance at par with the Nvidia GTX 980, but for significanty less. We forecast a marginal increase in AMD’s discrete GPU market share (both notebooks and desktops) in the long-run. View Interactive Institutional Research (Powered by Trefis): Global Large Cap |  U.S. Mid & Small Cap |  European Large & Mid Cap More Trefis Research
    CMG Logo
    Monthly Notes On The Restaurant Industry: Chipotle Mexican Grill & McDonald's
  • By , 8/31/15
  • tags: MCD
  • The U.S. restaurant industry has been witnessing tough competition among all the segments for its breakfast customer traffic. On the other hand, casual dining restaurants have taken the opportunity to attract the lunch time visitors. According to a recent report by the research group NPD, burgers have been the customers’ top priority for the lunch hours, and casual dining restaurants came out as the leaders in driving customer traffic by reducing the price of its burgers. Casual dining chains witnessed a 2% increase in lunch visits over the 12 months period ended June 2015. The report mentions that the average price of a burger at casual dining restaurants is close to $9 compared to $5.62 in fast casual restaurants. However, casual dining restaurants serve complimentary fries with the burgers, and that is not the case at fast casual restaurants, where the fries need to be purchased separately. Additionally, the decrease in lending rates from 4.85% to 4.60% by The People’s Bank of China, led to the biggest stock market plunge in China since 1996. As a result, most of the U.S. listed stocks suffered major drops over the last week. Here are some of the updates related to some of the restaurant companies covered by Trefis: McDonald’s The Golden Arches reported negative comparable sales for the fifth consecutive quarter in its second quarter fiscal 2015 earnings report. The company posted revenues of $6.49 billion, beating the street estimates by $40 million. McDonald’s comparable sales in APMEA (Asia/Pacific, Middle East and Africa) region declined by 4.5% in the second quarter, whereas operating income declined 26% year-over-year (y-o-y), as McDonald’s Japan still struggles with low customer traffic. The important takeaway in the earnings report was the positive guidance given by the company for the third quarter, as McDonald’s expects growth in the International Lead market segment, and also expects recovery efforts in Asian markets to increase the customer count. MCD stock traded close to $100 for the major part of August. However, after the Chinese interest rate cut, the stock declined to $91, before bouncing back to $97. Our price estimate for MCD stock is $99, which is roughly 3% above the current market price. Chipotle Mexican Grill Chipotle reported excellent results in its second quarter earnings report, with 14.1% y-o-y growth in the net revenues to $1.2 billion, and 4.3% growth in the comparable sales. ( Chipotle Mexican Grill, earnings call transcript )) The highlight of the earnings was the addition of a new pork supplier, Karro Food Group of the U.K., which has already started serving pork to the company’s restaurants in Florida, bringing relief to the restaurants that were facing a Carnitas shortage. CMG stock rose to its all-time high with an approximate 8% jump to $724. For the majority of the month of August, the stock traded above $740, before declining 7% to $695 on the news of Chinese interest rate cuts. The stock is currently trading close to $721. Our price estimate for CMG stock is $727, which is roughly 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
    EA Logo
    Monthly Update On Gaming Industry: Electronic Arts & Activision Blizzard
  • By , 8/31/15
  • tags: ATVI
  • The U.S. gaming industry showed some signs of improvement in terms of hardware sales over the past 2 months. However, the overall hardware sales figure for the combined first 7 months of 2015 is down nearly 7% compared to that in same period last year. On the other hand, the software sales for the first 7 months  in 2015 were 2% higher than that in the same period last year, despite the absence of any major title release. Gamers are actually spending more money on games, now that they are done buying the new console systems. The People’s Bank of China cut its benchmark lending rate from 4.85% to 4.60%, the lowest in a decade. Further, policymakers decided to lower the reserve requirement ratio by 50bps for banks. These measures to facilitate monetary easing have been taken following the biggest stock market plunge in China since 1996 and a four week rise in money market rates as lenders hoard cash. As a result, the Dow Jones index fell nearly 10%, affecting most of the U.S. listed stocks. Here are some updates related to some of the gaming companies covered by Trefis: Electronic Arts Electronic Arts reported excellent results in its June-ended quarter report, with non-GAAP revenues rising to $693 million, $53 million above the guidance. Apart from the company’s popular sports titles, other games, such as Battlefield Hardline  and   The Sims 4, helped the company in engaging more gamers around the world, effectively leading to more game-play hours and better revenue growth. The major takeaway from the earnings report was the increasing revenue contribution of the digital segment, indicating the shift of gamers’ interest to online gaming and downloadable content. With strong software sales growth this year, the company is confident of its newer editions of the sports titles. Additionally, the return of Need For Speed is attracting many racing game lovers, and the incremental revenues from this franchise will certainly boost the company’s revenue growth in the holiday season of 2015. EA’s stock traded between $70 and $75 for the major part of August 2015, before dropping roughly 14% after the release of the Chinese interest rate news. Our price estimate for EA is $76, which is roughly 12% above the current market price. Activision Blizzard Activision Blizzard posted record Q2 revenues, driven by strong growth in the digital segment. The sustained momentum of the company’s core franchises, namely  Call of Duty, Destiny,   and  Skylanders ; as well as excellent user response to the new releases:  Heroes of The Storm   and  Hearthstone, drove the non-GAAP revenues to $1.04 billion, up 8% year-over-year (y-o-y) Activision Blizzard is bringing back the most successful storyline in the Call of Duty history, with the launch of Call of Duty: Black Ops III in November 2015. The previous two editions of this series averaged around 29 million unit sales. (See:  Activision might continue FPS domination with new Black Ops title ) Being one of the highly anticipated games this year, the company reported that the number of  Black Ops II  monthly active users rose to over 11 million players. ATVI’s stock rose from $25 to $28 during the first week of August and traded stably between $28 and $30 thereafter. The stock fell back to $26 on the outbreak of the Chinese interest rate cut news. However, it has regained its momentum and is currently trading back at $29. Our price estimate for ATVI is $29, roughly the same as 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
    F Logo
    Two Things Ford Is Doing To Tackle The China Slowdown
  • By , 8/31/15
  • tags: F GM TM HMC
  • Ford Motors (NYSE:F) has enjoyed an extraordinary spell in China in recent years. In 2012, the company laid out a plan to double its production capacity and sales in China by 2015. However, in 2013 and 2014, sales rose even faster than the growth in production capacity. Consequently, it was not surprising that the company hit production bottlenecks by the end of the year 2014. The company addressed its production constraints by adding two new plants in the region and sales started to pick up again. But since then the Chinese economy seems to have hit a roadblock, jeopardizing the company’s future prospects. Ford CEO Mark Fields has said that he is taking the long term view on China.  And while it is true that there is a lot to be excited about in the long run with China, in the short term there could be a lot of hiccups. Below we talk about how Ford plans to minimize the impact of the slump in China over the near term. Background In 2013, sales went up 49% for the year but the sales growth slowed in 2014. The company management blamed the slowdown on capacity constraints. In November of 2014, Ford opened a third assembly plant in China. The plant, which opened in Chongqing, increased the company’s production capacity in the region by 360,000 units per year. Another plant opened in Hangzhou in March this year, its sixth in the country. The plant added another 250,000 units in production capacity. The Chongqing plant assembles the recently launched Ford Escort, which is a major part of Ford’s attempts to gain market share in China. The Ford Escort is an entry-level offering which is positioned in between the Ford Fiesta and Ford Focus. The car has deliberately conservative styling and its main target audience is budget conscious families. The car also offers a big backseat, which is a major selling point in China. Ford’s China sales have been dependent on the strong growth in SUV models, the Ford Kuga, and Ford EcoSport. The addition of the Ford Escort will allow the company to reach a different demographic and hence boost its sales. The company also started selling its luxury vehicle Lincoln in China late last year and plans to open eight Lincoln retail outlets in seven different cities in the region. Sales Slowdown Ford operates in China through two joint ventures — Chang’an Automobile Company, which builds passenger cars and SUVs, and Jiangling Motor Corporation(JMC), which builds commercial vehicles. Both these companies have seen their sales dip in July. Sales of Chang’an fell by 4% in July, while sales of JMC fell by 12%. JMC’s decline is disconcerting because overall sales in July fell by 7.1%. However, during the earnings call last month, Ford’s management stated that the forthcoming decline in commercial sales in China had been visible to the company for a while and the company had already adjusted production and spending in anticipation. This is why the company posted a strong profit in the second quarter in China despite the sales decline. SUV Sales Are Still Growing Over the last three months, overall vehicle sales have been down, but the SUV segment has continued to do well. In July, as overall sales dipped by 6.6%, SUV sales grew by 34%. While most of that growth is being captured by inexpensive SUVs manufactured by local companies, international companies are still hopeful of benefiting from the trend. Ford, which sells the Kuga, EcoSport and Explorer SUVs in China, added a five-passenger version and a seven-passenger version of the Edge to its lineup in China through its Chang’an Joint Venture earlier this year.  Now JMC is also entering the SUV market by beginning production of the Everest SUV, a midsize SUV based on the platform of Ford’s Ranger pickup. The Everest is a rugged vehicle that provides many off-road capabilities and hence is a good compliment to the mostly urban lineup that Ford currently has in China. The timing of these introductions could turn out to be a boom for the company. As overall growth slows, rising SUV sales can help the company maintain its margins as they sell for higher prices. See full analysis for Ford Motors 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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    Aeropostale's Underlying Concerns Escalate Following Another Dismal Quarter
  • By , 8/31/15
  • tags: ARO AEO ANF
  • As expected,  Aeropostale (NYSE:ARO) reported lackluster quarterly results yet again, marking its eleventh consecutive quarter of net losses. Its revenues fell 17.5% to $327 million with loss per share at $0.55, both missing the average analyst estimate. The more disappointing factor, however, was that were not any latent signs of recovery in the company’s performance. Its average price per unit fell drastically after stabilizing in Q1 and P.S. from Aeropostale’s store count remained at 26, while we expected it to increase. It appears that Aeropostale’s infusion of fashion-forward products in its portfolio is not showing much promise, as discounting remains the main traffic driving factor. For P.S. from Aeropostale, the retailer’s weak financing capacity seems to be restricting the brand’s expansion, which raises several concerns around its only lucrative business prospect. Keeping in mind what has transpired in the recent quarter, we have lowered our price estimate for Aeropostale by over 30% by making certain adjustments to its revenue per square feet, store count and EBITDA margin forecasts. Aeropostale said that heavy discounting of older inventory was the main reason behind the decline in its average prices, and they are confident about their back-to-school inventory. However, the retailer’s guidance for the third quarter suggests otherwise. The company expects to report a loss per share of $0.30-$0.38, worse than the consensus estimate of $0.31. While U.S. buyers’ shift towards fast-fashion brands and online shopping has troubled the entire casual apparel industry, the impact on Aeropostale has been particularly intense. And there seems to be no end for the company’s troubles, as the factors that were supposed to help it recover are not fulfilling their promise. Our revised price estimate for Aeroposatle is at $2.22, implying a significant premium to the current market price.
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    Why Is Alaska Air Ahead Of Its Peers? – Part 2
  • By , 8/31/15
  • tags: ALK DAL UAL AAL LUV JBLU
  • In an environment where the top US airlines have been quivering over investor perceived overcapacity, Alaska Air continues to grow, rather strongly. The Seattle-based airline witnessed an increase of more than 16% in its stock price over the last three months, when the rest of its competitors were struggling to convince the market about the fundamentals of their business. In fact the airline has managed to remain resilient recently, even when the global markets started wobbling over fears of yet another recession due to weakness in the Chinese economy and its impact on the rest of the world. In our previous article, “ Why Is Alaska Air Ahead Of Its Peers? – Part 1,” we had discussed some of the quantitative reasons that are driving the airline’s exceptional performance. Just to do a quick recap, we discussed factors such as its diversifying revenue base, focus on operational excellence, and a low cost structure, which influences the airline’s current market price. In this note, Part 2 of the series, we will talk more about the qualitative factors, such as a strong management, generating value for the shareholders, and an investment grade balance sheet, that are keeping Alaska Air ahead of its peers. Source: Google Finance We have a   price estimate of $81 per share for Alaska Air, which is almost 7% ahead of its current market price. See Our Complete Analysis For Alaska Air Group Here A Focused Management A leader is one who knows the way, goes the way and shows the way. – John C. Maxwell Source:  geniusquotes.org Alaska Air has a top management that not only knows “ what to do ” but also knows “ how to do it. ” How else can one justify the resilience demonstrated by the airline when its leading position in Seattle was threatened by its closest rival, Delta ? Though Delta’s invasion into Alaska Air’s home town created a pricing pressure for the latter, it did not unnerve the senior management of the airline. Rather, the management chalked out a well thought out plan to defend its position in the Seattle market, which accounts for more than 60% of the airline’s revenues. The carrier reallocated some of its Seattle capacity to newer destinations and added non-stop flights to Salt Lake City, where Delta holds a strong position. The airline reached the 1,000 flights-per-day mark in early July with an aim to grow its Seattle capacity 10% by the end of this year. In addition, the airline has invested money on hiring more counter staff and building landing gates in Seattle to strengthen its presence in its home town. All these efforts have enabled the airline to maintain its No. 1 position in Seattle, despite the growing competition from Delta. With the superior managerial skills and expertise of Alaska Air’s senior executives the airline is well placed to overcome such incursions even in the future. Contrary to this, the top executives of two of its competing airlines – American Airlines and Southwest – publicly commented on expanding their capacity, if needed, to fight competition. This triggered a fear of a potential excess supply of seats in the market, leading to a major stock sell-off by investors.  Most of the top US airlines, including Alaska Air, lost close to 10% of their market cap within a week of these events. However, since the airline’s management refrained from getting its hands dirty in this mess, the airline’s stock quickly recovered, while the counterparts continued to struggle. To further add to the situation, the US Department of Justice (DOJ) launched a probe against the top four US airlines – American, United, Delta, and Southwest – to detect any unlawful price collusion among these airlines. Again, Alaska Air came out clear from this situation and continued to focus on growing its operations. All these events go on to show the credibility of Alaska Air’s management and its contribution in the airline’s progress. Source: Google Finance Generating Value For The Shareholders While some airlines, such as JetBlue and United, continue to shy away from paying out dividends to the shareholders, Alaska Air’s management has been proactively returning cash to its shareholders in the form of dividends and share repurchases over the last couple of years. The airline started distributing dividends in 2013 and has raised the dividend payments from $0.125 per share in 2014 to $0.20 per share in the latest quarter. Consequently, Alaska Air currently has a dividend yield of 1.1% for the trailing twelve months (TTM), which is higher than all its peers. The airline’s willingness to share its growing profits with its shareholders not only highlights the solid fundamentals of the business, but also reinforces investor confidence in the company. Source: Company Filings, Google Finance In addition to paying dividends, Alaska Air has constantly leveraged any opportunity to buy back its own shares at attractive prices. In the beginning of this month, the airline authorized a new $1 billion share repurchase plan, which is the airline’s ninth repurchase program since 2007. The airline has spent more than $1.1 billion in repurchasing approximately 53 million shares, representing about one-third of its total outstanding shares in 2007. The airline plans to return over $550 million to shareholders in 2015, of which it has already returned more than $300 million in the first half of the year. The management’s faith in its own business, reflected in the large repurchase programs, is enabling Alaska Air to attract more investors than its rivals. Source:  Bank of America Merrill Lynch 2015 Transportation Conference Investment Grade Balance Sheet Over the years, the Seattle-based airline has been trying to de-lever its balance sheet using its notable cash flows. With constant efforts, the airline managed to bring down its debt-to-capitalization rate from 81% in 2008 to 31% in 2014. This is consistent with the capital structure of S&P 500 Industrials, which range between 25-45%. As a result, the airline has obtained an investment grade credit rating from S&P and Fitch. It is the second airline, after Southwest, to have received this rating. A strong credit rating adds to the credibility of the airline’s operations and makes it, seemingly, a safer bet for the investors. Source:  Bank of America Merrill Lynch 2015 Transportation Conference In the first half of 2015, Alaska Air generated a net profit of $383 million and operating cash flow of $889 million, almost double compared to a year ago. The management utilized these cash flows to pay down its debt obligations to further reduce the airline’s leverage. The airline lowered its debt-to-capitalization rate from 31% in 2014 to 29% at the end of June 2015. As a result, Alaska Air has become the only airline to have a net interest income, as indicated by the management in its latest conference call. With a stronger and less levered balance sheet, the airline has a potential to deliver potentially less risky returns than its competitors going forward. Debt-to-Capitalization Ratio Across The Industry Source:  Bank of America Merrill Lynch 2015 Transportation Conference Having discussed the quantitative as well as the qualitative factors that are driving Alaska Air’s performance, we believe that with a strong and experienced management, which continues to focus on operational excellence and a low cost structure, and believes in returning value to the stakeholders, the airline will continue to outperform its competitors at least in the foreseeable future. View Interactive Institutional Research (Powered by Trefis): Global Large Cap  |  U.S. Mid & Small Cap  |  European Large & Mid Cap More Trefis Research
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    PepsiCo's Snacks More Crucial To Overall Growth
  • By , 8/31/15
  • tags: PEP KO DPS BUD
  • Revenues for one of the world’s largest food and beverage conglomerates might be split half between drinks and snacks, but the latter is shouldering more responsibility than it is typically assumed. The foods business, comprising the likes of Frito-Lay and Quaker Foods, formed 53% of the net revenues last year for  PepsiCo (NYSE:PEP). While sales for the snacks division have risen at a CAGR of 3.5% over the last three years, sales for the drinks division have declined at a CAGR of 3.2%. We estimate a $98 price for PepsiCo, which is above the current market price. See Our Complete Analysis For PepsiCo Drink segments such as carbonated soft drinks (CSD) and juices have fallen out of favor with customers over the last few years, due to the growing health concerns regarding the high amounts of sugar and other preservatives in these drinks. For example, CSDs and juices together form approximately half the net volumes in the U.S. liquid refreshment beverages market, and with continually waning demand for these segments, drinks such as Pepsi, Diet Pepsi, Mountain Dew, and Tropicana have suffered declining volume sales. According to our estimates, CSDs and juices combined form 21.6% of PepsiCo’s valuation. On the other hand, even while health concerns have impacted soft drink sales in most developed nations, snacks, even the salty snacks with high cholesterol levels, continue to command a solid fan following. Case in point — the strengthening Frito-Lay North America division. Following a 3% top line growth in 2014, PepsiCo’s Frito-Lay North America reported 2.5% revenue growth through the first half of 2015, on 2% growth in organic volume. This division alone constitutes 36.5% of PepsiCo’s valuation by our estimates, and the broader foods business forms roughly 65% of the net valuation. Not only is this because of continual sales growth for Frito-Lay North America, but this is also PepsiCo’s most profitable division, with 28.5% operating margins this year, compared to 18% for the overall company. Even though Frito-Lay North America has earned 31% lesser revenues than the Americas Beverages division this year, its operating profit is 40% more than that for the latter, and continues to grow. While CSDs continue to bear the brunt of widespread health and wellness concerns, the snack food market has managed to grow at a steady pace. The U.S. snack food market, worth $35 billion, grew at a CAGR of 4.2% between 2009-2014, and continues to gain value. What works for PepsiCo is that the overall demand for snacks remains strong, and the company is the dominant player in this market. According to research by Nielsen, 63% of North Americans said that they ate chips/crisps as a snack in the last 30 days, a segment which is dominated by PepsiCo’s brands such as Lays, Doritos, and Cheetos. PepsiCo, which holds around 25.4% volume share in the U.S. liquid refreshment beverage market, second behind Coca-Cola’s 33.6% share, dominates the savory snacks market in the country with a 36.4% market share. The next biggest manufacturers in this sector are Kellogg’s and Mondelez with much smaller 6.8% and 5.3% shares, respectively. Americans have a large snacking habit, which is expected to continue to bolster growth in the salty snacks market for PepsiCo going forward. What also makes growth in the Frito-Lay North America division crucial for the overall group is the increased volatility in international markets. Despite the strong organic growth, the company reported a 6% fall in its top line in the last quarter, due to a 10% negative effect of currency translations. Considering that markets outside the U.S. form ~50% of PepsiCo’s top line, the continually strengthening U.S. dollar has dented the reported earnings this year. Performing well in the domestic market will bode well for PepsiCo, which is losing money to unfavorable currency translations. In foreign markets too, the core performance of snacks remains stronger than that of drinks. In Europe, while PepsiCo’s drinks have witnessed a 6% organic volume decline in the first half, snacks volume has remained even. On the other hand, while drinks volume has grown 1% in Asia, Middle East, and Africa, snacks volume has increased 6%. The performance of PepsiCo’s drinks business has picked up more recently, with growth in North America in the last quarter, which is important, especially as the U.S. contributes more than half of the company’s net sales, and slowing drink sales in developed markets has for long plagued sales of beverage manufacturers. Organic volume sales for PepsiCo Americas Beverages rose 1% year-over-year in Q2, and effective pricing increased 4%. But PepsiCo’s foods business continues to easily outperform drinks. The black sheep of the foods business remains Quaker Foods North America. It seems like PepsiCo’s efforts to stick with the Quaker brand– which carries a more wholesome and healthier image — have gone awry. Quaker Foods North America had adjusted EBITDA margins of around 35% a few years ago, but the continually falling sales, hurt by falling demand for traditional breakfast segments, have resulted in a gradual decline in margins to approximately 29% last year. Quaker’s sales growth remains sluggish, with sales declining in each of the last three years. The brand considerably trails its competitors — General Mills and Kellogg’s. Weak performance of Quaker, which forms around 4% of PepsiCo’s annual revenues, is weighing down PepsiCo’s profitability. However, except for the Quaker division, PepsiCo’s foods division seems to be in great shape. Despite lagging Coca-Cola in beverage sales in almost every significant market, PepsiCo’s strong snacks business has kept the overall growth better than that of Coca-Cola.  In the last six months, Coca-Cola’s stock has declined by more than the S&P 500 Index, whereas PepsiCo’s stock has, although lower, performed better than both Coca-Cola’s stock and the S&P 500 Index. See the links below for more information and analysis: PepsiCo earnings review: snacks and beverages make a good marriage? Bottled water is a potential growth category that can’t be ignored Soda makers wonder: where could growth in U.S. come from? The strong dollar is weighing down these large beverage companies Trefis analysis: Dr Pepper North America CSD Revenues Trefis analysis: PepsiCo Soft Drink Revenues Trefis analysis: Coca-Cola Revenues 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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    Q2 2015 U.S. Banking Review: Loan Portfolios
  • By , 8/31/15
  • tags: BAC COF C JPM USB WFC
  • The U.S. banking industry continues to benefit from increased lending activity over Q2 2015, with data compiled by the Federal Reserve showing that the total loan portfolio for all commercial banks swelled at an annualized rate of 7% for the period. This follows 8.4% growth in the first quarter, and is the fifth consecutive quarter for which loans grew by more than 6%. While commercial loans remained the primary driver of this growth, the second quarter also benefited from a notable uptick in real-estate lending – something we highlighted in a recent article . In this article, we detail the trends in the loan portfolio of the country’s largest commercial banks –  JPMorgan Chase (NYSE:JPM),  Bank of America (NYSE:BAC),  Citigroup (NYSE:C),  Wells Fargo (NYSE:WFC),  U.S. Bancorp (NYSE:USB) and Capital One (NYSE:COF) – over recent years, and compare the proportion of different loan types in each of their loan portfolios.
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    Newmont Making The Right Moves To Counter Low Gold Prices
  • By , 8/31/15
  • tags: NEM ABX FCX SLW
  • Newmont Mining (NYSE:NEM) has been making all the right moves to combat the prevailing subdued gold pricing environment. The company recently completed the sale of its equity interest in the Valcambi gold refinery in Switzerland for $119 million. The proceeds of the equity stake sale will be partially used to pay down the company’s debt. These moves are a part of the company’s efforts to adapt to an environment of low gold prices. Gold prices have weakened considerably this year, with expectations of an interest rate hike by the Fed keeping prices subdued. An interest rate hike is expected to reduce the investment demand for gold, with investors shifting to interest bearing assets. Gold prices, which averaged $1,266 per ounce in 2014, have averaged less than $1,200 per ounce so far this year, as illustrated by the chart shown below. Newmont has sold off $1.6 billion worth of non-core assets since mid-2013. The company’s net debt declined to $3.08 billion at the end of Q2 2015 from $4.24 billion at the end of 2014. Newmont’s All-in Sustaining Cost (AISC) metric for gold production fell to $909 per ounce in Q2 2015, around 14% lower than the AISC for the corresponding period of 2014. The AISC metric captures all of the costs required to sustain ongoing mining operations. The decline in AISC is a measure of the success of Newmont’s cost reduction initiatives, which were facilitated by the sale of high cost, non-core gold mines. With gold prices expected to remain subdued in the near term, these measures will stand Newmont in good stead as it continues to grapple with weak gold prices. See our forecasts for average realized gold prices for Newmont’s North American gold mines See the links below for more information and analysis: Newmont’s Purchase Of CC&V Gold Mine A Smart Move Trends In Jewelry Demand For Gold Royal Gold Streaming Agreement A Smart Move For Barrick As It Looks To Shed Debt 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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    Sprint's Offer To DirecTV Customers Is Bold, But Will It Work?
  • By , 8/31/15
  • tags: S VZ T
  • Sprint  (NYSE:S) recently announced that it would offer a full year of free wireless service to DirecTV customers who open a new line on its network. The move is a direct attack on AT&T (NYSE:T), which recently closed its $49 billion acquisition of the satellite TV provider, and is presently offering discounts to customers if they bundle their TV services with AT&T’s telecom services. Sprint’s offer – which is valued at at least $600 (see details below) – might seem somewhat reckless for a carrier that is contending with negative cash flows and a sizable debt load. However, the downside risks are actually relatively limited, although it still remains to be seen whether the offer will prove to be an effective customer acquisition exercise for Sprint.
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    Weak Trading Activity Continues For E*Trade
  • By , 8/31/15
  • tags: ETFC AMTD SCHW
  • E*Trade Financial (NASDAQ:ETFC) recently released its trading metrics for July, reporting a 7% sequential rise in trade volumes. The 149,000 daily average revenue trades (DARTs) on its platforms were 3% lower than the prior year period. Despite lower year-on-year volumes for the month, E*Trade continued to improve its average client asset balances, which rose by 2% annually to $46.7 billion by the end of July. In its most recent earnings, E*Trade reported a modest 1% year-on-year rise in net revenues to $445 million. Comparatively, the brokerage reported a 4% annual decline in revenues through the March quarter. Low trade volumes since the beginning of the year led to limited growth in trading commission-based revenues in the first half of 2015. Similarly, flat yields on assets in Q2 resulted in E*Trade’s interest revenues remaining flat over the prior year period at $267 million despite a mild increase in interest-earning assets. On the other hand, revenues generated by account maintenance fees and services charged by the brokerage have been consistently high this year. ( (E*TRADE Financial Corporation Announces Second Quarter 2015 Results, E*Trade Press Release, July 2015)) Below we take a look at some key metrics through Q3 and our full year forecasts for E*Trade. We have a $23 price estimate for E*Trade’s stock, which is about 10% lower than the current market price. E*Trade’s market price rose from over $22 in January to about $31 in June before trading at around $26 last week. See our full analysis for E*Trade Financial Net Client Assets Higher Than 2014 Levels E*Trade earns interest income by holding customer cash and deposits in addition to credit balances, which include margin, real estate and consumer loans. The company’s average client balances for brokerage accounts through July were 2% higher than the year-ago period at $46.7 billion. The brokerage reported a full year average client balance of $41.4 billion for 2014. We forecast E*Trade’s average client balance for the full year to be 6% higher than 2014 levels at about $44 billion. Subsequently, we forecast the average balances to rise to over $55 billion through the end of our forecast period. Last year, the net yield on these assets rose for the first time in over five years, due to which full-year revenues generated by interest on these balances grew by 11% year-over-year to $1.1 billion. The implied yield on these assets was 23 basis points higher than 2013 at 2.63%. However, the yield on these assets stood at 2.54% in the most recent quarter. As a result, net interest revenues were flat over the previous year period at $267 million. We currently forecast the average yield for the current year to be around 2.86%; as a result, net interest revenues could be over 10% higher than the prior calendar year at around $1.3 billion. Limited Growth In Trading Activity E*Trade added about 146,000 net new brokerage accounts in 2014, ending the year with 3.14 million accounts. The brokerage has successfully added about 50,000 net new accounts in 2015 thus far, ending July with 3.19 million brokerage accounts.The total number of brokerage accounts at E*Trade at the end of July were about 3% higher than the year-ago period. We currently forecast the total number of brokerage accounts at E*Trade to increase to 3.27 million by the end of 2015, and to over 4 million through the end of our forecast period. However, E*Trade witnessed an 11% year-on-year decline in trade volumes through the March quarter to about 170,000 trades per day. The trend continued in the June quarter, with trade volumes falling both sequentially (-12%) and annually (-4%) to just under 150,000 trades per day. The unimpressive streak continued in July, with DARTs staying 3% lower than previous year levels at 149,000 trades per day. In the June quarter, E*trade realized a slightly higher revenue per trade compared to 2014 levels. As a result, the transaction-based revenue generated by the brokerage for the quarter was down by only 2% over Q2 2014 to $103 million (compared to the 11% decline in trade volume). The implied revenue per trade – calculated by dividing the net trading commission revenue by the total number of trades  – was $10.96 during the quarter, compared to $10.72 in the year ago period. Impact Of Revenue Growth On Margins E*Trade’s operating expenses in 2014 were slightly lower than the previous year at $1.1 billion, while its operating income was up by over 100% year over year to $633 million. Since most expenses incurred by brokerages are fixed in nature, growth in net revenues directly impacts margins. According to our estimates, E*Trade’s adjusted EBITDA margin was over 40% through the year, significantly higher than 2013 levels of about 32.5%. Subsequently, low trade volumes and resulting revenues in the first half of 2015 has led E*Trade’s adjusted EBITDA margin to compress. Its adjusted EBITDA margin fell by about 5 percentage points to 38.6% in Q1’15 and over 3 percentage points to 38.9% in Q2. Two key factors that can help the brokerage post healthier margins are improved yields on client assets and a rise in trading activity in the second half of the year. We are currently optimistic in our forecast for the company-wide EBITDA margin. We currently forecast the figure to rise to about 42% in 2015, while we expect it to increase more gradually through the end of our forecast period. 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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    GameStop: Focus Shifts To New Businesses
  • By , 8/31/15
  • tags: GME EA ATVI MSFT
  • Is this a start of a new story for GameStop  (NYSE:GME)? Or is it just a temporary delight in the midst of a trend shift? GameStop reported an excellent second quarter result, driven by strong sales in its core department, as well as robust growth of its new businesses. The video game retailer reported an impressive 41% year-over-year (y-o-y) increase in the diluted EPS to 31 cents. However, the most notable takeaway from the earnings report was a massive 27% y-o-y increase in the company’s mobile revenues, primarily driven by a significant 62% y-o-y increase in Technology Brands revenues. GameStop’s core business, the physical sales of video game products, is facing a massive threat from the recent trend shift in the industry. With the advent of digitalization in gaming, more gamers are opting for downloadable contents (DLC). As a result, the physical sale of video game software is witnessing a gradual decline. Consequently, GameStop decided to tap into the consumer electronics market through its Technology Brands segment. With such an explosive growth in the Technology Brands segment, GameStop’s Tech brands are now the fastest growing AT&T and Apple dealer in North America. This segment might just prove to be the company’s next leading business segment. Our price estimate for the company’s stock is $41, which is roughly 2% below the current market price. See our complete analysis of GameStop Robust Growth In Tech Brands Drives Margins Growth of GameStop’s Technology Brands is evident from the fact that the revenue contribution by the segment has been increasing significantly with every quarter. With $142 million in revenues, up nearly 27% y-o-y, the revenue contribution of the segment rose to 8.1% from 6.5% in Q2 last year. On the other hand, the revenue contribution of the core segments (Software, hardware, pre-owned and value products) has dropped from 80.1% in Q2 2014 to 76% in Q2 2015. This indicates the increasing dependence of GameStop on its new business segments. GameStop added 182 net new Technology Brands stores in the second quarter, taking the total count to 731 stores, up 129% y-o-y. During the second quarter, GameStop incurred nearly $9 million in charges partially related to Technology Brands’ expansion, including the acquisition of RadioShack stores. Moreover, the company acquired 3 AT&T resellers at the end of July. With this pace, GameStop seems to be in-line with its target of net new 450-550 Technology Brands stores in fiscal 2015, with stronger growth in the second half of the year. The interesting thing to note is that the contribution of these new businesses to the company’s gross profit rose from 18% in Q2 2014 to 23% in Q2 2015. As a result, the net gross margins for the company rose to 32.9%. Keeping in mind the current pace of the segment’s growth and future prospects of the business, we might expect further growth in the margins in the coming couple of quarters. High Hopes From ThinkGeek In June, with the acquisition of Geeknet, Inc., GameStop acquired yet another online retail brand, ThinkGeek, which is an American based online retail brand that deals with the sales of clothing, electronic goods, and gadgets, and it caters to the so called ‘Geeky Groups.’  The acquisition is aimed at expanding the company’s multichannel business, with the sales of non-gaming products, and gradually making its mark in this $20 billion industry. GameStop’s multichannel business p0sted a 28% growth in the second quarter, and with the addition of ThinkGeek, we might witness this segment to prosper in the next few years. The company has already received a positive response from its customers regarding the new business segment. The company has mentioned in its call transcript that nearly 46% of PowerUp members are familiar with this brand, giving them additional leverage during the second half of fiscal 2015. However, the additional revenues from the newly acquired business will be accounted for in the second half of the year. Nonetheless, the addition of such a popular and strong brand to the company’s portfolio is no doubt a strong point, and might further strengthen the revenue contribution from new businesses. Core Business  Positive But Slow After the slow start for industry-wide hardware sales, the demand for next generation consoles showed strength during the last two months. Moreover, the software sales were up for a major part of this year, despite the absence of major game titles. As for GameStop, hardware and software sales rose without accounting for the impact of foreign exchange; hardware sales rose 3.7% y-o-y and software sales rose just 0.7%. The sustained strength of the next generation consoles (PlayStation 4 and Xbox One) helped the company in selling 42% more next-generation consoles y-o-y. Additionally, some of the new title releases, such as Witcher 3 and Batman: Arkham Knight, drove this quarter’s software sales at par with that in Q2 2014. Furthermore, despite a 5% y-o-y growth (excluding foreign exchange impact), the pre-owned product segment witnessed a 100 basis points decline in the margins to 46%, due to an increase in the refurbishment costs. Moreover, the company expects a further decline in the margins as the product mix in the segment shifts to new generation consoles. This is because generally the next-generation console units have lower margin than the prior-generation ones. However, GameStop expects a mid-single digit growth for the segment for the full fiscal year 2015.   Earnings takeaways: Net Sales rose 1.8% y-o-y to $1.76 billion, with 8.1% growth in the same store sales Including the impact of FX, hardware sales dropped 2.2% y-o-y, Software sales declined 6% y-0-y, and pre-owned and value product revenues increased 0.5% Non-GAAP digital receipts grew 11.1% y-o-y Mobile revenues increased 27% y-o-y   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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    These Two Scenarios Can Dampen Estee Lauder's Valuation
  • By , 8/31/15
  • tags: EL LRLCY REV AVP
  • Estee Lauder (NYSE:EL) has recently released its Q4 FY2015 earnings results (fiscal year ends in June). The company’s sales have been severely dampened by a slowdown in travel retail, a weak performance by its bigger skincare brands, and currency headwinds. We expect Estee Lauder’s Asia-focused travel retail sales to remain slow in the short-run, on account of the economic problems in countries such as China and South Korea. Also, since 70% of Asia’s sales come from skincare, especially from the bigger brands, the revival of these brands might also take some time. The skincare business accounts for about 50% of Estee Lauder’s value, as per our estimates. In this article, we discuss how the delayed revival of its travel retail and flagship brands might lower the company’s valuation. Our price estimate of $84 for Estee Lauder is slightly above the current market price. See Our Full Analysis for Estée Lauder Travel Retail Might Trouble Estee Lauder In The Short Run (~5% Downside) Travel retail is one of the major growth drivers for Estee Lauder. Estee Lauder’s travel retail channel has been built with a focus on Asia. Its Q4 FY2015 results demonstrated weak performance from this channel due to factors such as the economic slowdown in China and the MERS virus attack in Korea. Along with this, the economic slowdown in Europe and Brazil also slowed down travel and hence the sales through the travel retail channels. However, Estee Lauder’s management claimed that the growth trend has been solid even till the third quarter and we also think that travel retail can be a primary catalyst for the company’s growth in the long run. However, in the short run, the economic slowdown in most of its key business regions might keep Estee Lauder’s travel retail under pressure. In 2014, China’s GDP growth rate hit a 24-year low and is expected to continue growing at an even slower pace in 2015. South Korea’s economic growth softened towards the latter half of 2014, and the country’s central bank expects the economy to slow down further in 2015, on account of lower inflation and weak consumer spending. Hence, Asia doesn’t look too promising for travel retail right now. Similarly, the UK which is globally the fourth largest duty-free and travel retail market ( source: Generation Research ), witnessed a growth in passenger traffic, but a decline in visitor spending, in the first half of 2015. According to International Passenger Survey conducted by the tourism body Visit Britain, overseas visitor spending declined by 1% to $14.6 billion, even though the number of visitors increased by 3% to 16.8 million. According to Visit Britain, spending in the first half of 2015 was impacted by the adverse exchange rate movements, notably, the strong sterling as compared to the euro. A major challenge with the travel retail channel is that it is more unpredictable than a company’s domestic business. According to Vincent Boinay, Managing Director of L’Oréal Travel Retail, the most important reason for this uncertainty is the lack of data sharing among the market participants. We have forecasted Estee Lauder’s skincare EBITDA margin to rise from around 25% in 2014 to cross 26% by the end of our forecast period. However, if the declining trend in travel retail persists for some more time, and the EBITDA margin falls to around 24%, then there can be a 5% downside to our price estimates for Estee Lauder. Declining Demand For Its Flagship Brands (~5% Downside) Over the last few quarters, there has been a declining demand trend for Estee Lauder’s skincare brands. In its fiscal 2014 year-end discussion, Estee Lauder’s management admitted that the skincare growth was slow in its most important region, the U.S. (U.S. contributes to roughly 50% of the company’s net sales). The US consumers expected  innovative products, across newer skincare categories, such as masks and oils. Hence its recent acquisitions in the beautifying mask (GLAMGLOW) and oil based treatment (RODIN olio lusso) categories provided some solution to the skincare demand and supply gap. However, in its Q4 FY15 performance, it was observed that though Estee Lauder’s mid and smaller sized brands experienced double-digit growth, its flagship Estee Lauder brand and Clinique had been lagging behind. The Lauder and Clinique brands are much bigger in size with a broader distribution channel, whereas the smaller brands are targeted at specific consumer segments and hence the growth can be achieved more easily. The revival of these big brands is of utmost importance for the sustainable growth of Estee Lauder’s overall skincare segment. The company is undertaking revival measures such as launching new products, more aggressive marketing, and social media spread for these brands. However, these initiatives might take some time to have a significant impact on the company’s sales. Also, given the fact that a significant portion of these brands’ sales take place through the travel retail channels, and in the Asian markets where skincare contributes to almost 70% of beauty sales, and given the slowdown of these markets, Estee Lauder’s flagship brands might take some more time to recover. We have forecasted Estee Lauder’s skincare market share to rise from around 8% in 2014, to almost 9% by the end of our forecast period. However, if the deceleration in its skincare sales persist for some more time, and the market share remains almost flat, then there can be a 5% downside to our price estimates for Estee Lauder. 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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    Smartphone Weekly Notes: BBM User Adds, Apple's iPhone Event, Samsung Pay
  • By , 8/31/15
  • tags: BBRY
  • The smartphone space had an interesting week, with Apple  (NASDAQ:AAPL) announcing that it would be conducting a media event on September 9, where it is expected to unveil its latest iPhones. In other news,  BlackBerry  (NASDAQ:BBRY) provided some updates on its BBM services, while Samsung  (PINK:SSNLF) rolled out the beta version of Samsung Pay, its mobile payment service. Here’s a quick round up of the news that mattered in the smartphone industry and how it could impact the relevant companies.
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  • commented 8/31/15
  • tags: GE
  • Music Market and Streaming Services Market: Global Industry Analysis and Forecast Till 2025 by FMI

    Global Music market and streaming services are becoming more dynamic owing to increased inclination of consumers towards such services. The increasing up-gradation in the technology is anticipated to increase the demand of music streaming among the smartphone users over the forecasted period. Music market and streaming services market is expected to show significant growth due to the streaming of songs through audio and video platforms. However, market of physical album is expected to decline relatively. Global music market is consolidated market with various companies undergoing mergers and acquisitions, partnerships and strategic alliances in order to increase their market share.

    Music Market and Streaming Services Segmentation

    Global music market is segmented into digital downloads, physical, streaming, synchronization and ringtones. Digital download is the largest market segment in terms of revenue, followed by the streaming. Furthermore, streaming services are segmented into sound exchange distributions, on demand ad-supporting services and subscription services. Music market and streaming services are further segmented on the basis of region as North America, Latin America, Western Europe, Eastern Europe, Asia Pacific excluding Japan, Japan and Middle East and Africa. In North America, U.S contributes the maximum revenue in terms of revenue contribution, Also, European region is expected to reflect a significant growth during the forecast period. However the global music market is expected to lose significant portion of its revenue due to the piracy in the near future. Accordingly government across various countries have taken several initiatives to curb piracy. For instance, U.S. possess copyright alert systems that keep check on piracy. In Europe service providers have blocked the access to the pirate bay.

    Browse Full Report@ http://www.futuremarketinsights.com/reports/music-market-and-streaming-services-market

    Music Market and Streaming Services: Region-wise Outlook

    Music market and streaming services market is expected to show tremendous growth in the coming years due to the rising number of high net worth individuals coupled with increasing number of consumers upgrading to smartphones. . Globally among all the regions, North America is expected to contribute the largest market share followed by European region in the forecast period. US is expected to be the dominant market for the music market and streaming services in the North American region. However, European region is expected to be the fastest growing market followed by Asia Pacific.

    Music market and streaming services: Drivers

    Increasing number of internet enabled mobile devices such as iPhone drives the growth of music market and streaming services. Rising disposable income leading to increasing purchase of smart phones and other devices, which offer specification support to music and streaming services are expected to fuel the music market and streaming services market growth. Other factors that fuel the growth of music market specifically includes increasing usage of subscription and streaming services by the consumers. Subscription streaming is the key driver for the streaming services market. In music streaming market there is increasing adoption of cloud services as it provides consumers to access music online and presently it is also being increasingly adopted by the various companies to increase the subscribed users to access the digital content stored in remote servers

    Request Report TOC@ http://www.futuremarketinsights.com/toc/rep-gb-699

    Music Market and Streaming Services: Key Players

    The key international players operating in Music market and streaming services includes Google Inc., Rhapsody International Inc. Apple Inc., Pandora Media Inc. Various companies operating in streaming services market are continuously launching various music streaming services [ less... ]
    Music Market and Streaming Services Market: Global Industry Analysis and Forecast Till 2025 by FMI Global Music market and streaming services are becoming more dynamic owing to increased inclination of consumers towards such services. The increasing up-gradation in the technology is anticipated to increase the demand of music streaming among the smartphone users over the forecasted period. Music market and streaming services market is expected to show significant growth due to the streaming of songs through audio and video platforms. However, market of physical album is expected to decline relatively. Global music market is consolidated market with various companies undergoing mergers and acquisitions, partnerships and strategic alliances in order to increase their market share. Music Market and Streaming Services Segmentation Global music market is segmented into digital downloads, physical, streaming, synchronization and ringtones. Digital download is the largest market segment in terms of revenue, followed by the streaming. Furthermore, streaming services are segmented into sound exchange distributions, on demand ad-supporting services and subscription services. Music market and streaming services are further segmented on the basis of region as North America, Latin America, Western Europe, Eastern Europe, Asia Pacific excluding Japan, Japan and Middle East and Africa. In North America, U.S contributes the maximum revenue in terms of revenue contribution, Also, European region is expected to reflect a significant growth during the forecast period. However the global music market is expected to lose significant portion of its revenue due to the piracy in the near future. Accordingly government across various countries have taken several initiatives to curb piracy. For instance, U.S. possess copyright alert systems that keep check on piracy. In Europe service providers have blocked the access to the pirate bay. Browse Full Report@ http://www.futuremarketinsights.com/reports/music-market-and-streaming-services-market Music Market and Streaming Services: Region-wise Outlook Music market and streaming services market is expected to show tremendous growth in the coming years due to the rising number of high net worth individuals coupled with increasing number of consumers upgrading to smartphones. . Globally among all the regions, North America is expected to contribute the largest market share followed by European region in the forecast period. US is expected to be the dominant market for the music market and streaming services in the North American region. However, European region is expected to be the fastest growing market followed by Asia Pacific. Music market and streaming services: Drivers Increasing number of internet enabled mobile devices such as iPhone drives the growth of music market and streaming services. Rising disposable income leading to increasing purchase of smart phones and other devices, which offer specification support to music and streaming services are expected to fuel the music market and streaming services market growth. Other factors that fuel the growth of music market specifically includes increasing usage of subscription and streaming services by the consumers. Subscription streaming is the key driver for the streaming services market. In music streaming market there is increasing adoption of cloud services as it provides consumers to access music online and presently it is also being increasingly adopted by the various companies to increase the subscribed users to access the digital content stored in remote servers Request Report TOC@ http://www.futuremarketinsights.com/toc/rep-gb-699 Music Market and Streaming Services: Key Players The key international players operating in Music market and streaming services includes Google Inc., Rhapsody International Inc. Apple Inc., Pandora Media Inc. Various companies operating in streaming services market are continuously launching various music streaming services
    CSCO Logo
    Monthly Networking Notes: Cisco, VMware, Juniper In Focus
  • By , 8/31/15
  • tags: VMW JNPR
  • Networking giant  Cisco  (NASDAQ:CSCO) announced last week that it has completed the acquisition of cloud-delivered enterprise security company OpenDNS. Cisco announced its intent to buy San Francisco-based OpenDNS in June in order to bolster its network security portfolio and help better market its proprietary products and fend off competition from open architecture networks. On the other hand, Juniper (NYSE:JNPR) continues to appease customers with its open network platform, with NASCAR team Joe Gibbs Racing most recently adopting the company’s switching and security solutions. Meanwhile,  VMware (NYSE:VMW) recently announced an upgrade to its network virtualization platform, the VMware NSX. Here’s a quick roundup on recent trends and key developments in the networking market.
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    United Continental Finally Makes Its Way To The S&P 500
  • By , 8/31/15
  • tags: UAL DAL AAL LUV ALK JBLU
  • United Continental (NYSE:UAL), the second largest airline by traffic, will finally become part of the S&P 500 Index after the market closes on Wednesday, September 2, 2015. The Chicago-based airline will replace Hospira (NYSE:HSP), which will be acquired by Pfizer (NYSE:PFE), next week. The legacy carrier will be included in the S&P 500 GICS Airlines Sub-Industry Index and will become the fourth US airline to feature in the benchmark index after Southwest, Delta, and the most recently added, American . Though the airline took almost a decade to make it to the coveted index after exiting bankruptcy protection, we expect the news to work in its favor, particularly in the current uncertain economic environment. Source: PR Newswire Here’s why we think so: Despite being the second largest airline by traffic, United was not included in the S&P 500 index even after 10 years of exiting the bankruptcy protection process.  On the contrary, Delta rejoined the index within six years of exiting its bankruptcy, while American Airlines took less than 15 months to re-join the index after its merger with US Airways in December 2013. While the airline took longer than its peers to join the benchmark, we expect the news to finally enhance the airline’s perception in the market. Typically, the inclusion of a stock into the S&P 500 index boosts its market price as index-tracking funds or managers tracking the benchmark tend to buy the stock. Thus, we expect United’s trading volumes to go up, escalating the airline’s stock price. While an addition in the benchmark does not reflect an opinion on the investment merits of a company, the news is likely to reinforce investor confidence in United as a standalone investment. Source: Google Finance At a time when the US airline industry is struggling through uncertainties related to a market perceived oversupply of seats and a potential slowdown in the Chinese economy, we anticipate the inclusion of United into the index to be viewed as positive news by most investors. See Our Complete Analysis For United Continental Holdings here   Also Read some of Trefis Analysis on United Continental Chinese Whispers – Are The Legacy Carriers In Trouble Again? DOJ’s Investigation Will Not Have Long-Term Impact On The US Airlines Scenario Analysis: How Will United’s Price Move Under Different Scenarios 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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    Harley-Davidson: Where Will Growth Come From?
  • By , 8/31/15
  • tags: HOG
  • Harley-Davidson  (NYSE:HOG) had a rough last year in the domestic market. Worldwide retail sales fell 1.4% year-over-year through the first half of the year, which was, as expected, impacted by the 2.5% fall in international markets.  This weakness resulted from the increased volatility in some of the emerging markets, and a tough pricing environment in other markets, due to the stronger dollar. But what has also been a downer for Harley, is the 0.7% fall in retail sales in the U.S., which forms approximately two-thirds of net shipments for the company.  And which is why, a weak performance in the domestic market is dragging down the overall financials. Our current price estimate for  Harley-Davidson stands at $64, which is above the current market price. See our full analysis for Harley-Davidson The U.S. economy had picked up in the second quarter of last year, following a rough winter, with the job market doing well and the housing sector also registering solid growth. Oil prices reached historical lows, which can only be a positive for the heavyweight motorcycle market, as customers were flush with cash. However, while the overall U.S. heavyweight motorcycle market witnessed growth, Harley somewhat faltered.  There were a number of reasons why that happened — lesser availability of the much anticipated Street 500 and Street 750, absence of the Road Glide through the first half of the year, or maybe this generation is simply not buying as many Harleys? This year, the U.S. heavyweight motorcycle market grew 7.5% through June, but Harley’s retail sales in the country fell 0.7%, as aforementioned. Harley has lost out due to the aggressive model discounts offered by its European, Japanese, and other foreign counterparts. This loss in price competitiveness for the company has been on the back of a continually strong dollar, which has risen this year against certain crucial currencies such as the euro, the Japanese yen, the Russian ruble, and the Australian dollar. With the euro still forecast to hit parity with the U.S. dollar this year, pricing could continue to be an issue for Harley, especially as the company has remained committed to its premium brand image and has not opted to actively participate in the pricing war. This has cost Harley market share, and could continue to do so. And now with China going through a slowdown, concerns over the contagion effect of this on the rest of the world, including the U.S., could also impact sales of heavyweight motorcycles. This means that Harley, which is already losing share in the domestic market, could be hit by an overall slowdown in demand for heavyweight motorcycles, considering how these heavier motorcycles (601+cc) are typically luxury buys, and with a looming fear of a possible economic slowdown in the U.S., customers might look to hold off on making such discretionary purchases. Despite the 4.7% decline in wholesale motorcycle shipments through the first half of the year, the company still expects to ship 276,000-281,000 motorcycles to dealers and distributors this year, up 2-4% year-over-year. This means that shipments will have to be up 7-10% in the next two quarters. Harley will lap lower shipments in the second half of last year, after bad weather in the U.S. forced the iconic maker of heavyweight motorcycles to lower its shipment outlook, so the year-over-year growth in the second half could be strong. However, the increased volatility in the U.S. might deter growth for the company. Harley has released its new 2016 model year motorcycles, and along with the Street pair, these bikes could make a difference. Sales for the Street 500 and 750 grew by double-digits in the last quarter. Why the Street is important, and is not just another model series at Harley, is because these cheaper and relatively lighter urban motorcycles are expected to bring in customers that are new to the Harley brand, thereby increasing the manufacturer’s reach and customer base, rather than cannibalizing sales. According to Harley, in its first year, 7 out of 10 Street motorcycles in the U.S., and 9 out of 10 Street motorcycles in EMEA were to customers who were new to the Harley brand. In fact, in India, almost every Street buyer was new to the Harley brand. The Street is a good example of how Harley is looking to further bring in new customers, and penetrate emerging economies with motorcycles that are more suited to the local taste, i.e. are cheaper, lighter, and made to withstand the uneven roads. However, a majority of Harley’s sales still come from the core customer base of middle-aged Caucasian males. Sales to the outreach customer base comprising young adults, women, African-Americans, and Hispanics have increased by more than that to the core customer base, but given the aging core customer base and rough pricing environment for Harley, growth might be a little tough. The main question remains whether Harley can meet its motorcycle shipment targets this year. See the links below for more information and analysis: Harley-Davidson earnings review: can it get better from here on in? Not as bad as it seems for Harley-Davidson Could delaying the launch of project LiveWire cost Harley-Davidson? The strong U.S. dollar is weighing on Harley-Davidson’s financials Strategic pricing by competitors and unfavorable currency impact hurt Harley-Davidson’s q1 results Trefis analysis: Harley Davidson U.S. Motorcycle Revenues Trefis analysis: Harley-Davidson Europe Motorcycles Revenues View Interactive Institutional Research (Powered by Trefis): Global Large Cap |  U.S. Mid & Small Cap |  European Large & Mid Cap More Trefis Research
    Baby Boomers Facing Retirement Crunch
  • By , 8/31/15
  • tags: SPY TLT
  • Submitted by Wall St. Daily as part of our contributors program Baby Boomers Facing Retirement Crunch By Tim Maverick, Senior Correspondent Baby Boomers and retirement – it’s a tough subject for anyone in the financial planning business. After working most of their lives, Baby Boomers want it all in retirement: travel, dining out, owning two cars and multiple homes. And they want to do this off of income generated by their investments. Yet you’d be amazed how many people go to see an advisor with far too little in savings or investments to enjoy that sort of retirement . Even those people who have enough assets often have them allocated extremely poorly. The hard truth is that, by your mid 50s or early 60s, you should have at least seven to eight times your annual salary tucked away if you want to maintain your current lifestyle in retirement. I no longer give professional investment advice, but here are some of my thoughts on Baby Boomers and retirement. Playing Catch-Up Sadly, many Baby Boomers have spent everything forward. A recent survey from The Insured Retirement Institute found that six in 10 respondents said they had no retirement savings. They seem to have spent more time planning family vacations than their own golden years. If that sounds familiar, it’s time to play catch-up. The chart below shows how much you’d have to save, starting at various ages, to retire with $1 million: Fortunately, if you’re over 50, Uncle Sam does try to help a bit. If you have a 401(k) plan, save the maximum amount allowed by the IRS. For 2015, that limit is $18,000, with another $6,000 permitted in catch-up contributions. For traditional and Roth IRAs, the limit this year is $5,500, with another $1,000 allowed for those over 50. Still, for many people, that won’t be enough to retire at 62, and they’ll have to keep working for several more years. Many Boomers understand this. The survey from The Insured Retirement Institute found that 36% of respondents say they’ll retire at age 70 or older. That gives them additional time to accumulate wealth for retirement. And it will, of course, result in a higher monthly Social Security payment upon retiring. Retirement Investing and Asset Allocation Properly allocating your assets is key for Baby Boomers. After all, you’re not really trying to get rich. You’re just trying to keep what you’ve accumulated over the years. In the past, the simple rule for the stock portion of your portfolio was 100 minus your age. Then, it changed to 120 minus your age. The remainder was allocated to fixed income investments and possibly other assets, such as real estate and gold. With today’s bull market mentality, though, you might think the proper stock allocation is 100% in stocks even 10 years after your death! But here’s the thing: Properly allocating to stocks is trickier than using a simple formula. I believe that stock allocation in a portfolio should be at its lowest point during the year or two before retirement and the year or two afterwards. That’s when you’re most vulnerable to losing wealth at just the wrong time. Work with your advisor for specific percentages – particularly because bonds have also become a relatively high-risk investment. With regard to my point about vulnerability, just look at recent history. Between October 2007 and March 2009, the S&P 500 Index lost 55% of its value. According to the Employee Benefit Research Institute, nearly one in four people aged 56 to 65 had at least 90% of their portfolio in stocks, and more than two in five had at least 70% in stocks – not good if you’d planned your retirement in that time frame. Likewise, don’t get fooled into thinking that target date funds, set up specifically for retirement, will protect you. In 2008, the average 2010 target fund lost almost 25%. As I keep saying in these articles, a cookie cutter, autopilot approach will not work. Finally, as counter-intuitive as it sounds, I believe the stock portion of a portfolio should begin to rise once a person is a few years into retirement. Lifespans are increasing – people are living 25 to 30 years in retirement – and that means you’ll need the growth that stocks offer over the long term. And don’t get me started on those pesky rising healthcare costs. Bottom line: You can’t have your retirement assets just idling at zero interest rates, as you run the risk of outliving your nest egg. Good investing, Tim Maverick The post Baby Boomers Facing Retirement Crunch appeared first on Wall Street Daily . By Tim Maverick
    The Real Story Behind China’s Market Implosion
  • By , 8/31/15
  • tags: SPY TLT
  • Submitted by Wall St. Daily as part of our contributors program The Real Story Behind China’s Market Implosion By Carlton Delfeld, Special Correspondent Winston Churchill famously referred to the Berlin Wall as the “Iron Curtain” that separated the free from the oppressed. In the investment world, there’s an “iron curtain,” too – namely, between retail investors and privileged, high-end investors, such as hedge funds, pension funds, and institutions. In short, most individual investors unfortunately receive secondhand, conventional, run-of-the-mill advice. But sophisticated investors like my former client, the Tiger Management hedge fund, value private, timely, on-the-ground intelligence. They expect a global perspective, coupled with local acumen. I saw this firsthand on my recent investment tour across Southeast Asia, where I got the real lowdown on what’s happening in China  . . . Problems Mounting While in Singapore, where wealth assets have surged by 1,120% since 2000, I had fascinating meetings with tycoons, bankers, and ambassadors about the state of both the global and local markets. The topic of conversation obviously turned to China. Not just because of its recent stock market woes, but because for centuries, countries like Singapore have been China’s competitors, suppliers, investors, and borrowers all rolled into one. So they have to know what’s happening behind the scenes in China because their very survival depends on it. But right now, they’re worried  . . . For a start, the main concern is that China’s economy is slowing, as the two drivers of past growth – investment in manufacturing/industry and exports – pull back for different reasons. In addition, China’s real estate bubble is unwinding, industrial manufacturing capacity is way beyond current needs, and the country’s once-powerful labor cost advantage has evaporated, as countries like Vietnam, Indonesia, Bangladesh, and even Mexico now have lower labor costs than China. To put things in perspective, manufacturing wages in China have risen 10-fold over the last decade. This decline in competitiveness has hit export growth hard, with an 8% year-over-year decline recorded last month. Consumption is also spotty at best, with domestic auto sales actually declining for the first time last month. Weaker exports and manufacturing has led to factory closures, bad loans, and unpaid wages piling up. In turn, this has sparked protests – more than 200 public demonstrations have occurred already this year, according to an independent watchdog group. This sort of activity is watched closely by the Chinese government, which fears unrest above all else. China’s Government: From Help to Hindrance So you can’t blame politicians for trying anything and everything to stimulate growth. They took measures to beef up the stock market early this year – a strategy that resulted in a 60% rise through June. But their clumsy and heavy-handed interference eventually backfired – turbulence and panic cut the year-to-date return down to 23% in less than a month. You know the story from there, as the Chinese markets have continued to fall. Next on the government’s menu is “adjusting” how the value of the yuan is determined. By basically pegging the yuan to the U.S. dollar since 2004, it’s made China somewhat uncompetitive as the Japanese yen, Australian dollar, Canadian dollar, euro, and regional currencies have significantly cheapened against the greenback. This has put Chinese exporters at even more of a price disadvantage. The official line is that China is moving to more flexible exchange rates that are driven more by the currency markets. But keep in mind that a policy of weakening the yuan comes with significant risk. To many in China, a weaker currency is a loss of face and prestige. The perception of a weakening yuan will accelerate outflows of money from China. This is already a major problem as tycoons, entrepreneurs, and even middle-class Chinese are increasingly moving their wealth overseas to places like San Francisco, Vancouver, Singapore, London and Sydney. A weaker currency drives up the costs of all imports, including food. China’s 100 million tourists like a strong currency that makes overseas trips and shopping cheaper. Not to mention the 10 million Chinese students who study abroad each year. A weaker yuan drives up costs, especially for politically sensitive middle-class families. As China struggles with all these issues, what does this mean for investors? How to Catch Profits From China’s Meltdown For a start, forget buy and hold. China is a pure trading market. Follow China’s capital flight – it will point to great opportunities. Look to China’s competitors, especially Asia’s other big dog, Japan, as it benefits when China falters. As far as commodities are concerned, remember that just a few years ago, China bought over half of the global supply of many of these commodities. Be wary of trying to catch the bottom as they crash. Stay tuned – more on all this in the coming weeks. Carl Delfeld The post The Real Story Behind China’s Market Implosion appeared first on Wall Street Daily . By Carlton Delfeld
    Volatility Is Back! Trade This Moving Market Like a Pro
  • By , 8/31/15
  • tags: SPY LUV
  • Submitted by Wall St. Daily as part of our contributors program Volatility Is Back! Trade This Moving Market Like a Pro By Jonathan Rodriguez, Senior Analyst Unless you’ve been living under a rock, you know that stock markets around the world suffered a major blow on Monday. All three major U.S. indices ended the day in full-blown correction territory. The Chicago Board Options Exchange Volatility Index (VIX), which measures CBOE call volume and is also known as the market’s “fear gauge,” spiked above 50 for the first time since 2009. Now, it’s far too early to say whether we’ve seen the bottom or not. But the outlook isn’t as grim as you might think. What’s more, the worst thing to do on a day like Monday is sell. Believe me, the investors making real money are those buying the dips. It’s a tough concept for some people to get their minds around, but corrections provide some of the most rewarding opportunities. And if you think you’ve missed your chance to buy some stocks on the cheap, you’re dead wrong. Using one powerful technical indicator, you can trade this volatile market like a pro for weeks to come. I’m talking about the Relative Strength Index (RSI), which is one of the most useful technical indicators out there. Its value is enhanced even further during times of intense market volatility. RSI measures a stock’s momentum using a simple formula that determines strength or weakness and grades on a scale from 0 to 100. When you hear an analyst talking about a stock being “oversold” or “overbought,” they’re probably referring to RSI. Typically, a reading below 30 indicates a stock is oversold and a reading above 70 means a stock is overbought. As of Tuesday’s open, 80% of the S&P 500’s constituents were oversold. The Index itself had an RSI reading of 28. Buying a stock you want when it’s oversold can be the difference between paltry returns and super-charged gains. Let’s take a look at an example. 15% in Two Weeks Thanks to RSI The last time the Dow Jones Industrial Average (DJIA) fell below 16,000 points was in October 2014. You’ll recall that was the height of the Ebola scare, and airline stocks took a huge hit. Despite a major operational restructuring and strong early year performance, Southwest Airlines Co. ( LUV ) wasn’t spared. It fell 18% last October from its all-time high just one month prior. The stock’s RSI fell from 90 (extremely overbought) to 15 (extremely oversold) in the blink of an eye. So how could a savvy investor have played this selloff opportunity on a red-hot stock using RSI? The most efficient way to use RSI is to buy when the stock price crosses back above 30 – the oversold threshold. This RSI cross implies that a stock’s momentum has swung back to the upside. Using this example, RSI on Southwest crossed above 30 on October 13. Just a few weeks later, shares shot back up to $34.59, and the stock’s RSI crossed above 70, implying overbought conditions. Once Southwest became overbought, you could’ve sold shares when the RSI fell back to 70 and bagged an easy 15%. Or, you could’ve ridden them through the end of the year to a 41% gain. Now’s the Time to Make Your Move Right now, the market is showing an even juicier opportunity than last year’s Ebola dip. Of course, there’s always a chance that things could get worse before they get better. But it’s safe to say that after Tuesday’s pop, bullish sentiment is alive and well in this market. The smart money is buying stocks from their watch list and gearing up for the inevitable oversold bounce in the broad market. Using RSI, you can do the same and take advantage of this volatile market. On the hunt, Jonathan Rodriguez The post Volatility Is Back! Trade This Moving Market Like a Pro appeared first on Wall Street Daily . By Jonathan Rodriguez
    Credit Suisse Logo
  • commented 8/29/15
  • tags: CS
  • Mortgage Kapital credit is the best loan lender

    Good Day Everyone,
    I am Nolan Osman, i'm new in here but i like to share my testimony to everyone that has tried everything possible to borrow Money from Bank or seek for a loan to boost your business and had lost hope.
    You must ignore all these loan lenders, because they are all SCAMS...real SCAMS...i was a victim of which i was ripped thousands of dollars... But my life entirely changed since I met Mortgage Kapital Credit post by chance on internet! and how they are giving good loan online and i decided to ask for a loan as soon as possible. I thought it was a scam just like other post but i got reply and they approved my loan for just 3% within 24 hours after meeting up to their necessary requirements, and my loan was deposited in my bank account without collateral. I advise those who are looking for a reliable lender to contact mortgagekapitalcredit @ gmail.com or Facebook (facebook.com/klement.antonin.7). I completely trust them and please do not hesitate to contact me at nolan.osman @ yahoo.com if you want to know more about them.

    Nolan Osman sent from my ipad [ less... ]
    Mortgage Kapital credit is the best loan lender Good Day Everyone, I am Nolan Osman, i'm new in here but i like to share my testimony to everyone that has tried everything possible to borrow Money from Bank or seek for a loan to boost your business and had lost hope. You must ignore all these loan lenders, because they are all SCAMS...real SCAMS...i was a victim of which i was ripped thousands of dollars... But my life entirely changed since I met Mortgage Kapital Credit post by chance on internet! and how they are giving good loan online and i decided to ask for a loan as soon as possible. I thought it was a scam just like other post but i got reply and they approved my loan for just 3% within 24 hours after meeting up to their necessary requirements, and my loan was deposited in my bank account without collateral. I advise those who are looking for a reliable lender to contact mortgagekapitalcredit @ gmail.com or Facebook (facebook.com/klement.antonin.7). I completely trust them and please do not hesitate to contact me at nolan.osman @ yahoo.com if you want to know more about them. Nolan Osman sent from my ipad
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    Weekly Pay-TV Notes: Dish’s Sling TV Flounders During Fear the Walking Dead Premiere, Netflix Collaborates With SoftBank Ahead Of Japanese Launch
  • By , 8/28/15
  • tags: DISH NFLX
  • The pay-TV industry saw significant activity this week, with Dish Network’s Sling TV suffering an outage during Sunday night’s premiere of AMC’s highly-anticipated Fear the Walking Dead . This is the fourth time in the last few months when Sling TV has failed to provide satisfactory service during the telecast of a high profile event. On a separate note, Streaming giant Netflix has decided to partner with Japan’s SoftBank Group ahead of its launch in the Asian country. Netflix has set a September 2 launch date for Japan and teaming-up with local businesses will help the company in reaching out more efficiently to the masses. On that note, we discuss below these developments related to the pay-TV companies over the past few days.

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