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QSR Logo
Domino's Pizza Inc Leads Pizza Chain Growth Across The World
  • By , 6/18/19
  • tags: MCD QSR DPZ PZZA YUM
  • Domino’s Pizza Inc (NYSE:DPZ) has seen very high growth since 2014, which took it to the top of global pizza chains in 2017 with respect to retail sales. Its operating margin has also continuously increased with 2018 seeing the highest jump in the last six years to 37.9%, ahead of Pizza Hut at 35.2%. Here, Trefis compares Domino’s with the other top players in the pizza chain market across the world. For detailed analysis please see our interactive dashboard  How has Domino’s Fared with respect to other Pizza Chains?  In addition, here is more  Consumer Discretionary data . Domino’s leads in Pizza Sales for the last 2 years as Pizza Hut sales remain flat Domino’s Pizza Inc retail sales grew from $12.7 billion in 2013 to $15.8 billion in 2018, at a CAGR of 4.6%. Pizza Hut’s retail sales grew from $11.9 billion in 2013 to $12.2 billion in 2018, at a CAGR of 0.4% Papa John’s International Inc retail sales grew from $3.1 billion in 2013 to $3.4 billion in 2018, at a CAGR of 1.6% Operating Margins get higher with higher re-franchising Operating Margins have increased at a steady rate for Domino’s till 2017 and seen a good jump in 2018 to 37.9% Pizza Hut has seen a good increase post 2016  driven by refranchising. In 2018 the margin was at 35.2% Papa John’s Operating Margin had been steady over the years with a sudden dip in 2018 to 1.9%, primarily due to the impact of lower comparable sales and the adoption of the new revenue recognition standards that revise the method of accounting for the customer loyalty program. Pizza Hut leads Store growth with more than 18K stores across the world Pizza Hut has the highest number of stores across the world at 18.4K. Domino’s Pizza also has been continuously expanding its reach and has reached 15.9K stores in 2018 from just 10.9k in 2013. Papa John’s has also increased its presence at a steady rate and had 5,303 stores at the end of 2018. Yum Brands Inc has led the way in paying back their shareholders with $12.6 billion in buybacks in the last 6 years The companies also have been continuously paying back the shareholders with dividends and re-purchase of stock. Yum Brands Inc has bought back shares worth $12.6 billion in the last 6 years while Domino’s Pizza and Papa John’s have bought back stock worth $2.9 billion and $0.9 billion, respectively. As shown above, Domino’s Pizza Inc’s revenue, operating margins, and reach has been continuously increasing. The company is also paying back its shareholders through dividends and repurchasing the stock. These factors have combined for the company to see its stock jump from $42 at the start of 2013 to $283 today.   What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams More Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
    CHL Logo
    How Does China Mobile's Wireless Business Compare With Its Peers?
  • By , 6/18/19
  • tags: CHL CHA CHU
  • China Mobile  (NYSE:CHL) dominates the Chinese wireless market with a market share (in terms of subscribers) of about 58%. However, the carrier has been underperforming its smaller rivals, China Telecom and Unicom, over the last two years, as they bolstered 4G coverage and launched new plans targeted at heavy data users. In this analysis, we compare and contrast China Mobile’s key wireless metrics with its rivals. We also examine how the company’s wireless business impacts its overall earnings and Trefis price estimate. View our interactive dashboard analysis on  How Does China Mobile’s Wireless Business Compare With Its Peers?  You can modify key drivers to arrive at your own earnings and valuation estimates for the company. China Mobile Dominates Chinese Wireless Market, But Its Growth Is Slowing China Mobile’s wireless subscriber base grew from about 826 million in 2015 to about 925 million in 2018, translating into a CAGR of ~4%. In comparison, China Telecom’s base grew by 15% and Unicom’s grew by about 9%, driven by their expanding 4G coverage. Comparing China Mobile’s Revenues With Its Rivals Wireless service revenues stood at about $77 billion in 2018, compared to levels of around $25 billion for China Telecom and China Unicom. Comparing Wireless ARPUs While China Mobile’s wireless ARPUs are higher than China Unicom’s, coming in at about $6.9 in 2018, they are below China Telecom’s ARPUs, on account of a weaker 4G subscriber mix. How China Mobile’s Wireless Services Business Impacts Its Stock Price Step 1: Estimating China Mobile’s Wireless Revenues We estimate that China Mobile’s wireless revenues will grow to about $82 billion in 2019, driven by slightly higher ARPUs and an expanding subscriber base. Step 2: Estimating China Mobile’s Total Revenue We estimate that the company’s total revenues will stand at about $117 billion in 2019. Step 3: Estimating Net Income We estimate that net income will stand at about $20 billion in 2019 and about $19 billion in 2020. Step 4: Calculating China Mobile’s EPS We expect EPS to come in at about $4.9 in 2019 and $4.7 in 2020. Step 5: Arriving At Price Estimate We are valuing the company at about 12x its projected 2020 results.  
    AAPL Logo
    Why Has Roku Stock Outperformed?
  • By , 6/18/19
  • tags: AAPL ROKU
  • Streaming media player maker Roku’s (NASDAQ: ROKU) stock has risen by ~280% since it listed in September 2017. While Roku is best known for its streaming hardware (Players), its financial performance is being driven primarily by growth in the high-margin Platform business, which generates revenues via advertising, subscriptions, transaction revenues, and the licensing of the Roku OS to TV brands. In this analysis, we look at the key drivers of Roku’s business, its margins, expenses, and Trefis estimate for its potential operating break-even. View our interactive dashboard analysis on Why Has Roku Stock Outperformed? You can modify key drivers to arrive at your own valuation for the company and its break-even period. Additionally, you can see all  Trefis technology company data here . 1. How Have Roku’s Revenues Trended And What’s The Outlook For Its Key Business Segments? Roku’s total revenues have grown from around $320 million in 2015 to about $740 million in 2018, driven primarily by the Platform division. The 3 Year CAGR for Platform revenues was 102%, versus 6% for the Players division. We expect total revenues to grow by about 41% in 2019 and 34% in 2020. 1.1 Roku’s Platform Business Is The Biggest Driver Of Growth Roku’s platform segment accounted for 55% of total revenues in 2018, up from 15% in 2015. The key drivers of Roku’s platform revenues are its Active Accounts and Average Revenues Per User (ARPU). The number of active Roku Accounts has grown from 9 million in 2015 to about 27 million at the end of 2018, driven by a higher installed base of Roku players and Smart TVs with Roku OS. Over Q1’19, the company estimated that over 1 in 3 Smart TVs sold in the U.S. were Roku powered. ARPUs have been trending higher from about $9 in 2016 to about $18 in 2018, driven by higher advertising sales, subscriptions, and a-la-carte purchases made on its platform. The company takes a 20% cut of the purchases made on its platform and can take as much as 30% of ad inventory on ad-supported channels. 1.2 Roku’s Player Revenues Could Rise On Lower Price Points, New Launches Player revenues represent the revenue from the sale of Roku streaming players, accessories, and audio products. While sales remained sluggish between 2015 and 2017, they picked up in 2018, driven by lower prices, which helped to improve volumes. We expect the strategy to continue driving growth over 2019 and 2020. 2. How Are Roku’s Gross Margins And OpEx Expected To Trend & When Can It Break Even? 2.1 Higher Mix of Platform Revenues Will Drive Gross Margins Roku’s gross margins have been trending higher, driven by a growing mix of high-margin Platform revenues (platform gross margins were 71% in 2018, vs. 11% for players) While we expect overall margins to expand, platform margins are projected to trend lower due to a higher mix of video advertising – which has lower margins – and also due to the introduction of premium subscriptions which will be accounted for on a gross basis. 2.2 How Have Roku’s Operating Expenses Trended & What’s The Outlook? R&D expenses grew to about $171 million in 2018, marking a 3-year CAGR of 50%. We expect R&D spending to grow to about $356 million by 2020, as the company continues to invest in platform and product development. Sales, marketing, and G&A expenses grew at a 3-year CAGR of about 31%. However, we expect these expenses to grow at a slower pace going forward. 2.3 Estimating Operating Profits & Potential Break Even We estimate Roku’s operating profit as Gross Profit – Operating Expenses. We believe it is possible that Roku will reach operating break-even by 2020, as revenues grow faster than expenses. 3. Estimating Roku’s Fair Value 3.1 Estimating Revenue Per Share 3.2 Arriving At Roku’s Price Estimate Using A Revenue Multiple Roku stock is valued at about 11x its projected 2019 revenue per share.   What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams More Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
    GE Logo
    A Detailed Look At Why GE's Stock Has Underperformed The Market Since The Downturn
  • By , 6/18/19
  • tags: GE MMM JCI
  • Since the financial crisis, General Electric’s (NYSE:GE) stock price has collapsed – destroying about $200 billion in shareholder wealth. The company’s market cap was almost $300 billion before the downturn but slumped to just $50 billion in early 2009 due to concerns about the quality of assets held by GE Capital at the peak of the recession. The company’s market cap recovered to $250 billion by mid-2015, though, and remained largely around that level till early 2017 before sliding again to settle at its current level of $90 billion. General Electric’s journey over the last decade has been marred by inappropriate acquisitions which adversely affected its revenues and profitability. Trefis summarizes how the factors that have impacted the company’s performance and, in turn, its stock price over the last decade in the interactive dashboard – Why Has GE’s Stock Under-performed The Market Over The Last Decade?    Additionally, you can see more Trefis Industrial company data here . How Does GE’s Stock Performance Compare With The S&P500 and DJIA? While major market indices have achieved an average annual growth of 11% over the last 8 years, General Electric’s stock has   effectively fallen in value at an average rate of 8.5%. The under-performance of GE’s stock can be primarily attributed to unfavorable acquisitions and a rather soft management as detailed below. Understanding How GE’s Revenue Composition Has Changed Over The Years 2012-2014: Over these years revenue contribution was dominated by Power, Aviation and Healthcare, with each contributing approximately 15% of total revenues. 2015-2016 : Acquisition of Alstom’s energy business helped Power segment’s contribution surge to 30% while strong performance of Aviation segment helped its contribution improve to over 20%. However, the contribution of Lightning business drastically declined to just 4% as energy efficiency regulations and market shifts away from traditional lighting products in favor of more energy-efficient, cost-saving options negatively impacted the demand for the company’s products. 2017-2018: General Electric acquired Baker Hughes in 2017, helping contribution of Oil & Gas increasing to 22% while operational issues in the Power segment dragged its contribution down to 26%. 2019-2022: Trefis expects contribution of Aviation segment to increase to 27% while Power segment is expected to slide to around 20% . How Have Acquisitions And Divestments Impacted General Electric’s Performance Over The Last Decade? GE Capital – The Elephant In The Room GE’s biggest mistake in the run-up to the recession was entering the financial industry. GE Capital became a huge liability during the financial crisis and in the aftermath of the recession. Investors were seen shying away from GE shares due to the high risk and volatility associated with GE Capital. General Electric decided to exit most of its GE Capital operations only in 2015, and restructured its portfolio as a pure industrial company. This exit plan war largely completed in 2017, and reduced GE’s total assets from $655 billion in 2014 to $309 billion in 2018 . The delay in GE’s decision to exit GE Capital business played a big role in the company’s sub-par performance over the last decade. GE’s Power Segment Grew Bigger, But Became Very Unprofitable Power segment has been the largest contributor to GE’s revenues over the years. In 2015, GE acquired its French competitor Alstom’s energy business for  €12.4 billion – making it GE’s most expensive industrial acquisition ever. Although this acquisition boosted GE’s revenues, the Power business has been negatively impacted by operational issues since then. The operational issues coupled with Alstom’s low profitability dragged the segment’s EBITDA margin from around 27% in 2015 to just 3.5% in 2018 . GE’s Oil & Gas Segment Expansion Plans Also Ran Into Unexpected Issues In 2017, GE combined its oil and gas business with Baker Hughes Incorporated, and ended up with an ownership of 62.5% in the new company – Baker Hughes, a GE Company (BHGE). This transaction helped the company’s Oil and Gas revenues grow from $12.5 billion in 2016 to more than $21 billion in 2018 . But General Electric acquired Baker Hughes at a time when the company’s oil & gas business was in turmoil and oil prices were declining. The acquisition negatively impacted the segment’s profitability, as the company failed to derive the cost synergies it was expecting from the acquisition. This led to the division’s EBITDA margin shrinking from around 21% in 2015 to 9% in 2018. Finally, GE’s Swelling Leverage Ratio Is Also To Blame Leverage Ratio = Interest-Bearing Debt ÷ Shareholders Equity GE has an extremely elevated leverage ratio. The company has failed to control its debt balance and in fact, the proportion of interest-bearing debt to shareholders equity has increased sharply over the last couple of years due to the series of high-profile acquisitions. GE’s leverage ratio of 5x is roughly 3 times that of its industrial average. The increased risk introduced by the massive debt burden has also proven to be a major deterrent for investors. What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams |  Product, R&D, and Marketing Teams More Trefis Data Like our charts? Explore  example interactive dashboards  and create your own
    AKAM Logo
    Can Revenues For Akamai's Cloud Security Solutions Business Exceed $1 Billion By 2021?
  • By , 6/18/19
  • tags: AKAM MSFT GOOG AMZN
  • Akamai Technologies  (NASDAQ: AKAM) provides solutions for delivering content across the Internet. Over recent years, the company has leveraged its strength in the industry to expand its presence in the cloud security business. Trefis estimates that Akamai’s technology leadership and reach are likely to help revenues for its security business cross $1 billion in two years. You will find additional details about our expectations in the  interactive dashboard for Akamai’s Cloud Security Business.  Additionally, you can see more Trefis Technology company data here . Akamai’s Cloud Security Solutions Business Is Proving To Be A Natural Extension Of Its Core Content Business Akamai’s core business of content delivery (through caching customer data to minimize latency) has seen competition from some of its largest customers over recent years (including Amazon, Apple, Facebook, Google, Microsoft, and Google). However, the reach and technical strength of Akamai’s network has allowed it to become an important player in the growing edge computing market. Building upon the reliability of its network, and keeping in mind the increasing security risks emanating at the edge, security has been a natural value add for Akamai’s product portfolio. Also, the company’s distributed platform helps it reach over 130 countries. Akamai’s access to the flow of traffic across the internet has helped it gain invaluable insights, which it then used to build its security business. Consequently, the company’s cloud security business has witnessed close to 30% y-o-y growth for the last many quarters. It Also Includes A Strong Lineup Of Security Products For Potential Clients The cloud security business consists of: Web Application Protector : A solution to guard against web application and distributed denial of service (DDoS) attacks. Kona Site Defender : A cloud security solution to guard against network and application layer DDoS attacks, web application attacks, and direct-to-origin attacks. Bot Manager : A tool to identify bots, categorize and manage different bots based on a customer’s security policies. Fast DNS : DNS stands for Domain Name System and translates human-readable domain names into numerical values to be processed by machines. Fast DNS is a solution to guard against DNS-based DDoS attacks. Prolexic Routed : A solution to guard against high-bandwidth, sustained DDoS attacks. Client Reputation : A traffic analysis and profiling tool to inform customers about potential threats. Enterprise Application Access and Enterprise Threat Protector : Help control access of individual applications behind the firewall. Which Is Why Trefis Estimates Sustained Growth Over Coming Years Akamai’s strength in the cloud security business is evident from the fact that annual revenues have been growing at more than 30% over recent years. We expect an increase in connected devices and growth in edge computing to continue to drive growth in the business over the next few years. While the management expects the security business to witness a growth rate in excess of 20% over 2019-20, we believe that a larger revenue base and increased competition could dampen the growth rate in 2020. Overall, we feel the security business is likely to grow at a CAGR of 18% through 2021 – reaching almost $1.1 billion by then. Do not agree with our forecast? Create your own forecast for Akamai’s Cloud Security Business by changing the base inputs (blue dots) on our interactive dashboard. What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams |  Product, R&D, and Marketing Teams More Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
    VALE Logo
    How Does Vale's Iron Ore And Pellet Business Compare With Its Major Peers?
  • By , 6/17/19
  • tags: VALE RIO CLF
  • Vale (NYSE:VALE) has maintained its leadership position as the world’s largest iron ore miner over the last couple of years, led by rising volume and high grade ore production. The growth of its iron ore and pellet business is crucial for the company as it contributes close to three-quarters of its annual revenue. In this analysis, Trefis compares and contrasts Vale’s iron ore and pellet division’s growth and performance vis-à-vis its primary competitors and provides an outlook of the future course of business in the aftermath of production cuts. You can view Trefis’ interactive dashboard – How Does Vale’s Iron Ore And Pellet Business Compare With Its Peers – and make changes to our assumptions to arrive at your own forecast for Vale’s shipments, revenue, and market share. In addition, here is more  Materials data . A Look at Historical Revenue and Shipments Trend Vale has added over $11 billion in revenue from its iron ore and pellet business over the last four years, with segment revenue increasing at a CAGR of 19.2% from $15.9 billion in 2015 to $27 billion in 2018. Revenue growth in all these years has been healthy in double-digits. In contrast, Rio Tinto (RIO) and Cleveland-Cliffs (CLF) have been able to add $4.5 billion and $0.8 billion, respectively to its iron ore and pellet business during the same time. Though CLF has grown at over 20% in the last two years, its size is less than one-tenth that of Vale’s iron ore division. Vale provides the largest amount of iron ore and pellet from its mines in Brazil and pelletizing plants in Oman and China. Shipments have increased from 322.7 million metric tons in 2015 to 364 million metric tons in 2018, driven by improving grades and investment in mine development and exploration. Its shipments have been higher than RIO and CLF combined in each of the previous four years. Historical Price Realization Vale’s price realization per ton over the years has been higher than RIO but lower than CLF. Vale’s iron ore price per ton increased from $44.61/ton in 2015 to $66.21/ton in 2018, in line with global price movement. However, with the implementation of a new environmental policy in China, under which China curtailed the import of low-grade iron ore (with Fe content of 62%), the premium for Vale’s pellet increased with its price rising to $117.53/ton, the highest in the market in 2018. Though Vale provides the best pellet grades in the world, pellet forms only 14% of its segment volume with 86% being concentrated by iron ore. This is in contrast to 100% of CLF’s revenue coming from pellet sales. This has led to the average price realized by Vale for the segment (iron ore + pellet) to be much lower at $74.18/ton in 2018 compared to $113.43/ton for CLF. While RIO’s grade-mix being inferior to both companies, it realized a lower price. Forecasting Production and Shipments Iron ore and pellet production at Vale has remained higher than its peers and increased over the years, with a fall in 2016 due to the Samarco dam collapse in November 2015. With another major dam burst in Brazil in January 2019, production for the year is expected to fall by close to 40 million metric tons. Production cut would likely lead to shipments dropping from 364 million tons in 2018 to 347 million tons in 2019, followed by a rise to 360 million tons by 2020. This would be in contrast to RIO and CLF steadily increasing their iron ore production Price Movement Iron ore prices recently reached a 5-year high, led by expectations of supply shortage following production cuts by Vale and rising demand from China, with the Chinese mills producing steel at an annualized rate of more than 1 billion tons. The index price for 66% concentrate has surged to $118.50/ ton while Brazilian high grade (65%) exports are fetching close to $123.70/ton. This could lead to Vale’s pellet business realizing prices close to $120/ton over the next two years. However, the average price for the division would be pulled down to $75-$80. It would be higher compared to the $70-$73 price range for RIO, but much lower compared to $114-$115 for CLF’s shipments. Revenue Expectations Vale’s revenue for the division is expected to drop by about 1.3% to $26.7 billion in 2019, led by lower shipments, partially offset by premium pricing. FY 2020 could see a healthy revenue growth of 7.6%, driven by the possibility of Vale restarting full production at its 30 million tons per year Brucutu mine. In contrast, RIO’s iron ore and pellet revenues are set to continue an increasing trend in 2019 and 2020. CLF’s revenue would most likely be stable in 2019 and 2020 at $2.4 billion, led by stable production trends at its mine before its Great Lakes project starts adding to volume in 2021. Vale Ceding Market Share? Vale has been successful in steadily increasing its share in the total iron ore and pellet revenue of these three players – VALE, RIO, CLF – from 50.7% in 2015 to 56.5% in 2018. With expectations of a drop in revenue led by a decrease in shipments, Vale’s share of revenue is projected to decline to 54.7% in 2019, lower than 2016 levels. FY 2019 could be used by players such as RIO and CLF to capture the market share to be ceded by Vale. However, Trefis analysis shows that with its sheer size and resources at its disposal, Vale would most likely bounce back sooner than expected with a market share of over 55% in 2020. Thus, in the near term, there does not seem to be any credible or major challenge to Vale’s market leadership position in the iron ore and pellet space.     What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams |  Product, R&D, and Marketing Teams More Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
    AAPL Logo
    Why Apple Should Design Its Own Baseband Chips
  • By , 6/17/19
  • tags: AAPL QCOM
  • There have been reports that Apple  (NASDAQ:AAPL)  could acquire key parts of Intel’s German smartphone modem operations, as it looks to build its own 5G chips for the iPhone. Below, Trefis estimates the potential financial upside for Apple from designing its own modems and what it could mean for the broader iPhone business. View our interactive dashboard analysis on  How Could Apple’s Margins Benefit If It Designed Its Own Baseband Chips? The Move Is In Line With Apple’s Strategy Of Shifting To Custom Silicon  Apple currently uses Intel 4G chips on its flagship iPhones and plans to use Qualcomm chips for its 5G iPhones, which could launch by 2020 or 2021. However, the company has been progressively using more self-designed chips on its devices, cutting its dependence on third-party vendors, as it looks to improve the performance of its products via tighter integration. The in-house chip design team currently develops its A-series processors, wireless chips for audio products, and is increasingly focusing on power management. Modems are one of the most complex and pricey parts of a wireless device, handing the transfer of data with cellular and other networks. By developing proprietary modems, Apple could potentially improve wireless performance as well as battery life on its devices. Modems Are Slated To Get More Expensive Competition in the design and production of smartphone components is fairly limited, considering the high barriers to entry both in terms of technology and capital investments, and this means that components are getting more expensive. While 4G baseband chips cost Apple about $18 for the iPhone X series per IHS Markit, 5G chips are expected to cost twice as much  as 4G chips per JP Morgan, although we believe prices will decline with time. By designing its own baseband chips, Apple could protect its margins and be less dependent on vendors such as Qualcomm. What’s The Impact On Apple’s Gross Margins If It Introduces its Own 5G Chipset By 2024? Trefis assumes that a third-party 5G baseband chip would cost ~$25 per unit in 2024 and we assume that Apple’s own chip could cost about 20% less. This translates into a saving of about $5 per iPhone. Assuming an average selling price of $740 per iPhone in 2024, we estimate that iPhone gross margins could expand by about 70 bps if Apple uses proprietary baseband chips. We estimate that Apple’s overall gross profits could be higher by about $1.2 billion, assuming iPhone shipments of 230 million in 2024. On a dollar basis, overall gross profits could be about 1% higher if Apple adopts its own baseband chips. Overall, it’s safe to assume that a possible shift to proprietary modems would have more to do with product design and strategy than financial savings.   What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams More Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
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    Why Is Apollo Global Management Acquiring Shutterfly?
  • By , 6/17/19
  • tags: SFLY
  • Private equity firm Apollo Global Management LLC recently entered into an agreement to acquire U.S. digital imaging company Shutterfly, Inc for $2.7 billion, including the company’s $900 million debt. Shutterfly disclosed its intent to be acquired late last week, clarifying the financial aspects of the proposed deal. Notably, Apollo also announced that it is acquiring privately-held Snapfish LLC, a small internet-based retailer of photography products, and plans to merge it with Shutterfly. Shutterfly’s shareholders will receive $51 per share in cash as a part of the deal – a price Trefis has maintained as the fair value for the company since the start of 2019. Details about our price estimate for Shutterfly can be found in our interactive dashboard  What is Shutterfly’s Fundamental Value Based On Expected 2019 Results?   Additionally, you will find more  Trefis Internet and Software company data here . A Quick Look At Shutterfly’s Revenue Streams Trefis’ model for the company breaks its key value drivers down to three key components: Consumer segment : Shutterfly’s retail division, which delivers customized products like photo albums, photo cards, greetings cards, stationery, and other gift items. Lifetouch segment (created in 2018): Shutterfly acquired Lifetouch, a national leader in school photography, in April 2018 for $825 million. Shutterfly Business Solutions segment (SBS) : SBS provides personalized direct marketing and other end-consumer communications as well as just-in-time, inventory-free printing to Shutterfly’s customers. The trends in revenue for each of these segments over recent years is captured in the chart below. Salient Points of the Deal That Will Take Shutterfly Private On April 23, 2019, a media report  speculated that funds managed by Apollo Global Management were considering a bid for Shutterfly. On June 10, 2019, Shutterfly agreed to be acquired in an all-cash deal. The transaction is expected to close in early Q4 2019. Shutterfly’s common shareholders shall receive $51.00 per share in cash, representing a premium of 31% when compared to Shutterfly’s unaffected closing stock price of $38.91 on April 23, 2019. Upon completion of the transaction, Shutterfly will become a privately-held company How Is Apollo Likely To Benefit From The Deal? Shutterfly is a leading digital retailer and manufacturer of high-quality personalized products and services and provides a unique product range in the industry. Shutterfly recently acquired Lifetouch, a national leader in school photography. The integration of Lifetouch provided the company access to more than 10 million purchasing households which form its ideal target customers. Snapfish is a web-based photo sharing and photo printing service. Apollo intends to acquire both Shutterfly and Snapfish. It plans to merge the two photo-product retailers to form a larger combined business. This merged private entity is likely to provide a well-diversified product and category range, that is expected to contribute to its customer growth and drive value in the near term. Apollo is most likely working with a time frame of 3 to 5 years for this investment. Over this period, it will look to realize synergies from the combined entity and to then grow the business enough to either sell it a potential acquirer or take it public again via an IPO, at a much higher valuation (with potential returns in excess of 100%) What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams More Trefis Data Like our charts? Explore  example interactive dashboards  and create your own
    UL Logo
    What To Make of Unilever's Purchase Of A Japanese-Inspired Skin Care Brand?
  • By , 6/14/19
  • tags: UL CL PG KMB
  • Unilever  (NYSE:UL) has signed an agreement to acquire a Japanese-inspired skincare company, Tatcha, for an undisclosed sum. This move furthers Unilever’s bid to strengthen its presence in the premium personal care segment, as it moves away from its stagnating foods business. Tatcha has a growing presence in North America in the natural personal care segment. This acquisition is a small but positive step toward the consolidation of Unilever’s position in the global personal care market. Trefis maintains a long-term price estimate for Unilever at  $57, which is around 10% below the current market price. Below we discuss the personal care segment and its expected 2019 performance on our interactive dashboard How Unilever Could Benefit From Acquiring Tatcha? which details our forecasts for the company in the near term. You can modify our assumptions to see the impact any changes would have on the company’s revenue and EBITDA and see  more Trefis Consumer Staples data here. Personal Care Segment Is A Key Growth Driver For Unilever Personal Care is Unilever’s largest division, having overtaken the Foods division in 2011 to take the top spot. The company’s shifting priority is evident from the fact that the revenue share of its Foods unit had fallen from 30% in 2011 to 23% in 2017, while the share of its Personal Care segment grew from 33% to 39% over the same period. It should be noted that Unilever has now combined its Foods and Refreshment division into one segment, after the divestiture of the company’s spreads business in 2018. Unilever’s Personal Care division includes Skin and Hair Care, Deodorants, and Oral Care divisions. With nearly 70% of the segment’s revenues coming from the Skin and Hair Care segment, and the company’s increased focus on this division through recent acquisitions, we believe the Personal Care segment will be a key growth driver for Unilever going forward. In its 2013 annual report, Unilever stated that it is utilizing cash flows from its Foods business to fund acquisitions in the Personal Care and Home Care categories. This marked the beginning of Unilever’s enhanced focus on the Personal Care category, which was refined further in the subsequent years. More recently, Unilever named the expansion of the segment through acquisitions as one of its top priorities. Some of the recent acquisitions  in the space include  Quala, Carver Korea, Sundial, and Schmidt’s Naturals.  In 2018, Unilever’s Personal Care segment’s revenues grew to $24.4 billion while its EBITDA margin stood at around 24.3%. Since the company’s acquisition strategy is focused on the high-margin premium segment, it should result in some margin expansion over the long term. Consequently, we estimate that the EBITDA margin of Unilever’s Personal Care Segment will improve to 24.7% by the end of 2022. We have assumed that inorganic growth will proceed gradually, in line with Unilever’s acquisition strategy.     What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams More Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
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    Here's Why Norfolk Southern's Coal Freight Revenues Could Decline In The Near Term
  • By , 6/14/19
  • tags: NSC CSX UNP
  • Norfolk Southern’s (NYSE:NSC) coal freight business accounts for roughly 15% of the company’s value, according to Trefis  estimates. The segment generated revenues of $1.82 billion in 2018, accounting for 16% of the company’s total revenues, and a growth of 4.5% over the prior year. This can be attributed to an uptick in coal exports in 2018. In fact, the coal export volume for Norfolk Southern was up 6% last year. However, the volume growth in export was offset by declines in utility, domestic, and industrial coal. The revenue growth was primarily led by higher average revenue per coal carload. You can view our interactive dashboard analysis ~ How Did Norfolk Southern Fare In Q1, And What Can We Expect From Full Year 2019? ~ for more details on the expected performance of the company. In addition, you can see more of our data for  industrial companies here . For railroad companies, including Norfolk Southern, the coal freight business is dependent on macro trends in the coal and gas industry, primarily natural gas pricing, which has declined around 20% year-to-date, and thus offering a reasonably priced and cleaner alternative to coal as an energy source. On the contrary, coal prices could inch higher in the long run, given the introduction of tough environmental protection laws in several countries, which will make it difficult to develop new mines, thereby limiting the supply. Also, the trends in exports have changed in the recent past. The trade tensions between the U.S. and China could hamper the growth in coal exports. Note that China is an important market for the U.S. coal. The exports to Asia doubled from 15.7 million tons in 2016 to 32.8 million tons in 2017. Looking at China, exports were 3.2 million tons in 2017, as compared to zero in 2015 and 2016. Looking forward, the overall U.S. coal exports are expected to decline 15% to 98 mst (million short tons) in 2019. Coal production is expected to decline 7% to 700 mst, while coal consumption is expected to decline 12% (y-o-y) to 604 mst in 2019,  according  to EIA. These factors will likely have an impact on railroad coal shipments. Norfolk Southern could see low single-digit decline in coal volume for the full year 2019. However, this will partly be offset by growth in average revenue per carload, which has been trending higher. Average revenue per coal carload grew 6% last year. This can primarily be attributed to a higher fuel surcharge, given the trends in fuel prices over the last 3 years, and better pricing. However, crude entered bear market territory recently with ballooning U.S. inventories. It will be interesting to see how the crude averages for 2019 turn out, as it could have an impact on the company’s fuel surcharge revenues.         What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams All Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
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    What Could Be Salesforce.com's Revenue Growth Over The Next 3 Years Post Tableau's Acquisition?
  • By , 6/14/19
  • tags: CRM DATA SAP
  • Trefis estimates that the acquisition of Tableau will potentially increase Salesforce.com’s (NYSE:CRM) revenue to more than $24 billion by FY 2022 (ended January 2022). As the acquisition will be completed at the end of Q3 2020 (ended October 2019), we expect a synergy gain of 0.5% of Combined total revenue in FY 2020. We will discuss this below in detail. You can view our interactive dashboard analysis –  Can Salesforce.com’s acquisition of Tableau increase its revenues to $24+ Billion in the next three years?   In addition, here is more Information Technology Data . Salesforce.com is the #1 CRM company in the world with regards to market share. It offers Customer Relationship Management (CRM) software which helps companies better manage customer data and information, which, in turn, helps those companies to better serve their customers and increase sales. Tableau is one of the fastest growing analytics platform providers in the world. Their software products allow a broad population of business users to engage with their data, ask questions, solve problems, and create value. Acquisition Deal: On June 10, 2019, Salesforce.com entered into a definitive agreement with Tableau to acquire the company. The deal will be an all stock transaction where each share of Tableau Class A and Class B common stock will be exchanged for 1.103 shares of Salesforce common stock, representing an enterprise value of $15.7 billion (net of cash), based on the trailing 3-day volume weighted average price of Salesforce’s shares as of June 7, 2019. This converts to approximately $170 worth of Salesforce.com’s shares for each share of Tableau. Post the acquisition, Tableau will function as a separate brand of Salesforce. The acquisition of Tableau is expected to be completed during Salesforce’s Q3 2020 (ending October 2019).   How has Salesforce.com’s Revenue grown and what is its forecast? Salesforce.com has seen a high revenue growth for the past few years. Revenue has increased from $8.4 billion in FY 2017 to $13.3 billion in FY 2019. We expect the growth to continue at a steady rate of around 19% and reach a revenue of $22.4 billion by FY 2022. How has Tableau’s Revenue grown and what is its forecast? ( Please note that Tableau revenue figures are presented in line with Salesforce.com’s nomenclature of Fiscal years for easy comparison.) Tableau has seen high growth over the years as revenue has increased from $827 million in FY 2017 to $1,155 million in FY 2019. We expect the high growth to stabilize moving forward and revenue to reach $1.6 billion by FY 2022. What would be Total Revenue of Salesforce.com after adjusting for the Synergy Gain from Tableau’s Acquisition? Trefis estimates the company will have a synergy gain of 0.5% for the first year as the acquisition will complete in the 3rd quarter. Post that we expect a synergy gain of 2.1% and 2.3% in FY 2021 and FY 2022, respectively. This will take Salesforce.com’s revenue to nearly $24.5 billion in FY 2022.     What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams More Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
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    Increasing Demand For Digital Transformation Solutions Should Have Boosted Adobe's Fiscal Q2 Results
  • By , 6/14/19
  • tags: ADBE GOOG MSFT AMZN ORCL SAP
  • Adobe (NASDAQ:ADBE) reports its fiscal Q2 2019 earnings on Tuesday, June 18. The company had reported Q1 results ahead of consensus estimates, while revising its guidance to align better with its newly adopted accounting standard. The strength in the company’s experience cloud should continue to help margins expand. We also anticipate the benefits of Adobe’s alliance with Microsoft and SAP to start contributing to strength in the company’s analytics business. Per Trefis estimates, Adobe’s shares have a fair value of $259, which is roughly 5% below the current market price. Our interactive dashboard on Adobe’s Price Estimate  outlines our forecasts and estimates for the company. You can modify any of the key drivers to visualize the impact of changes on its valuation, and see all of our technology company data here . A Quick Look At Adobe’s Revenue Sources Adobe makes money by selling software for creative content and marketing purposes, with a focus on building on user experience. The company’s products are offered as subscription and through licenses. Adobe has three segments: Digital Media (2018 revenue of $6.3 billion, 70% of total revenue ): Segment revenue is derived from the sale of subscriptions to Creative Cloud (Photoshop, Illustrator, Premiere Pro, Lightroom CC, InDesign, Adobe XD etc) and Document Cloud (Adobe Acrobat, Adobe Sign and Adobe Scan). Digital Experience (2018 revenue of $2.4 billion, 27% of total revenue ): Segment revenue is derived from the sale of subscriptions to Adobe Experience Cloud, a cross-channel marketing optimization tool that includes analytics, targeting, campaign management, content delivery and commerce enablement. Publishing (2018 revenue of $0.3 billion, 3% of total revenue ): Segment revenue is derived from the sale of licenses to legacy products such as eLearning, technical document publishing, web conferencing etc to OEMs. Performance Over Recent Quarters, And Expectations For Q2 and Full-Year 2019: Total revenues have grown by $3.2 billion over 2016-18 at a CAGR of 24.2%. 2018 revenue grew to $9 billion (23.7% y-o-y). Q1 revenue had increased to $2.6 billion (25.1% y-o-y). We expect Q2 revenues to grow to $2.7 billion (25.2% y-o-y) and 2019 revenues to increase to $11 billion (22.1% y-o-y). Digital media: Segment revenues have grown by $2.4 billion over 2016-18 at a CAGR of 26.7%. 2018 revenue grew to $6.3 billion (26.2% y-o-y). Q1 revenue had increased to $1.8 billion (21.6% y-o-y). We expect Q2 revenues to grow to $1.9 billion (20.9% y-o-y) and 2019 revenues to increase to $7.9 billion (25% y-o-y). Digital experience: Segment revenues have grown by $0.8 billion over 2016-18 at a CAGR of 22.4%. 2018 revenue grew to $2.4 billion (20.4% y-o-y). Q1 revenue had increased to $0.7 billion (34.1% y-o-y). We expect Q2 revenues to grow to $0.8 billion (36.3% y-o-y) and 2019 revenues to increase to $2.9 billion (17% y-o-y). Publishing: Segment revenues have declined by $20 million over 2016-18 due to the company reducing its focus on legacy businesses. 2018 revenue grew to $0.3 billion (0.1% y-o-y). We expect these revenues to remain largely flat compared to the previous quarter. We forecast Adobe’s EPS figure for full-year 2019 to be $5.76. Taken together with our forward P/E multiple of 45x for the company, this works out to a $259 per share price estimate for the company’s stock, which is lower than the current market price. Do not agree with our forecast? Create your own price forecast for Adobe by changing the base inputs (blue dots) on our interactive dashboard .
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    FICC Trading Portfolio For Largest U.S. Investment Banks Have Grown 50% In 3 Years, And There's More To Come
  • By , 6/14/19
  • tags: BAC C GS JPM MS
  • Once the single biggest revenue driver for the largest investment banks in the world, FICC (Fixed Income, Currency & Commodity) trading has lost a lot of its sheen in the wake of the economic downturn. Although it is no longer as profitable as it used to be for the investment banks, it remains an important revenue source for them, and is poised for steady growth over coming years. In order to understand the business better, Trefis has analyzed the FICC Trading Portfolio of the 5 largest U.S. Investment Banks in an interactive dashboard . The banks included in our analysis are Citigroup, Morgan Stanley, JPMorgan Chase, Bank of America, and Goldman Sachs. Besides summarizing the trends in this securities trading portfolio over the years, the dashboard includes our forecast for the FICC trading portfolio for each of these banks, and also captures the impact of changes on their Securities Trading Revenues. Additionally, you can see more Trefis data for financial services companies here . What is FICC Trading? It includes buying and selling of securities in both cash and derivative instruments for interest-rate products, credit products, mortgages, currencies and commodities. Investment banks usually maintain a portfolio of FICC securities to meet clients’ trading demand. JPMorgan Chase is the market leader in the FICC trading space with average annual FICC trading revenues of $14.5 billion over the last 10 years. How Has The FICC Trading Portfolio For These Banks Changed, And What Can We Expect Going Forward? The total FICC trading portfolio for the largest banks was $1.2 trillion in size in 2006. It swelled considerably during the run-up to the economic downturn of 2008 and remained elevated through 2009. The figure largely trended lower till 2015 with most of the banks (especially Morgan Stanley) implementing cuts to their FICC trading desks. New Regulations enacted in the aftermath of the 2008 recession have fundamentally changed the global FICC trading industry. Volcker Rule : It prohibits proprietary trading by banks which was one of the main sources of revenue. Dodd-Frank Act and Basel III Capital Rules : They increased regulatory oversight and limited the banks’ ability to use borrowed money for trading. Additionally, regulatory displeasure over commodity trading activities by banks due to allegations of market manipulation also forced many of these banks to exit the commodity trading segment completely. We expect the FICC trading assets to increase with an average annual rate of 2-3% over next five years leading to regain the peak level of $1.3 trillion by 2024. However, FICC trading revenues are expected to grow at a comparatively slower pace and reach $47 billion by 2024 with an average annual growth rate of 1.3%. How Has FICC Trading Yield Changed Over The Last 10 Years? Average FICC Trading Yield = Total FICC Revenues of Banks ÷ Total FICC Trading Assets. Average FICC Trading yield was highest in 2009 at 6% due to massive sell-off of FICC trading assets by banks in the aftermath of the subprime mortgage crisis. After all, mortgage-backed securities (MBS) played a big role in triggering the downturn. The yield gradually decreased over 2010-2012 and was around 4.1% in 2012 which was driven by high economic uncertainty in the wake of the European debt crisis and low client activity. The figure recovered over 2013-2015, but spiked to the unusually high level of 5.3% in 2015 as the investment banks reduced their exposure to debt securities due to negative market outlook. The yield decreased in subsequent years to 3.9% in 2018 and is expected to be around 3.6% over coming years. The green-to-red shading for figures along a column shows the variations in FICC trading asset base and FICC trading revenues for the top 5 US investment banks in a particular year. Key Revenue Observations Over The Last Decade (2009-2018): Total FICC Trading revenue was highest in 2009 ($78.3 billion) and lowest in 2018 ($43.5 billion). The average annual revenue over this period was $52.5 billion. JPMorgan has shown strongest performance among its peers with highest average annual revenue of $14.5 billion. However, Goldman Sachs recorded highest annual revenue of $21.9 billion in 2009. Morgan Stanley remains the weakest performing bank in FICC Trading with lowest annual revenue of $2.4 billion in 2012 and lowest average annual revenue of $4.8 billion. This can be attributed to the bank’s decision to focus its efforts primarily in the equity trading market (where it is the market leader). Do not agree with our forecast? Create your own forecast for by changing the base inputs (blue dots) on our interactive dashboard. What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams |  Product, R&D, and Marketing Teams All Trefis Data Like our charts? Explore  example interactive dashboards  and create your own
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    Did Cloud Revenues Arrest The Decline In Oracle's Top Line Over Fiscal Q4?
  • By , 6/14/19
  • tags: ORCL AMZN GOOG MSFT ADBE IBM CRM VMW
  • Oracle (NYSE:ORCL) will report its fiscal Q4 and full year 2019 results on Wednesday, Jun 19. The company has delivered results that have exceeded market’s expectations the last couple of quarters. However, the growth in cloud revenues is yet to fulfill the promise of completely offsetting the decline in legacy businesses. While Larry Ellison has maintained that the current year should see an inflection, investors will be looking for cues around conversion of interest seen in Q3 into actual sales. Per Trefis estimates, Oracle’s shares have a fair value of $52, which is slightly below the current market price. Our interactive dashboard on Oracle’s Fiscal Q4 Expectations outlines our forecasts and estimates for the company. You can modify any of the key drivers to visualize the impact of changes on its valuation. Additionally, you can see more Trefis  technology company data here . A Quick Look At Oracle’s Revenue Sources Oracle earns money through the sale of enterprise software and associated hardware. The company had launched its Gen 2 cloud and Autonomous database in order to increase the ‘as a service’ component in its offerings. The company reported $39.8 billion in total revenues for fiscal 2018, spread out across 4 reporting divisions: Cloud services and license support (2018 revenue of $26.3 billion, 66% of total revenue): Segment revenues are derived from the sale of subscription for Oracle Cloud Services and product upgrades. Cloud license and on-premise license (2018 revenue of $6.2 billion, 15.5% of total revenue): Segment revenues are derived from the sale of software licenses to be used on-premise or in the cloud. Hardware (2018 revenue of $3.4 billion, 8.5% of total revenue): Segment revenues are derived from the sale of hardware products and related software. Services (2018 revenue of $4 billion, 10% of total revenue): Segment revenues are derived from the sale of consulting and technical support services. Summarizing Fiscal Q3 Performance, And Highlighting Our Expectations For Q4 and Full-Year 2019: Cloud services and license support: This segment has seen an increase of $4.5 billion over 2016-18. Q3 revenue grew to $6.7 billion (1.1% y-o-y). We expect Q4 revenue to grow to $6.9 billion (1.8% y-o-y), and full-year 2019 revenue to increase to $26.8 billion (2.1% y-o-y). Cloud license and on-premise license: This segment has seen a decrease of $1.1 billion over 2016-18. Q3 revenue fell to $1.3 billion (-3.7% y-o-y). We expect Q4 revenue to decline to $2.2 billion (-2% y-o-y) and 2019 revenue to decrease to $5.5 billion (-10.5% y-o-y). Hardware: This segment has remained largely level at $3.4 billion over 2016-18. Q3 revenue fell to $0.9 billion (-7.9% y-o-y). We expect Q4 revenue to decline to $1.1 billion (-1.5% y-o-y). Services: This segment has seen a decrease of $0.7 billion over 2016-18. Q3 revenue fell to $0.8 billion (-1.3% y-o-y). We expect Q4 revenue to decline to $0.9 billion (-1% y-o-y) and the figure for full-year 2019 revenue to fall to $3.3 billion (-17.6% y-o-y). We forecast Oracle’s EPS figure for full-year 2019 to be $3.57. Taken together with our trailing P/E multiple of 15x for the company, this works out to a $52 per share price estimate for the company’s stock, which is slightly below the current market price. Do not agree with our forecast? Create your own price forecast for Oracle by changing the base inputs (blue dots) on our interactive dashboard .
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    After An Impressive Start To The Fiscal Year, How Is Lululemon Athletica Expected To End FY-2019?
  • By , 6/13/19
  • tags: LULULEMON LULU GES LB UA
  • Lululemon Athletica (NASDAQ: LULU) released its Q1 2019 financial results on June 12, 2019, followed by a conference call with analysts. The company beat consensus estimates for both revenue as well as earnings. LULU reported revenue of $782.3 million in Q1 2019, marking a growth of 20.4% over Q1 2018. Higher revenue was driven by comparable store sales growth of 6% and a whopping 33% increase in direct-to-consumer net revenue during the quarter, along with net opening of 15 new stores, higher customer traffic, better conversion rates, and growth in the wholesale business. However, on a sequential basis, revenue declined by 33% due to the seasonality factor, as revenues are highest in the fourth quarter of a year owing to the holiday season. Earnings came in at $0.74 per share in Q1 2019, much higher than $0.55 per share in the year ago period, primarily driven by lower product costs, favorable mix of higher margin products, and a decrease in the effective tax rate. You can view the key announcements in Trefis’ interactive dashboard – How did Lululemon fare in Q1 2019 and what is the full year outlook? In addition, here is more  Trefis Consumer Discretionary Services data. A Quick Look At LULU’s Revenue Segments Lululemon reported total revenue of $3.29 billion in FY 2018. Key revenue segments are: Company-operated stores:   $2.13 billion revenue in FY 2018 (65% of total revenue). This includes sale of yoga wear, running apparel, training apparel, and sports-wear for women from the company’s retail stores. Direct to consumer:   $0.86 billion revenue in FY 2018 (26% of total revenue). This includes the net revenue generated from e-commerce website www.lululemon.com, other country and region-specific websites, and mobile apps, including mobile apps on in-store devices that allow demand to be fulfilled via the distribution centers or other retail locations. Other:   $0.3 billion revenue in FY 2018 (9% of total revenue). This includes sales from temporary locations, sales to wholesale accounts, showrooms, through license and supply arrangements, and warehouse sales. A] Revenue Trend Company-Operated Stores Store revenue increased by 17% (y-o-y) to $506.4 million in Q1 2019, mainly due to 44 net new lululemon branded company-operated stores opened since Q1 2018, spread across North America, Asia, Europe, and Australia/New Zealand. Additionally, comparable store sales increased 6% (y-o-y) in Q1 2019, driven by increased store traffic. Direct-To-Consumer Direct-to-consumer sales increased by 33% (y-o-y) to $209.8 million in Q1 2019, primarily due to increased website traffic. With increased digitization and higher traffic on the company’s website and mobile apps, the contribution of digital sales to total revenue increased from 24.3% in Q1 2018 to 26.8% in Q1 2019. Other Revenue Other revenue increased 12% (y-o-y) to $66 million in Q1 2019, driven by an increased number of temporary locations, including seasonal stores, increase in net revenue from existing outlets, and sales to wholesale accounts. B] Total Expense and Profitability Trend On an absolute basis, total expenses have witnessed a rising trend due to an increase in cost of sales and SG&A expense, along with higher tax outgo. However, as a % of revenue, LULU has been able to manage its expenses efficiently. Cost of Goods Sold: Cost of sales increased in Q1 2019 due to higher expenses related to product department and distribution centers, unfavorable foreign exchange, and higher occupancy and depreciation cost. However, cost of sales as a % of revenue decreased by 80 basis points due to increase in product margin, driven by lower product costs, a favorable mix of higher margin product, and lower markdowns. SG&A: SG&A cost increased by 22% (y-o-y) in Q1 2019, driven by higher employee cost, packaging cost, digital marketing expenses, branding cost and expenses related to new operating locations. SG&A as a % of revenue increased by 40 basis points during the quarter. Effective Tax Rate: The effective tax rate declined from 29.9% in Q1 2018 to 26.4% in Q1 2019, driven by an increase in tax deductions related to stock-based compensation. Net income margin witnessed an increase to 12.3% in Q1 2019, compared to 11.6% in the year-ago period. Higher profitability was driven by better cost management and higher revenue growth. Full Year Outlook For the full year, we expect revenue to increase by about 14.6% to $3.77 billion in FY 2019. Higher revenue is likely to be driven by an increased focus on digital penetration, higher customer traffic, strong comparable store sales in the retail business, along with investment in improving the company’s brand image. Net income margin is expected to increase from 14.7% in FY 2018 to 15% in FY 2019, driven by a focus on high-margin brands, lower markdowns, and lower product cost. Trefis has a price estimate of $183 per share for LULU’s stock. We believe that impressive revenue growth trends, aggressive expansion of its digital ecosystem, strong same-store sales growth, focus on high margin brands and rising profitability, coupled with an increasing focus on enhancing shareholder returns through buybacks, would likely provide support to LULU’s stock price going forward.   Do not agree with our forecast? Create your own forecast for Lululemon Athletica by changing the base inputs (blue dots) on our interactive dashboard.   What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams All Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
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    How Does China Mobile's Wireline Broadband Business Compare With Its Peers?
  • By , 6/13/19
  • tags: CHL CHA CHU
  • China Mobile  (NYSE:CHL) has quickly grown to become one of the largest broadband providers in China, in terms of number of subscribers, with its total user base standing at about 168 million as of April 2019. The growth of this business is crucial for the company as revenue from its core mobile operations have remained sluggish (CAGR of under 2% over the last 3 years). In this analysis, Trefis compares and contrasts China Mobile’s key wireline broadband metrics with its rivals and also examines how the business impacts its overall earnings and stock price. View our interactive dashboard analysis  How Does China Mobile’s Wireline Broadband Business Compare With Its Peers? China Mobile’s Wireline Broadband Subscriber Base Expanding Faster Than Rivals China Mobile’s wireline broadband base grew at a CAGR of about 42% over the last 3 years, as it expanded its coverage area. This compares to a growth of about 9% and 4%, respectively, for China Telecom and China Unicom. How Do China Mobile’s Wireline Broadband Revenues Compare With Rivals? Wireline broadband revenues stood at about $8 billion in 2018, compared to levels of around $11 billion for China Telecom and $6 billion for China Unicom. China Mobile’s Growth Has Been Coming At The Expense Of ARPUs China Mobile’s average revenue per user (ARPU) is significantly lower than its rivals, coming in at about $4.40/month in 2018, versus about $6.50 for its rivals. However, we expect the metric to trend higher, driven by higher broadband speeds and growing Fiber to the home (FTTH) penetration. How China Mobile’s Wireline Broadband Business Impacts Its Stock Price Step 1: Estimating China Mobile’s Wireline Broadband Revenue Step 2: Estimating China Mobile’s Total Revenue Step 3: Estimating Net Income Step 4: Calculating China Mobile’s EPS Step 5: Arriving At Price Estimate We are valuing the company at about 12x its projected 2020 results.   What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams More Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.  
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    Can Amazon's Advertising Revenues Reach $60 Billion in 5 years?
  • By , 6/13/19
  • tags: AMZN BABA GOOG BIDU FB EBAY MSFT
  • Amazon’s  (NASDAQ:AMZN) advertising revenue growth over recent years, while logical, has come as a surprise to most. After all,  Amazon is one of the world’s largest retailers, and its retail business has been dominated by its e-commerce site, where GMVs have consistently risen. While Google and Facebook usually helped customers discover products they might be interested in, Amazon focused almost completely on fulfilling the demand for those products till a couple of years ago. But Amazon has capitalized on the need to help discovery of products on its e-platforms over recent years – allowing it to nearly double its advertising income in each quarter of 2018. Amazon’s access to an enviable trove of customer transaction data, one of the world’s largest spread of SKUs and a large customer base is likely to help the company’s advertising business grow rapidly over coming years. Considering the levers that Amazon has, Trefis estimates that  Amazon’s U.S. advertising business could potentially reach $60 billion by 2024 . Amazon’s revenue from the U.S. have been increasing steadily. We expect this contribution to continue growing over the next few years, leading to advertising revenues from the U.S. potentially reaching $60 billion by 2024. As we highlight in the chart below, Amazon’s U.S. online advertising revenues could grow at a CAGR of 43% over the next five years.   We recently published an interactive dashboard on the size and growth expectations of the U.S. online advertising market . As a part of that article, we highlighted that the U.S. online advertising market could reach $259 billion by 2024 from 108 billion in 2018, at a CAGR of 16%. This implies that Amazon can potentially grab a 23% share of the U.S. online advertising market – up from just 6.5% now . Also, based on our fundamental analysis of Amazon’s business, we expect the company’s total revenue growth rates to begin declining due to the base effect. Despite slower year-on-year growth, Amazon’s revenues could swell to over $660 billion by 2024 from $233 billion in 2018 at a CAGR of 19%. We note that Amazon does not break out its advertising revenue as a part of its reported numbers. However, the company’s ‘Others’ segment has been disclosed to contain mostly advertising revenues. We thus project the ‘Others’ revenue for Amazon to capture our expectations of growth based on the growth of the company’s consumer businesses. We expect Amazon’s Others revenues to reach $79 billion by 2024 from $10 billion in 2018, at a CAGR of just over 40%. With $60 billion of this number attributable to U.S. advertising as highlighted above, the remaining figure of $19 billion includes international advertising revenues along with all other non-advertising revenues for the company. Do not agree with our forecast? Create your own forecast for Amazon’s U.S. Online Advertising Business by changing the base inputs (blue dots) on our interactive dashboard.
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    What Is Driving Our $64 Price Estimate For Las Vegas Sands?
  • By , 6/13/19
  • tags: LVS MGM WYNN
  • Las Vegas Sands (NYSE:LVS) reported $6.8 billion in gaming revenues from Macau in 2018, making it the largest concessionaire in Macau with a market share of 19%. The company’s stock gained 20% during the rally in 2018 and eventually also fell by a similar level this year, primarily due to investor concerns around the impact of the ongoing U.S.-China trade war. Per Trefis estimates, Las Vegas Sands has a fundamental value of $64 per share . We recently lowered our price estimate from $78 to the current level of $64, and highlight the drivers of this stock and rationale behind lowering of our forecasts below. You can view our interactive dashboard on How Has Las Vegas Sands Fared In Recent Quarters, And What’s The Outlook For 2019?  to observe the quarterly revenue trends and modify yearly forecasts to gauge the impact on the stock price. Additionally, you can find more Trefis  Consumer Discretionary sector data here. A Quick Look at Las Vegas Sands Revenue Sources Wynn reported $13.7 billion in Total Revenues for full-year 2018. This included five revenue streams: Casino: $9.8 billion in FY2018 (72% of Total Revenues). This segment includes income from regulated gambling activities at the company’s properties. Macau and Singapore properties contribute 69% and 22% of the casino revenues, respectively. Rooms: $1.7 billion in FY2018 (13% of Total Revenues). This segment includes income from visitors/tourists who take a lodge in the company’s properties. Macau, Las Vegas, and Singapore properties contribute 42%, 35%, and 23% of the room revenues, respectively. Food and Beverage: $865 million in FY2018 (6% of Total Revenues). This segment includes income from restaurants at the company’s properties. Mall: $690 million in FY2018 (5% of Total Revenues). This segment includes income retail stores at the company’s properties from rentals and retail sales. Convention, Retail and Other: $622 million in FY2018 (5% of Total Revenues). This segment includes income from business conventions at the company’s properties. Factors Behind Our Share Price Revision The combined rolling chip volume (or VIP turnover) of Venetian Macau, Sands Cotai Central, and Parisian Macau dropped by 10% y-o-y in Q1. These three venues contributed 84% of the Sands’ casino revenues from Macau last year. The declines were largely attributed to Chinese foreign currency regulations and smoking restrictions earlier this year. Hence, for the full year, we expect the VIP turnover in Macau to drop by 20%, as Sands has the largest share with 5 properties in Macau. The non-rolling chip volume and slot handle (or mass market volume) observed a moderate growth in Q1 despite an overall decline in gaming revenues in Macau. For the full year, we expect the mass market segment to grow at 8-10%. This segment will remain the key driver of revenue growth over coming years due to the increasing popularity of mass market games in China. The three American concessionaires, Wynn Resorts, Las Vegas Sands, and MGM Resorts  together have a 40% share of Macau’s gaming revenues. While we believe that the ongoing U.S.-China trade dispute is unlikely to affect the American companies too much in the near term, it could potentially hurt Macau’s popularity in the long run. What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams More Trefis Data Like our charts? Explore  example interactive dashboards  and create your own
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    How Much Is Freeport-McMoRan Expected To Add To Its Copper Revenue In The Next 5 Years?
  • By , 6/12/19
  • tags: FCX NEM GOLD VALE
  • In spite of short-term operational concerns at its Grasberg mine in Indonesia, and global copper price volatility due to re-escalation of the US-China trade war, Freeport-McMoRan (NYSE: FCX) is betting big on the expected boom in electric vehicle sales to drive demand for copper in the medium term. As per Trefis’ estimates, FCX is expected to add over $4.5 billion to its copper revenue over the next five years. Additional revenue is likely to be driven by strong growth in end markets (electric vehicles, building construction, etc.), pick up in global copper shipments, and expected improvement in copper prices beyond 2019. You can view our interactive dashboard – How Much Is Freeport-McMoRan Expected To Add To Its Copper Revenue In The Next 5 Years? – and modify the key drivers to arrive at your own volume, price and revenue estimate for the company. In addition, here is more  Materials data . Historical Shipment and Revenue Trend Vis-à-vis End Market Performance FCX’s copper shipments have largely trended upward over the last 5 years, driven by growth in its two primary end markets – electric vehicles and building construction. Though EV sales registered strong growth over the last couple of years, FCX’s copper shipments dropped in 2017 due to internal operational issues and lower ore grades mined. However, volume increased in 2018 driven by higher grades and favorable end market demand. FCX’s copper revenue has steadily increased from 2015 to 2018, adding about $2.4 billion in revenues during these four years. Forecasting Global Copper Market Shipments Trefis estimates global electric vehicle sales to increase from 2.1 million units in 2018 to 6 million units by 2023, registering a CAGR of 23%. With an average usage of about 300 pounds per EV, the total copper shipments to EV manufacturers is expected to triple from the current level to 1.8 billion pounds over the next five years. With many developed as well as developing countries being keen on expanding their EV footprint, the market would likely be the fastest growing end market for copper companies, with a contribution of 6% of total global copper demand. Strong growth in this segment is expected to lead to the global copper shipments increasing almost 3x to 30 billion pounds by 2023. Forecasting FCX’s Copper Shipments Over the Next 5 Years With the ongoing transition of the company’s Grasberg mine in Indonesia, from open pit to underground, copper production from the region is expected to be negligible over the next two years. This is expected to adversely affect total shipments in 2019 and 2020 as Grasberg contributes about 30% of FCX’s copper volume. However, restarting of production in Indonesia in 2021, and continuing growth in production at the North and South American sites, FCX’s total copper shipments are expected to increase from 3.8 billion pounds in 2018 to 4.8 billion pounds in 2023. Price Realization FCX’s copper price realization has moved in tandem with global copper price levels historically. Prices have remained under pressure through 2018 due to the US-China trade war. With the re-escalation of trade tensions, copper prices have fallen from $2.95/pound in April 2019 to below $2.70/pound currently. We expect price realization to remain subdued in 2019 at about $2.75/pound and increase gradually with a rise in copper demand to $3.25/pound over the next five years. Forecasting Freeport’s Copper Revenue Higher copper shipments and better price realization is expected to help FCX increase its copper revenue from $11.1 billion in 2018 to $15.6 billion in 2023. Thus, as per Trefis’ estimates, Freeport-McMoRan is expected to add about $4.5 billion to its copper revenue over the next five years. Trefis has a price estimate of $14 per share for FCX’s stock, higher than its current market price. About 76% of the company’s value is being driven by its copper segment.   What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams More Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
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    What To Expect From Intel's Data Center Business In The Near Term?
  • By , 6/12/19
  • tags: INTC AMD NVDA
  • Intel’s  (NASDAQ:INTC) Data Center Group segment accounts for 40% of the company’s value, according to Trefis estimates. The segment generated revenues of $23.0 billion in 2018, accounting for 32% of the company’s total revenues, and a growth of 21% over the prior year. This can be attributed to a continued uptick in sales of its Xeon scalable processors. In this note we discuss the expected performance of the company’s Data Center Group in the near to medium run. You can view our interactive dashboard analysis on ~  What’s Driving Our $51 Price Estimate For Intel?  ~ for more details on the expected performance of the company. In addition, you can see more of our data for  information technology companies here . Intel’s Data Center Group segment includes revenue from the sales of processors and chipsets designed for the enterprise, cloud, communications infrastructure, and technical computing segments.  The company’s share in the global data center total available market was around 33% in 2018. Of late, AMD has been gaining share from Intel in desktops, notebooks, as well as the server markets, led by its Ryzen and EPYC processors. In fact, AMD has managed to gain close to 2% market share (y-o-y) in servers as of Q1 2019. The overall data center market demand slowed in the recent past, primarily in China, and this impacted Intel’s Q1 segment sales. While the company faces near term demand headwinds, the segment could see growth rebound in the medium to long run. In fact, the total available data center market is expected to grow at a CAGR of 6.5% to $90 billion by 2022. While the company’s Xeon scalable is the market leader, AMD’s EPYC Rome architecture could pose a further threat with its strong performance . Intel cut its Data Center Group revenue forecast for the full year 2019, and it now expects the sales to be down in mid-single-digits, due to weakened demand from China, and inventory absorption. The figure for the full year could be around $21.6 billion, in our view. While the company could see revenue grow in the medium term run to north of $25 billion by 2022, it could translate into a 5% loss of market share to 28% from 33% currently. The market at large will likely benefit from growth in cloud computing, which will result in increased sales of bigger, faster, and higher-end servers at the expense of cheaper ones.   What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams All Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
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    What's Driving Our $165 Price Estimate For Motorola Solutions?
  • By , 6/12/19
  • tags: MSI ERIC NOK
  • Motorola Solutions  (NYSE:MSI) has seen its stock price rise by over 40% this year, driven by improving earnings, growing LMR business, and expanding software sales. Trefis is increasing its price estimate for the company to about $165 per share, which is slightly ahead of the current market price. Below, we provide our expectations of the company’s key divisions and the rationale driving our price estimate. View our interactive dashboard analysis on  What’s Driving Our $165 Price Estimate For Motorola Solutions? Products Division Will Benefit From LMR Growth, New Acquisitions The company’s products business has been expanding, driven by higher land mobile radio (LMR) sales in North America and the EMEA region, as well as due to its acquisition of video surveillance cameras maker Avigilon. We expect the LMR business to continue to expand, driven by the company’s increasing focus on software and platforms, which increase switching costs. The Avigilon business should also grow, as the company cross-sells these products to its commercial and government customers. Moreover, the current re-escalation of the trade dispute between the U.S. and China could give Avigilon a boost versus Chinese companies – who play a significant role in the North American surveillance hardware market. Software & Services Business Will Outgrow Products Motorola’s services and software revenues have been expanding driven by the company’s end-to-end offerings such as command center, its growing installed base of systems, and increasing focus on offerings such as command center. The company has also been making acquisitions to drive the software business. Earlier this year, it acquired VaaS, a provider of AI-driven image capture and analysis technology for vehicle location, in order to expand its command center software portfolio. The focus on this software could help the company cross-sell radio and video surveillance products as well, as it ties them together as a single platform, potentially also improving stickiness.   MSI’s software business grew at a CAGR of about 13% over the last 3 years, versus a CAGR of under 7% for Products. We expect software sales as a % of product sales to be about 70% by 2020, up from 64% in 2018. Estimating Net Income A growing mix of software sales could bode well for Motorola Solutions margins. Estimating EPS EPS should grow to close to $9 by 2020, driven by expanding earnings and the company’s share repurchase program. Calculating Price Estimate We are valuing the company at about 19x projected 2020 EPS.   What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams All Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
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    Revenues For UBS's Wealth Management Business Could Cross $19 Billion In Five Years
  • By , 6/12/19
  • tags: UBS CS JPM
  • UBS’s  focus on its cornerstone wealth management business significantly increased after the financial crisis. After the economic downturn, the financial giant decided to cut back its investment banking activity and increased its focus on the wealth management business in view of stricter regulatory requirements. Additionally, in 2011 UBS was hit by the rogue trader scandal which resulted in a $2-billion trading loss – forcing the bank to reorient itself around wealth management and limiting its sell side operations. Trefis has summarized the changes in the bank’s wealth management business in its interactive dashboard – How Has UBS’s Wealth Management Business Changed Over The Last 10 Years, And What’s The Forecast Over The Next 5 Years?    Additionally, you can see more Trefis data for financial services companies here .  How Has UBS’s Revenue Composition Changed Over The Last Decade And What’s The Forecast? A timeline of change in UBS’s revenue composition: 2006 : Before the 2008 recession, Wealth Management (WM) and Trading Revenues contributed equally (around 35% ) to UBS’s total revenues. 2014 : After 2012, UBS significantly reduced its trading operations and increased its focus on the wealth management business. As evident from 2014 numbers, UBS was largely successful in overhauling its business model, with WM’s contribution to total revenues increasing to 53% while trading revenues fell to just  18%  of total revenues. 2018 : Wealth management now accounts for more than 55% of UBS’s total revenues while Trading division’s contribution has remained stable around 18%. Trefis projects wealth management’s contribution to remain stable around 55% over the next few years.  This represents an increase in these revenues from just under $17 billion in 2018 to $19.2 billion in 2024. How Has UBS’s Wealth Management Business Evolved Since The Economic Downturn? An increase in the number of high net-worth individuals, as well as an increase in their assets, has helped UBS increase its client assets from around $1.6 trillion in 2006 to over $2.2 trillion in 2014 . Upbeat market conditions coupled with new money inflows helped this figure reach $2.3 trillion in 2018, although a reduction in valuation across asset categories weighed on the client base in late 2018. Moreover, UBS increased its foothold in the Asia-Pacific region over the last decade, as individual wealth for Asian citizens grew at a faster pace than their European counterparts. As a result, Asia’s contribution to UBS’s client assets grew from around 7% in 2006 to more than 15% in 2018. Trefis expects this contribution to reach around 17% in 2024. UBS’s fees have remained around 0.8 % of client assets over the last 15 years, as an increase in asset base has been accompanied by a similar increase in revenues. Trefis expects the average fees to remain around 0.7% over coming years . How Do Changes In UBS’s Wealth Management Business Compare With That For Peers? UBS’s focus on wealth management business since the economic downturn has helped its contribution to total revenues to increase from less 35% in 2006 to more than 55% in 2018 . Swiss banking giant Credit Suisse has also focused on expanding its wealth management business over the years. Credit Suisse’s wealth management business now contributes 40% of its total revenues as compared to less than 30% before the financial crisis. However, the largest American bank JPMorgan has a much more diversified business model and has been able to achieve growth on all fronts since the downturn – especially since it added Bear Stearns investment banking operations to its own in 2009. As a result, contribution of its Wealth Management business to its total revenues has largely remained stable around 12%. What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams More Trefis Data Like our charts? Explore  example interactive dashboards  and create your own
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    Wynn's Shares Look Considerably Undervalued Despite Expected Macau Headwinds This Year
  • By , 6/12/19
  • tags: WYNN MGM LVS
  • Wynn Resorts (NASDAQ: WYNN)  has seen its stock tumble more than 20% over the last month primarily due to concerns about the impact of the ongoing U.S.-China trade war on the company’s extremely profitable Macau operations. While the notable reduction in Macau revenues for Q1 point to near-term headwinds for the casino giant, we believe that investor concerns are overblown. Per Trefis estimates, Wynn’s shares are very undervalued and have a fair value of  $143 per share . We detail our views in the interactive dashboard:  How Has Wynn Resorts Fared In Recent Quarters, And What’s The Outlook For Full-Year 2019?  You can modify key revenue and expense forecasts for the company on the dashboard and observe the impact on its stock price. Additionally, you can find more of our Consumer Discretionary sector data here. A Quick Look at Wynn Resorts’ Revenue Sources Wynn reported $7.7 billion in Total Revenues for full-year 2018. This included four revenue streams: Casino: $5.5 billion in FY2018 (72% of Total Revenues). This segment includes income from regulated gambling activities at Wynn properties. Macau and Las Vegas properties contribute 90% and 10% of the casino revenues, respectively. Rooms: $843 million in FY2018 (11% of Total Revenues). This segment includes income from visitors/tourists who lodge in Wynn properties. Macau and Las Vegas properties contribute 35% and 65% of the room revenues, respectively. Food and Beverage: $867 million in FY2018 (11% of Total Revenues). This segment includes income from restaurants at Wynn properties. Macau and Las Vegas properties contribute 25% and 75% of the Food and Beverage revenues, respectively. Entertainment and Retail: $491 million in FY2018 (6% of Total Revenues). This segment includes income from retail stores at Wynn properties, per different agreements. Macau and Las Vegas properties contribute 54% and 46% of the Entertainment and Retail revenues, respectively. Reasons for Our Reduction In Price Estimate From $150 to $143 The Macau Gaming revenues declined in the first quarter with a slight uptick in May. Macau observed revenue growth in the high-teens the last two years and this year it has been plagued by Chinese regulatory crackdown on foreign currency transactions and smoking restrictions in Casinos. Since the new regulations increase the Chinese government’s oversight in Macau, VIP Gaming Revenues have been hit hard with Wynn Macau and Wynn Palace reporting a 40% and 17% decline of VIP turnover in Q1, respectively. For the full year, we expect VIP turnover to decline by 10% and as the regulations get clearer, we expect VIP gaming to increase at a modest pace over coming years. In the recent quarter, the mass market segment observed a 7% and 2.2% increase in table drop at Wynn Palace and Wynn Macau, respectively. For the full year, we expect this segment to grow by 10% and continue at the same pace over the rest of our forecast period, supported by strong growth in the number of Chinese tourists to Macau. The three American concessionaires, Wynn Resorts, Las Vegas Sands, and MGM Resorts  together have a 40% share of Macau’s gaming revenues. While we believe that the ongoing U.S.-China trade dispute is unlikely to affect the American companies too much in the near term, it could significantly impact Macau’s popularity over the long run. What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams More Trefis Data Like our charts? Explore  example interactive dashboards  and create your own
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    What Would Be The Revenue Growth If Chipotle Adds 100 Stores In Europe?
  • By , 6/11/19
  • tags: CMG SBUX MCD DNKN QSR
  • Trefis estimates that Chipotle (NYSE: CMG) can add incremental revenue worth 3% of the Total by the year 2024 if they add 100 stores in Europe by then. The revenue is likely to be slower in the first 2-3 years as the brand is not yet well known in the region due to its negligible presence. We will discuss this below in detail. You can view our interactive dashboard analysis – What Would Be The Revenue Growth If Chipotle Adds 100 Stores In Europe Within The Next 5 Years?   for more details on the company’s expected performance. In addition, here is more  Consumer Discretionary data .   How have American Fast Food Chains’ Revenues grown in Europe? The fast food market has been rising in Europe as evidenced by the continuous increase in sales revenue of American chains like McDonald’s, KFC, Pizza Hut, and Taco Bell. McDonald’s has one of the highest reaches in the continent and recorded a system-wide revenue of about $25 billion in 2018. The system-wide sales revenue has grown around 9% in the last 2 years. KFC’s system-wide sales revenue has grown from around $2 billion in 2015 to around $2.9 billion in 2018. It grew at a CAGR of 13%. Pizza Hut’s system-wide sales revenue has grown from around $0.7 billion in 2015 to around $1.2 billion in 2018. It grew at a CAGR of 19%. Taco Bell has seen the highest growth among all the chains with system-wide sales revenue rising from around $21.4 million in 2015 to 132.7 million in 2018.   How has Chipotle grown over the years? Forecasting Chipotle’s Europe Revenue through 2024 if they reach an average of 100 restaurants: Chipotle has negligible presence outside the United States. Out of 2,491 restaurants operating as of 31st December 2018 only 37 restaurants are outside the United States. (23 in Canada, 7 in United Kingdom, 6 in France, and 1 in Germany) Trefis estimates, due to Chipotle’s negligible presence and considering a continuous increase in fast food consumption in Europe, it can potentially be a high growth market for the company. The risks that Chipotle might face in the first few years are: Revenue per restaurant would not be as high as its US counterparts as the brand would be quite new in the region. As the brand is relatively new the advertising and promotion cost would also be higher than what Chipotle would need in the United States.   Below, Trefis has estimated revenue that Chipotle can gain from Europe if by 2024 it reaches an average of 100 restaurants in the continent.   If by 2024 Chipotle reaches an average of 100 restaurants in Europe, the revenue contribution from it would still be less than 3% of the Total due to the substantially high presence in the US.  Trefis estimates that if Chipotle can generate this foothold in Europe by 2024, then the potential to grow in that market could be high.     What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams More Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.  
    BSX Logo
    How Much Can Boston Scientific's Cardiac Rhythm Management Business Grow In The Near Term?
  • By , 6/11/19
  • tags: BSX MDT ABT
  • Boston Scientific’s  (NYSE:BSX) Cardiac Rhythm Management business accounts for roughly 20% of the company’s value, according to Trefis estimates. It includes products such as pacemakers and implantable cardioverter defibrillators (ICDs) that are used to treat abnormal heart conditions. Cardiac rhythm management revenues of $1.95 billion in 2018 accounted for 20% of the company’s total sales, and a growth of 3.0% over the prior year. The growth in last year was higher than the CAGR of 0.7% (2014-2018).  This can be attributed to higher demand for its Resonate family of devices. The business grew at 3% even in Q1, 2019, led by the Resonate platform as well as strong growth of the Emblem defibrillator, which is a subcutaneous implantable defibrillator that provides protection for patients at risk for sudden cardiac death while avoiding risks and complications associated with transvenous leads. Looking forward, the business is expected to grow in low single-digits, primarily led by the Resonate product line. However, any significant growth is unlikely given the competition. Other players, such as Abbott, have been able to stabilize their rhythm management business. Medtronic’s Micra also got the U.S. FDA approval, and it is the smallest pacemaker available in the market. Increased competition could limit the segment growth for Boston Scientific. While the global cardiac rhythm management devices market is expected to grow at a CAGR of 7.80% over the next few years, Asia-Pacific is expected to grow at the fastest pace. Asia-Pacific contributed only 17% to Boston Scientific’s overall sales in 2018. It will be interesting to see how the market expansion could bode for Boston Scientific in the medium run. You can view our interactive dashboard analysis ~ How Did Boston Scientific Fare In Q1, And What Can We Expect From Full Year 2019? for more details on the key drivers of the company’s expected performance. In addition, you can see more of our data for Healthcare companies here .   What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams All Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.