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Investors leverage our research to quickly see what really drives a company's value, test what-if scenarios, and make better investment decisions. At the core of each piece of content is a rigorous and deep analytical model, but what makes our research different is the Trefis Interactive Experience. The Trefis Interactive Experience transforms those analytical models into a format that lets you drill down into the data and create your own "what-if" scenarios. We cover hundreds of large-cap stocks and our content is trusted by millions of investors and executives globally on numerous leading online brokerage platforms, as-well-as on platforms such as Thomson Reuters and Forbes.


COMPANY OF THE DAY : ORACLE

Oracle reported its Q3 earnings last week, with FX fluctuations continuing to weigh on revenue growth.

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FORECAST OF THE DAY : COCA COLA'S ASIA PACIFIC REVENUES

Coca Cola's Asia Pacific Revenues continue to see solid growth, driven by favorable market conditions and the company's strong market position.

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RECENT ACTIVITY ON TREFIS

F Logo
How Does Europe Revenues Affect Ford's Valuation?
  • By , 3/20/19
  • tags: F DDAIF GM HMC HOG LEA TM TTM VWAGY
  • Ford Motors (NYSE: F) reported its full year results for Fiscal Year 2018 in January. The company generated $160 billion in revenue and $0.92 in Non-GAAP EPS. Ford’s higher-than-expected earnings has boosted investor confidence. The company is taking important and decisive actions to resolve under-performance. Some of these, for example, they decided to phase out of sedans in the US market, restructuring in Europe, and plan to take China to a profitable growth. We have a price estimate of $11 for the company. Today we discuss How Important Is Europe For Ford?  through our interactive dashboard. In addition, here is more  Consumer Discretionary data . Ford recently announced restructuring of its Europe business even after going through a strong product refresh in 2018. In the region the company plans to leverage their profitable light commercial van and pickup business while simultaneously reduce cost and improve capital efficiencies. The company recently announced that there will be a more targeted vehicle lineup in Europe which will help with the cost efficiencies. Further, the company recorded a 5th consecutive year of growth in share of light commercial vehicle business in Europe and is targeting the top position in 2019. All things considered, we believe that the company is finely poised in the region. So we created a scenario analysis to ascertain how much does the Europe business contribute to Ford’s valuation if the revenues from the region are 50% less and Nil so as to determine the importance of the segment to the share value of the company. In case the company’s presence in the region is halved, and thus the revenue from the region is 50% of the current estimate, the price estimate falls down to $8, down by 28% from current Trefis Price. In the second case, if there is no presence of Ford in Europe, then the price estimate falls down to $5, down by 58% from current Trefis Price. Note: We have assumed reduction in indirect expenses and other expenses in the scenarios, and we haven’t assumed any closure costs as here we are seeing the situation as “what would it be if the company had no presence,” and not “what would it be if the company shut down the existing operations.”   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.
    GPS Logo
    Gap's Old Navy Spin-Off News Overshadowed Mixed 2018 Performance
  • By , 3/20/19
  • tags: GPS
  • Gap Inc (NYSE: GPS) recently announced its plan to separate Gap Inc. into two independent publicly traded companies – an independent Old Navy, and a yet-to-be christened new company (“NewCo”) that would include Gap brand, Athleta, Banana Republic, Intermix and Hill City. Further, the company expects the separation will be effective through a spin-off to Gap Inc. shareholders which is intended to generally be tax-free for U.S. federal income tax purposes. This news largely overshadowed the company’s soft showing in Q4, reported in late February, as its Gap Global brand continued to struggle, delivering a 5% comp decline, while the overall comp sales in the quarter were down 1%. Gap Inc’s comp sales for the year were flat compared to positive 3% last year. However, Old Navy and Athleta continued to perform well in fiscal 2018, delivering positive comparable sales. We currently have a price estimate of $34 per share for GPS, which is significantly ahead of the current market price, and does not currently account for the spin-off. We have summarized our full year expectations for GPS, based on the company’s guidance and our own estimates, on our interactive dashboard  GPS’ 2018 Financial Performance . You can modify any of our key drivers to gauge the impact changes would have on its valuation, and see all Trefis Consumer Discretionary Services company data here. Key Takeaways From Gap’s 2018 Financial Performance: Old Navy Continues To Thrive Old Navy continued its impressive performance in fiscal 2018, delivering comp growth of 3%. The brand accounts for nearly half of Gap’s overall revenues, and saw its revenues surge by 8% to reach $7.8 billion in 2018. Revenue per square foot also increased by 3% to $417, as Old Navy continues to operate at higher margin rates as compared to other Gap brands. Further, Gap opened more than 75 Old Navy stores in 2018 as demand for the brand continued to rise. However, the company’s management feels the brand remains under-penetrated when compared with its peers, and we expect the increasing store count to help improve its market share and revenues. Gap Global Continues To Struggle Gap Global’s comp sales were down by 5% in 2018 as compared to negative 1% last year. The brand has consistently struggled and delivered negative comp growth in the last five years. Total revenues for the brand were flat compared to last year, though revenue per square foot increased by 4%. Gap brand continues to work through its brand revitalization and restructuring as it closed down more than 90 stores in 2018. The company expects to close an additional 230 stores over the next two years, as management remains focused on reviving the Gap brand. Revival Of Banana Republic Fiscal 2018 was a year of progress for Banana Republic, as the brand achieved positive comp growth (for the first time in the last 5 years) and saw a 120 basis point product margin expansion. Margin expansion was achieved as a result of reduced expenditures on promotional activity. However, this adversely impacted consumer traffic but helped in improving the overall profitability of the brand.  The brand’s market share improved across pillar categories and we anticipate the rejuvenated Banana Republic’s market share and profitability to further improve in the foreseeable future. Athleta The “Athleisure” segment remains a major growth driver for the apparel industry. Sales in this category continue to grow, and the U.S. market is estimated at around $50 billion currently, with further growth expected. Gap’s Athleta delivered another strong performance in fiscal 2018, further improving its market share. Overall, the brand exceeded management’s own expectations in 2018 and remains poised for further growth in the coming years. 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 Research Like our charts? Explore  example interactive dashboards  and create your own.
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    What To Watch For In Paychex’s Q3
  • By , 3/20/19
  • tags: PAYX ADP
  • Paychex  (NASDAQ: PAYX) is scheduled to report its Q3 earnings on Wednesday, March 27. We expect the company to post EPS of approximately $0.74 and revenues of approximately $920 million, reflecting an increase of 6.3% from the year-ago quarter. Paychex has seen decent growth in sales and steady profits in the past several years, driven by growth across all major human capital management (“HCM”) product lines and professional employer organization (“PEO”) services. In Q2, the company’s total revenue grew by 7%, management solutions revenue grew a solid 5%, and PEO and insurance services revenues grew a strong 15% compared to the prior year quarter. The company’s acquisition of Oasis Outsourcing Group, the largest privately held PEO in the U.S, along with a growing client base and increasing retention ratio are likely to drive overall growth in Q3. We currently have a price estimate of $77 per share for Paychex, which is similar to the current market price. We have summarized our full year expectations for Paychex, based on the company’s guidance and our own estimates, on our interactive dashboard on  Paychex’s Expected Q3 Results . You can modify any of our key drivers to gauge the impact changes would have on its valuation, and see all Trefis Information Technology company data here. Key Indicators Likely To Impact Paychex’s Financial Performance: Paychex Continues To Achieve Inorganic Growth The acquisition of Oasis is anticipated to add $155M to $175M in total revenue for fiscal 2019, with approximately 45% of this incremental revenue expected to occur in Q3. With this acquisition, Paychex will become the second largest PEO in the U.S. by number of worksite employees served, serving more than 1.4 million worksite employees through various HR outsourcing services. The company also acquired HROI, PEO, and Lessor Group in FY2018. All of these acquisitions are likely to drive top-line growth for the company in the coming years. Revenues To Grow Across Segments Paychex’s Service revenue and revenue from interest on funds held for clients are likely to achieve consistent growth and drive future revenue and profitability for the company in the foreseeable future. Service revenue will continue to be the major driver of top line growth. Interest on funds held for clients grew by 31% in Q2, and is likely to further grow by 20% to 25% in fiscal 2019. Going forward, we expect the company to achieve sustainable growth as fundamentals for all of its revenue generating segments remain strong. 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 Research Like our charts? Explore  example interactive dashboards  and create your own.
    NSC Logo
    How Important Is Merchandise Freight For Norfolk Southern?
  • By , 3/19/19
  • tags: NSC CSX UNP
  • Norfolk Southern (NYSE:NSC) generates its revenues from its coal, merchandise, and intermodal freight. Merchandise is the largest segment for Norfolk Southern, and it accounts for roughly 60% of the total revenues. The segment includes freight from automotive, agriculture, chemicals, metals, and other construction related shipments. The contribution of merchandise freight to the company’s overall sales will likely see modest declines in the coming years, with the intermodal segment expected to grow at a faster pace. In this note we discuss the importance of the merchandise segment for Norfolk Southern. We have created an interactive dashboard ~ How Important Is Merchandise Freight For Norfolk Southern’s Stock? You can adjust various drivers to see the division’s impact on the company’s earnings. Also, here’s more  Industrials Data . Merchandise Revenues Have Seen Steady Growth Merchandise freight revenues have increased in recent years from $6.2 billion in 2016 to over $6.7 billion in 2018. The growth was led by higher volume and average revenue per carload.  2018, in particular, benefited from higher crude oil prices, which resulted in higher fuel surcharge revenue for Norfolk Southern. Looking forward, we expect a mid-single-digit growth for all of the sub-segments. Total construction starts climbed  7%  and 3% in 2017 and 2018, respectively. While the growth is expected to be slow in 2019, amid rising interest rates and higher material costs, the economy is expected to see expansion, which should bode well for the construction sector. As such, metals and construction related commodities, along with forest products, should drive the near term volume growth. It will be interesting to see the trends in automotive freight revenues. Total number of vehicles sold in the U.S. at 17.33 million last year marked the fourth highest figure. However, the same is expected to slow down in the coming years, and it could impact the overall shipments for the railroad companies. Looking at agriculture freight, the overall volume growth could be slow in the near term, given the trends in the U.S. wheat and soybean export, amid the foreign tariffs. Merchandise’s Contribution To Norfolk Southern’s EPS We use adjusted net income margin of around 24%, similar to that of Norfolk Southern overall, to arrive at $6.17 contribution to the company’s total earnings. To understand the contribution to Norfolk Southern’s stock price, we use around a 17x forward price to earnings multiple, and arrive at a $107 figure, which accounts for roughly 60% of our stock price estimate for Norfolk Southern. Our forward price to earnings multiple for Norfolk Southern is more or less around the same mark for that of the overall sector.     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.
    WPM Logo
    Could Decreasing Silver Revenue Play Spoilsport In Wheaton Precious Metals’ Q4 2018 Results?
  • By , 3/19/19
  • tags: WPM NEM GOLD FCX VALE
  • Wheaton Precious Metals (NYSE: WPM), one of the world’s largest precious metals streaming companies, is set to announce its fourth quarter results on March 20, 2019, followed by a conference call the next day. The market expects the company to report revenue of $1.9 billion in Q4 2018, 21% lower than in Q4 2017. Adjusted earnings for the quarter are expected to be $0.06 per share in Q4 2018 compared to $0.19 per share in the year-ago period. The lower revenue and EPS for the quarter is likely to be the result of lower shipments and a decline in the price of silver, slightly offset by higher gold revenue and the addition of Palladium sales in Q4. We have summarized our key expectations from Wheaton Precious Metals’ earnings announcement in our interactive dashboard – Would Wheaton Precious Metals be able to report higher revenue and margins in its FY 2018 results?  In addition, here is more  Materials data.   Key Factors Affecting Earnings Decreasing Silver Revenue: Revenue from silver is expected to decline by about 6.6% to $392 million in 2018 from $419 million in 2017, driven by lower shipments and declining prices. In its preliminary operations report, WPM reported a decrease in silver volume to 24.5 million ounces in 2018 from 24.6 million ounces in 2017, due to weaker than expected silver production at Penasquito mine and expiry of the streaming agreement related to the Lagunas Norte, Veladero, and Pierina mines in March 2018. Additionally, the termination of the previous San Dimas PMPA in mid-2018 has contributed toward lower output and is expected to lead to further reduction in shipments going forward. Price realization is also likely to be lower as silver prices declined in 2018 on the back of a stronger dollar and rising interest rates in the US, which made the greenback a much more lucrative investment option compared to precious metals. Increasing Gold Revenue: Revenue from gold is expected to increase by close to 12% to $474 million for the year 2018, compared to $424 million during the previous year. This increase is likely to be primarily driven by a 10.7% increase in volume sold. WPM’s acquisition of a new gold stream at Stillwater and the new agreement with First Majestic at the San Dimas mine would add to the gold sales and production volume. Under the new San Dimas agreement, the silver production would be converted to gold at a fixed ratio, which would, in turn, lead to higher gold volume attributable to WPM. Gold prices saw some volatility during 2018 due to a stronger dollar and rising interest rates in the US. However, toward the end of the year, prices increased with higher retail and institutional investment in the yellow metal, with many Central Banks buying gold as a hedge against rising economic uncertainty. Addition of Palladium: As per its preliminary report, WPM sold about 14.7 million ounces of palladium in 2018. We expect the company to realize a price of $1,050 per ounce sold as prices increased during the second half of the year, which benefited the company. Palladium is a new addition to WPM’s revenue streams with the company having entered into an agreement with Sibanye-Stillwater to acquire palladium at an agreed ratio of total production at the site. Higher Margins: The company’s net income margin is expected to witness a sharp increase in 2018. However, higher margins would be driven by a one-time benefit of gain from the termination of the previous San Dimas silver purchase agreement, which amounts to approximately $245.7 million. This gain would be slightly offset by higher interest expense on the back of rising interest rates and increased amount drawn under WPM’s revolving credit facility. Growth Prospects We expect the declining silver production to be completely offset by rising gold output, which would be driven by the new San Dimas agreement and Stillwater acquisition. Additionally, the company has announced the expansion of its Salobo III mine, thus ramping up its total gold production. With the addition of Palladium to its portfolio, WPM is expected to reap benefits of this diversification as palladium prices have increased sharply in the last couple of months. Thus, rising production of gold and palladium, along with a positive price outlook and expansion projects in the pipeline, is expected to support WPM’s stock price going forward. We have a price estimate of $24 for the company’s share price, which is higher than its current market price.   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.
    NKE Logo
    What To Expect From Nike’s Q3 Earnings
  • By , 3/19/19
  • tags: NKE AEO ANF
  • Nike (NYSE: NKE) is scheduled to report its Q3 earnings on March 21. We expect the company to post EPS in the ~$0.62 range and revenues of about $9.6 billion, reflecting an increase of nearly 7% from the year-ago quarter. In the trailing four quarters, the company recorded an average positive earnings surprise of 15.6% and we expect this trend to continue with the company beating consensus expectations in this quarter as well. Nike’s triple-double strategy – 2x innovation, 2x direct and 2x speed – is paying off, as evidenced by solid growth across footwear and apparel, driven by innovative platforms and strong owned and partnered digital channel in the first half of fiscal 2019. These efforts are also likely to benefit the company’s performance in Q3. The company’s stock surged by more than 30% in the past year, reaching record highs on multiple occasions. However, the unfavorable currency environment due to the global trade and geopolitical dynamics is likely to weigh on the company’s sales. We currently have a price estimate of $90 per share for Nike, which is marginally ahead of the current market price. We have summarized our full year expectations, based on the company’s guidance and our own estimates, on our interactive dashboard on  Nike’s Expected Q3 Results. You can modify any of our key drivers to gauge the impact changes would have on its valuation, and see all Trefis Consumer Discretionary Services company data here. Key Indicators Likely to Impact Nike’s Financial Performance : Nike Digital Continues To Grow In Q2 2019, Nike Digital achieved growth of 41% on a constant currency basis, and we expect this trend to continue as Nike continues to invest to expand its digital ecosystem. Nike Direct constituted approximately 29% of the company’s total revenues in 2018, with mobile contributing more than 50% of Digital commerce revenue. Nike Direct’s revenue share is expected to cross 50% in the foreseeable future as the industry shift towards digitalization. The company’s wholesale channel is also expected to grow, but at a slower pace compared to the Digital segment. Growth in International Markets, Women’s Business Nike’s North America business returned to healthy, sustainable growth in the first quarter of fiscal 2019, and the momentum continued in the second quarter of fiscal 2019, registering revenue growth of 9%. At the same time, Nike continued its pace of double-digit growth internationally, primarily driven by its growth in Greater China. Nike’s management stated that the U.S.-China trade dispute was seen to have little impact on the company’s operations in China. We expect Nike’s strong international performance to continue to drive overall growth for the company in fiscal Q3. The women’s Footwear and Apparel market is estimated at 1.5x the men’s footwear market globally, and yet today Nike’s Women’s business represents only 19% of the company’s total revenue. Although the Women’s business rate of growth outpaced the Men’s growth rate across geographies and achieved double-digit growth in Q2, we expect Nike’s Women’s business to further grow and become a larger part of the company’s operations. 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 Research Like our charts? Explore  example interactive dashboards  and create your own.
    CHA Logo
    Key Takeaways From China Telecom's 2018 Results
  • By , 3/19/19
  • tags: CHA CHU CHL
  • China Telecom  (NYSE:CHA), the smallest of the three Chinese wireless carriers, published its Q4 and full year 2018 results on Tuesday. The company’s net income for the year grew by about 14% to about RMB 21.21 billion ($3.16 billion) driven by growing wireless and wireline broadband subscriber base as well as lower equipment related costs. Below, we take a look at some of the key trends that drove the company’s results over the year. Our interactive dashboard on  What’s Driving China Telecom’s Valuation  details our forecasts and expectations for the carrier. In addition, you can see more   Trefis data for Telecommunications companies here. Wireless And Wireline Broadband Business Updates China Telecom posted the strongest subscriber growth among the three Chinese wireless players, adding a total of 53 million subscribers over the year, taking its total wireless subscriber base to 303 million. This amounts to 43.6% of the net adds in the Chinese wireless market.  The growth is being driven by the company’s move to offer larger data packs for heavy data users as well as its improving coverage (it has a total of 1.38 million base stations, an increase of about 210k year-over-year). The company saw its 4G subscriber mix rise to 80%, up from 72% a year ago, with 4G data consumption per user more than doubling to 5.5 GB per month. However, like its peers, China Telecom saw its ARPU contract, falling by around 8% year-over-year to RMB 50.5 (~$7.50) due to the government’s move to slash long-distance and roaming charges, while limiting data pricing. China Telecom’s wireline broadband business added a total of 12.3 million subscribers over the year, taking its total subscriber base to 145.8 million. The company increased the mix of FTTH users to 96% over the year. However, broadband ARPU trended lower by about 11% to RMB 44.3 (~$6.60), amid higher competition from rival China Mobile, which has outperformed the industry in terms of net adds. Capital Expenditures The company is projecting capital expenditures of RMB 78 billion ($11.6 billion) over 2019, marking an increase from the RMB 75 billion it spent over 2018. While the company’s 4G related capital expenditures will decline by about 5% year over year, it still expects to improve its 4G coverage in high data traffic areas. 4G capacity does not appear to be an issue in the interim, as the company’s 4G network utilization only stands at about 39%. The company has outlined about RMB 9 billion of its 2019 CapEx budget for expanding its 5G-related trials. Over 2018, China Telecom was carrying out outdoor 5G trials in 17 cities, with a total of over 1,000 base stations. 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.
    PFE Logo
    How Important Is Oncology For Pfizer?
  • By , 3/18/19
  • tags: PFE JNJ MRK BMY RHHBY
  • Pfizer’s  (NYSE:PFE) oncology business contributes more than 10% to its overall top line. This can be attributed to its breast cancer drug ~ Ibrance ~ which has been doing well of late, and it has a large addressable market. The contribution of oncology drugs to the company’s overall sales will likely increase in the coming years, with new compounds, such as Bavencio, getting the regulatory nod, and more drugs in its late stage pipeline. In this note we discuss the importance of oncology drugs for Pfizer. We have created an interactive dashboard ~  How Important Is Oncology For Pfizer’s Stock? You can adjust various drivers to see the division’s impact on the company’s overall earnings. Also, here’s more  Healthcare Data . Oncology Revenues Are On An Upward Trajectory Oncology revenues have seen rapid growth from close to $1.5 billion in 2012 to around $6 billion in 2018. This can be attributed primarily to the success of its two drugs ~ Ibrance and Sutent. While Sutent is a $1 billion plus drug, Ibrance generates over $4 billion in annual sales. Ibrance has been approved for the treatment of breast cancer, and is currently being tested in phase 3 for another three variants of breast cancer. The drug’s peak sales are expected to be as high as $8 billion. This is possible given that breast cancer is the most prevalent cancer type in women. Nearly 268,600 new cases of invasive breast cancer will be diagnosed in women in 2019, according to the American Cancer Society. Most of the breast cancer cases are HER2 (human epidermal growth factor receptor 2), an indication for which Ibrance has secured approval. This means that Ibrance targets a very broad set of breast cancer patients. However, last year Novartis saw its breast cancer drug Kisqali getting approvals for multiple indications. As more drugs are approved for different forms of treatment, Ibrance could face the risk of sales slowing in the coming years. For now, Ibrance is the leader in CDK 4/6 (cyclin-dependent kinase) inhibitor class in the U.S., with 90% share in terms of new prescription volume. The future growth will likely come from expansion in international markets, primarily Europe and Japan.   Oncology’s Contribution To Pfizer’s EPS We use adjusted net income margin of around 32%, similar to that of Pfizer overall, to arrive at $0.36 contribution to Pfizer’s total earnings. To understand the contribution to Pfizer’s stock price, we use around 18x forward price to earnings multiple, and arrive at a $6 figure, which accounts for roughly 15% of the company’s current stock price. Our price to earnings multiple for Pfizer is slightly above most of the other pharmaceutical companies, given the growth visibility in Pfizer’s sales from 2021, especially from biosimilars, anti-infective drugs, and a strong late stage pipeline. In fact, oncology sales contribution is expected to increase from 11% currently to close to 20% by the end of our forecast period in 2025, led by its new compounds.     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 To Expect From Seagate In Fiscal 2019?
  • By , 3/18/19
  • tags: SEAGATE STX WDC NTAP
  • Seagate Technology  (NASDAQ: STX) saw low single-digit top line growth while its adjusted earnings were up in the high twenties percent for the first half of fiscal 2019. This can be attributed to higher demand for the high capacity HDD product portfolio. However, price erosion adversely impacted the overall sales growth. There is a slowdown in overall HDD demand, and this will likely impact the company’s near term growth. We have created an interactive dashboard analysis ~  How Did Seagate Fare In Fiscal 2018, And What Can We Expect In Fiscal 2019?  You can adjust various drivers to see the impact on the company’s earnings and price estimate. In addition, here is more  Information Technology data . Expect Revenues To Decline In Mid-Single-Digits In Fiscal 2019 Seagate’s revenue growth in the first half of fiscal 2019 was primarily led by its client non-compute group, which was up in the high teens. The segment includes revenues generated by sales of hard drives for consumer electronics, including gaming consoles, along with the sales of branded external hard drives sold via the retail channels. Demand for increased capacity in gaming is aiding the segment growth. However, the overall softness in HDD demand could result in a slower growth rate for the full year. Client compute group, which includes sales of hard drives for laptops and desktops, saw sales down in mid-single-digits in H1 FY19. The overall PC market saw a low single-digit decline in shipments in calendar year 2018, marking it to be the seventh consecutive year to witness a decline in shipments. However, looking at calendar year 2019, the PC market is expected to see modest growth. Looking at the enterprise business, revenues were down in high single-digits in H1 FY19. However, the transition to higher capacity storage should drive the demand for the enterprise business. The current slowdown is likely to be more of a near-term issue, with the longer-term fundamentals of the storage market remaining strong. The near term headwinds can be attributed to the trends in NAND memory pricing, which have seen significant declines over the last year, as major vendors largely completed the transition from planar NAND to 3D NAND, boosting supply. Moreover, prices for DRAM have been trending lower, and they are expected to correct further. This has resulted in an overall reduction in pricing, but at the same time many customers are now willing to upgrade their storage capacity. For Seagate, the contribution of flash-based storage to its overall revenues is minimal, and it has thus not seen any significant impact on its top and bottom line, unlike its peers, such as Western Digital (See ~ What To Expect From Western Digital In Fiscal 2019? ). Also, the foreign tariffs imposed primarily on China have resulted in weaker demand, and the economy is seeing slower growth.  China’s growth is projected to  decelerate  from an estimated 6.6% in 2018 to 6.2% in 2019. Note that Asia Pacific accounts for half of the company’s revenues, and a slowdown in China will have an impact on Seagate’s performance as well. The company has  guided  for a slight decline in its adjusted margins, amid weaker demand. We forecast the adjusted earnings to be $4.48 per share in fiscal 2019, reflecting a decline in the high teens. Our price estimate of $52 for Seagate is based on a 12x forward price to earnings multiple.     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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    A Closer Look At The Model Y's Potential For Tesla
  • By , 3/18/19
  • tags: TSLA GM F
  • Last week, Tesla  (NYSE:TSLA) unveiled its new compact SUV, the Model Y, as it looks to reach a larger number of mainstream car buyers while catering to the fast-growing SUV market. The company will launch premium versions of the vehicle – including a long-range model starting at $47,000 and performance variant starting at $60,000 –  in the fall of 2020, while debuting the base model priced at $39,000 in spring 2021. Below we take a look at what the launch could mean for Tesla. We have created an interactive dashboard analysis that  breaks down the revenue potential of the Model Y  and how it could impact Tesla’s overall EPS by 2022. While Tesla does have a history of missing production timelines, this analysis should help users get a sense of the impact the upcoming SUV could have on the company’s financials (even if it is ultimately delayed). In addition, you can view all  Trefis Consumer Discretionary company data here. The Market For A Compact Electric SUV Could Be Significant The market for SUVs has been heating up, with light trucks (which includes SUVs)  outselling cars  by almost two to one in the United States. The compact SUV segment is particularly attractive, as sales grew by 12.6% to 3.56 million  vehicles in 2018, making it the largest auto segment in the U.S. by far. The segment is about 50% larger than the next largest segment – large pickups. The Model Y is also likely to be crucial to Tesla’s plans in the Chinese market, where the government is incentivizing EVs, with consumers showing an increasing preference for SUVs. Roughly 20% of cars sold in China are compact SUVs. Overall, Tesla CEO Elon Musk predicts that sales of the Model Y will eventually exceed those of Tesla’s three current models combined. We estimate that Tesla will be able to deliver about  250k Model Y SUVs by 2022, with a bulk of sales during the period happening in the U.S. market. This would translate into a C-SUV market share of over 6% for 2022. Production Ramp Could Be Smoother Than For The Model 3 Tesla is most likely to produce the vehicle at its Gigafactory 1 in Nevada and the upcoming Gigafactory 3 in Shanghai, China. We also believe that there is a possibility that the vehicle could be manufactured at the Fremont facility, depending on whether demand for the SUV cannibalizes sales of the Model 3. Overall, the production ramp for the Model Y could be less complex compared to the Model 3, which saw significant delays. For instance, Tesla has indicated that 76% of the parts on the Model Y will be common with the Model 3, which could ease any potential supply chain-related issues. Additionally, Tesla appears to have ironed out many issues with regard to the Model 3’s automated production process over the last year, and production levels are estimated to stand at about  5,800 cars a week presently, up from just about 500 cars per week a year ago. Tesla has also said that the number of labor hours per Model 3 declined by about 65% in the second half of 2018. A more mature and less labor-intensive production system could bode well for the launch of the new vehicle. Tesla is already taking reservations for the vehicle with a refundable deposit $2,500 (the Model 3 bookings opened with a $1,000 deposit), potentially giving the company some additional liquidity to carry out toolings and start production. Tesla May Face More Competition By The Time The Model Y Scales Up Competition in the EV market is heating up, and the Model Y will have to take on a slew of new electric vehicle launches from traditional carmakers by the time its production scales up in 2021. Manufacturers from both the luxury and mass markets are investing heavily in EVs, considering their superior performance and relatively lower mechanical complexity, and early examples indicate that they are getting the EV formula right. Volvo has indicated that it wants 50% of its vehicle sales to come from EVs over the next six years, and Jaguar has already launched the well-reviewed all-electric I-Pace SUV (related:  Reviewing Tesla’s Competitive Advantages As Jaguar Launches Well-Reviewed I-Pace ). That said, Tesla does have some inherent competitive advantages that include lower battery costs, a head start in the self-driving race (with more cars on the road logging data to improve its self-driving algorithms) as well as the brand recognition of being a pioneer in the EV market. 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 Research Like our charts? Explore  example interactive dashboards  and create your own
    ICE Logo
    Why IntercontinentalExchange Is Worth $80
  • By , 3/18/19
  • tags: ICE CME NDAQ
  • IntercontinentalExchange (NYSE:ICE) sustained its solid performance in Q4, ending 2018 on a positive note largely due to strong top- and bottom-line growth. The exchange operator managed to grow its revenue by over 7% y-o-y to just under $5 billion, while its adjusted earnings per share came in at $3.59 (up 21% y-o-y). This performance was primarily attributable to robust growth in trading volumes across asset classes – futures, agricultural contracts, cash equities, and fixed income, coupled with better than anticipated results across Listings and Data Services. As a result, the company witnessed record revenues in 2018 and a 13th consecutive year of revenue growth. We expect the company to have a solid fiscal 2019 driven by increased volatility, improved demand for its risk management solutions, and sustained efforts to enhance its technological capabilities – broadening its offerings driven by multiple acquisitions. However, we also expect ICE to report higher expenses due to its various strategic investments, which should slightly dampen its bottom line in the near term. As a result, we expect ICE’s overall revenue to grow by 3-4% in 2019. We have an updated  $81 price estimate for IntercontinentalExchange’s stock, which is slightly higher than the current market price. Our interactive dashboard on  what to expect from ICE in 2019  details our expectations for the company’s results this year. You can modify the charts in the dashboard to gauge the impact that changes in key drivers for ICE would have on the company’s earnings and valuation, and see all other Financial Services company data here . We have arrived at an $81 price estimate for IntercontinentalExchange based on revenue projections of $5.2 billion for FY 2019, net income of about $2.1 billion, a P/E multiple of 21, and a share count of 548 million. Factors That Should Drive Growth ICE’s Transaction and Clearing fees, which contributes to nearly 55% of its overall revenues, were the second-fastest growing revenue stream, with just over 11% revenue growth in 2018. The solid growth was a result of broad-based improvement across asset classes. Equity option volumes saw 43% year-on-year (y-o-y) growth through 2018, with a 246 basis point (2.46%) rise in its market share. Industry-wide equity options daily trading volumes grew by just over 24% during the period. This strong growth was primarily due to greater trading volatility and heightened uncertainty. Cash equities volumes also increased, with more than 14% growth in trading volumes in 2018. The decent growth in trading volumes was largely due to higher total U.S. equity volumes (up 6% y-o-y). After a solid performance in the previous year, derivative trading volumes saw 5% year-over-year growth in 2018. Commodity volumes grew by just under 2% – largely driven by robust growth in agricultural commodities, partially offset by energy derivatives, which declined marginally. Further, financial derivatives saw a 9% rise. We expect improvement in U.S. macro conditions should drive growth in trading volumes. ICE’s Data Services segment generated about 33% of the company’s overall revenues and grew by just over 1% y-o-y to $2.1 billion. This segment has seen consistent growth driven by new customer additions, coupled with solid customer retention and the acquisitions of TMX Atrium and BofAML’s Global Research Index Platform, partially offset by the divestiture of IDMS and Trayport. Further, with increasing demand for data-driven insights, ICE’s host of acquisitions – BondPoint, Chicago Stock Exchange, and TMC – should further expand its geographic and product presence, offer advanced and diverse fixed income solutions, improve its technology platforms, and provide new data and valuation services. Accordingly, the segment holds significant growth potential due to increasing demand for data-driven insights and the company’s wealth of data. As a result, we expect the segment’s revenue to provide for strong growth opportunities in the near term and grow by about 3-4% in 2019. 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 Can Chinese Stimulus Impact Baidu's Valuation?
  • By , 3/15/19
  • tags: BIDU GOOG NFLX YELP AMZN BABA SINA
  • With expectations of the U.S-China trade dispute trending towards a resolution, Chinese stocks have rallied this year. Post Baidu ‘s (NASDAQ:BIDU) Q4 results on February 21, we noted that management’s focus on driving AI across its portfolio of offerings and sustained traction in the company’s digital content and self-driving businesses appear to be becoming tailwinds to Baidu’s leadership in its core search business. Baidu’s results also did not appear to have been impacted by the U.S.-China trade disputes significantly, so while it could be impacted favorably by further Chinese stimulus measures, we believe the company’s underlying strength will drive a more significant upside. Estimating Impact On Baidu’s Stock From Chinese Stimulus Due to expectations of Chinese GDP growth slowing down in 2018, the Chinese government has been embarking on a slew of fiscal stimulus measures including tax cuts and issuance of municipal bonds. The rationale for fiscal stimulus is that when the government releases $1 in the economy, due to the cycle of spending and tax collection, the likely actual impact of the money released to the overall economy is typically greater than the stimulus. One way of estimating the impact of the stimulus is by using the marginal propensity to consume (MPC), or the quantification of an increase in consumer spending due to an increase in disposable income. For China, we estimate the MPC to be around 0.38. We also use a stimulus multiplier = 1/(1-MPC) (or 1.62 for China, based on our estimated MPC of 0.38), to determine the impact on GDP. Thus, for every $1 in stimulus measures, Chinese GDP could grow by as much as $1.62. We thus estimate the potential stimulus that the Chinese government could release into the economy, the consequent expansion in GDP and the percentage of this GDP expansion that is likely to occur in 2019. In addition, we also consider a base rate GDP growth (without the stimulus) to ascertain the total GDP growth.   Furthermore, since Baidu’s business performance has been dependent on the Chinese economy, we looked at the stock price performance and growth in GDP for the last three years. Over 2016-2018, the change in Baidu’s stock price has displayed a strong correlation – 99.7% – with GDP growth. While Baidu’s stock price changes are almost perfectly correlated with the growth in GDP, management’s observation of the company’s limited dependence on the broader economy may be due to the utility nature of Baidu’s core offerings (search) and incrementally advanced offerings based on AI. Thus, using linear regression, we estimate Baidu’s stock price could have upside  of around 20% over the course of 2019, while  our $200 price estimate based on the company’s fundamentals implies an even greater upside. The results of our analysis corroborate with the company’s portfolio of offerings. You can modify any of the key drivers to visualize the impact of changes, and see all of our technology company data here .   See More at Trefis | View Interactive Institutional Research (Powered by Trefis) All Trefis Data
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    Oracle Q3: Cloud Continues To Surprise
  • By , 3/15/19
  • tags: ORCL AMZN GOOG MSFT ADBE IBM CRM VMW
  • Oracle (NYSE:ORCL) reported its fiscal Q3 results on Thursday, March 14. The company beat expectations on revenue and EPS, driven by traction in cloud. We note that excluding FX, the net growth for Oracle continues to hover around 3-4%. While the size of the company’s revenue base and lower market share versus the larger public cloud vendors is likely to require a few quarters before the intended churn in revenue quality comes about, if the net growth does not start accelerating beyond the current low single digits within 2019 (as claimed by Larry Ellison), investor excitement could begin to wane. We have a price estimate of $58 per share for Oracle, which is around 15% higher than the current market price. Our interactive dashboard on Oracle’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 . Key takeaways from Q3 include: Cloud services and license support: Revenue increased to $6.66 billion (+1% y-o-y) and was impacted by 3% by currency headwinds. Cloud license and on‐premise license: Revenue decreased to $1.25 billion (-4% y-o-y) and was impacted by 4% by currency headwinds. Hardware: Revenue decreased to $915 million (-8% y-o-y) and was impacted by 4% by currency headwinds. Services: Revenue decreased to $786 million (-1% y-o-y) and was impacted by 4% by currency headwinds. Total revenue decreased to $9.6 billion (-1% y-o-y) and was impacted by 4% by currency headwinds, and non-GAAP operating margin grew to 44% (+100 bps y-o-y). Quarterly dividend was increased 26% from $0.19 per share to $0.24 per share. The company’s management continues to expect that currency will likely be a headwind to the extent of 3% in Q4. Accordingly, management has guided for the following for Q4: Revenue growth of 0% to -2%, y-o-y Non-GAAP EPS of $1.05 – 1.09 (+12%-16% y-o-y) While the total revenue remained flat, the improvement in margins seems to support management’s commentary of growth in the higher-margin autonomous database and in Gen 2 cloud, offsetting declines in legacy products. Furthermore, 20% of its Autonomous Database customers as net additions and 4,000 active trials paint an encouraging picture from a traction perspective. Going forward, the company believes that its leadership position in database is likely to help accelerate the adoption of its cloud with tailwinds from the productivity, compatibility and cost advantages that Oracle’s products offer. 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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    Adobe Q1: Leadership In Digital Transformation Continues To Drive Growth
  • By , 3/15/19
  • tags: ADBE GOOG MSFT AMZN ORCL SAP
  • Adobe (NASDAQ:ADBE) reported its fiscal Q1 earnings on Thursday, March 14, beating consensus revenue and EPS estimates. Adobe views its leadership position and the ability to help businesses transform on the content side as the key to its sustained momentum. As a testament to the strength in pricing, the company’s management increased its full-year EPS outlook by $0.05 to $7.80. We currently have a price estimate of $256 per share for Adobe, which is slightly lower than 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 . Q1 key takeaways are below: Total revenue was $2.6 billion (+25% y-o-y) and non-GAAP EPS was $1.71. Digital media grew to $1.78 billion (+22% y-o-y), with Creative revenue growing to $1.49 billion (+22% y-o-y) and Document Cloud growing to $282 million (+22% y-o-y). Digital Experience grew to $743 million (+34% y-o-y) and exceeded an annual revenue run rate of $3 billion. The partnership with Microsoft exceeded management targets, with Marketo and Magento beginning to work well on Azure. Publishing revenues grew to $81 million (+26% y-o-y) For Q2, the company expects total revenues of $2.7 billion and non-GAAP EPS of $1.77. While the company’s management did not break out the growth in its Digital Experience business by commerce and others, the progress on integration of Magento and Marketo seems to indicate that the segment is potentially benefiting from commerce solutions. In addition to the company’s ability to cross-sell solutions by way of its offering set, the commerce ability is fulfilling its promise of creating content, measuring and finally consummating through commerce. Also notable was Adobe Photoshop and After Effects receiving Scientific and Engineering awards for their contributions to the filmmaking industry during this year’s Academy Awards. Meanwhile, on the margin front, as the loss of deferred revenue from the acquisitions of Magento and Marketo dissipates, management expects margins to improve over the rest of the year. Do not agree with our forecast? Create your own price forecast for Adobe by changing the base inputs (blue dots) on our interactive dashboard .
    MA Logo
    A Closer Look At Mastercard’s Key Value Drivers
  • By , 3/15/19
  • tags: MA V DFS AXP
  • Mastercard (NYSE:MA) has consistently beat street estimates despite an overall slowdown in global economic conditions in 2018. Gross dollar volume achieved 13% growth, with a 20% growth in purchase transactions and 10% growth in cash transactions. The United States, Europe, and Asia Pacific regions contribute 90% to Mastercard’s GDV with a roughly equal share of 30%, respectively. Economic growth in Asia Pacific is expected to drive Mastercard’s revenue in 2019, as the economies of the United States and Europe are expected to grow at a much slower rate (per World Economic Outlook, 2019 ). The company is witnessing growth figures in payment transactions and cash transactions about in line with the overall industry trend. Per a World Payments report by Capgemini, the contribution of emerging markets to non-cash transactions are expected to increase to 50% by 2021 from the current levels of 33%. We have a price estimate for Mastercard of $238 per share, which is above the market price. You can view our interactive dashboard on  What is Mastercard’s Fundamental Value Based on Expected 2019 Performance? to modify the company’s key drivers and observe their impact on share price, and see all of our Financial Services company data here . What Is Driving Mastercard’s Value?  Transaction Processing Revenues have been witnessing high-teens growth for the past three years, driven by an increase in the number of transactions. Purchase transactions increased across geographies, with the APMEA region growing at a consistent 20% level for the past two years. Growth in cash transactions has been much lower at 10% compared to purchase transactions. The share of cash transactions has fallen from 89% to 77% in 2018 (per a McKinsey Report ). Consistent with the overall industry trend of a shift from cash payments to digital payments and positive economic outlook of the Asia-Pacific region, we expect MasterCard’s transaction processing revenue to continue growing at a high-teens level in 2019. Domestic Assessment Revenues have been witnessing mid-teens growth for the past three years, barring 2018 due to new revenue recognition rules. Domestic assessment is the fee charged to issuers and acquirers on the basis of dollar volume of activity. Gross dollar volume increased by 13% and 9% in 2018 and 2017, respectively. Out of the five reported geographies by Mastercard, the GDV growth slowed in Canada and Latin America. On the contrary, the Asia-Pacific region reported strong growth of 13.4% in 2018. Consistent with the economic slowdown in all reported geographies except Asia-Pacific, we expect domestic assessment revenue to grow at modest low-teens levels in 2019.   International Transaction Revenue has seen mid-teen growth in the past two years, and contributes over 20% of our price estimate. Per a Global Payments Report by McKinsey, the share of B2B in cross-border volume is the highest followed by C2B, B2C, and C2C. The cross-border online e-commerce payments (C2B) are expected to grow at a 10% CAGR through 2021. Other segments are expected to grow within the range of 5-10%. Despite higher growth observed by Mastercard’s cross-border volumes in the past two years, we have kept our forecast for 2019 at moderate levels. 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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    Key Takeaways From Urban Outfitters’ Fiscal 2018
  • By , 3/15/19
  • tags: URBN AEO ANF
  • Urban Outfitters (NASDAQ: URBN) delivered a strong financial performance in fiscal 2018. The apparel retailer’s revenue surged by 9.3% year-over-year to reach approximately $4 billion, with record sales across brands. The company also recorded its highest annual net income of $300 million since the economic downturn. The retailer’s fourth quarter comparable sales rose by 4%, marking the sixth straight quarter of each of the brands’ positive retail segment comp growth. Digital channel sales continued to lead the way, posting a double-digit sales increase in Q4 2018. However, the store channel recorded negative comp sales for the first time in the year in Q4. The company’s gross margin improved by approximately 150 basis points due to maintained margins, lower markdown rates and improved initial mark-ups. Operating income also surged primarily due to a reduction in store impairment expenses, which was partially offset by increased bonus expense, as each brand achieved its bonus target in the current year. For Q1 2019, the company expects its retail segment comp sales to be flat to slightly negative. We currently have a price estimate of $37 per share for URBN, which is ahead of the current market price. We have summarized our full year expectations for URBN, based on the company’s guidance and our own estimates, on our interactive dashboard  URBN’s 2019 Financial Outlook . You can modify any of our key drivers to gauge the impact changes would have on its valuation, and see all Trefis Consumer Discretionary Services company data here.   Key Takeaways from Urban Outfitters’ Fourth Quarter Financial Performance Are Summarized Below: Digital Sales Channel Continue To Thrive   The digital channel continued to lead the way for Urban Outfitters, posting double-digit sales growth across brands in Q4, primarily driven by increased sessions and conversion rate. The digital channel drove much of the increase in retail sales in Q4, with digital penetration of total retail segment sales running well above 40% for the quarter. Urban Outfitters’ loyalty program, UO Rewards, accounted for more than 70% of the total brand sales in Q4 2018 . Although average order value and units per transaction declined in Q4 2018, going forward we expect the company to make significant marketing investments to support the digital channel sales growth, as the digital channel will drive the overall revenue growth of the organization. Macroeconomic Uncertainty And International Expansion The company delivered a solid performance in the international market in 2018. While the company’s operations achieved positive growth in China and North America, total EU comps for its Urban Outfitter brand were negative for the first time in 12 quarters in Q4 2018. The company expects the demand in European countries to be low until the uncertainty surrounding Brexit is cleared. Over the next few years, the company plans to ramp up its European operations, which should provide a solid long-term growth opportunity once Brexit-related uncertainty subsides. 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 Research Like our charts? Explore  example interactive dashboards  and create your own.
    SINA Logo
    How Much Can Chinese Stimulus Impact Sina’s Valuation?
  • By , 3/14/19
  • tags: SINA TWTR FB GOOG BIDU YELP
  • With expectations that the U.S-China trade dispute may be trending towards a resolution, Chinese stocks have rallied this year. Following  Sina ‘s (NASDAQ:SINA) Q4 results on March 5, we noted that Sina’s expectation of growing 3-4x faster than GDP was noteworthy. Furthermore, the fall in the company’s share price in light of the trade dispute appears to be significantly leveraged to the perception of cross-border trade (as opposed to purely the performance of the Chinese GDP) and thus the company’s stock performance may not be impacted significantly by stimulus measures. Estimating Impact On Sina’s Stock From Chinese Stimulus Due to the expectations of Chinese GDP growth slowing down in 2018, the Chinese government has been embarking on a slew of fiscal stimulus measures including tax cuts and issuance of municipal bonds. The rationale for fiscal stimulus is that when the government releases $1 in the economy, due to the cycle of spending and tax collection, the likely actual impact of the money released to the overall economy is typically greater than the stimulus. One way of estimating the impact of the stimulus is by using the marginal propensity to consume (MPC), or the quantification of an increase in consumer spending due to an increase in disposable income. For China, we estimate the MPC to be around 0.38. We also use a stimulus multiplier = 1/(1-MPC) (or 1.62 for China, based on our estimated MPC of 0.38), to determine the impact on GDP. Thus, for $1 in stimulus measures, Chinese GDP is likely to grow by $1.62. We thus estimate the potential stimulus that the Chinese government could release in the economy, the consequent expansion in GDP and the percentage of this GDP expansion that is likely to occur in 2019. In addition, we also consider a base rate GDP growth (without the stimulus) to ascertain the total GDP growth. Furthermore, since Sina’s business performance has been dependent on the Chinese economy, we looked at the stock price performance and growth in GDP for the last three years. Over 2016-2018, the change in Sina’s stock price has displayed a strong correlation – 94.5% – with GDP growth. While a correlation level of ~95% implies Sina’s stock price has significant leverage to Chinese GDP, Sina’s correlation is actually lower than that of Alibaba and Baidu (over 99% for both). While part of this lower correlation could be partially attributed to microstructure issues, we estimate that the size of Sina relative to the other two also plays an important part in the stock being influenced by sentiment-driven actions. Consequently, using linear regression, we estimate Sina’s stock price could see an upside of  over 42% by the end of 2019, implying a stock price of over $75. This is still lower than our $89 estimate based on the company’s fundamentals. You can modify any of the key drivers to visualize the impact of changes, and see all of our  Technology company data here . See More at Trefis | View Interactive Institutional Research (Powered by Trefis) All Trefis Data
    AEO Logo
    How Did American Eagle Outfitters Perform In 2018?
  • By , 3/14/19
  • tags: AEO ANF URBN
  • American Eagle Outfitters (NYSE: AEO) reported somewhat mixed fourth quarter earnings recently. The retailer’s EPS of $0.43 surpassed the consensus estimate of $0.42 while revenue of $1.24 billion was below the consensus expectation of $1.27 billion. The retailer’s fourth quarter comparable sales rose 6%, marking 16 straight quarters of positive comp growth. The company’s annual revenue increased by 6% year-over-year to cross $4 billion, and its annual diluted EPS surged by almost 30% to reach $1.47 in 2018. Higher digital sales, continuous growth of Aerie brand and improved operating profit helped the company to grow its bottom line by more than 28%. AEO’s gross margin improved in 2018 on account of improved markdown rate and rent leverage, which was partially offset by higher delivery costs due to increased transaction count and increased incentive expense. For Q1 2019, the company expects comparable sales to increase in the low single digits and EPS to be approximately $0.19 to $0.21, which is similar to the mean consensus estimate of $0.21. We currently have a price estimate of $27 per share for AEO, which is ahead of the current market price. We have summarized our full year expectations for AEO, based on the company’s guidance and our own estimates, on our interactive dashboard  AEO’s 2018 Financial Performance . You can modify any of our key drivers to gauge the impact changes would have on its valuation, and see all Trefis Consumer Discretionary Services company data here. Aerie Brand Continues To Outperform American Eagle’s lingerie and activewear brand, Aerie, has been major growth vehicle for company, going from strength to strength in driving its overall profitability. The brand delivered another impressive comp increase at 23% in Q4 2018 – the brand’s 17th consecutive quarter of double-digit comp growth. The brand is expected to cross $1 billion in annual sales in the near term, as AEO continues to explore untapped capacity in new markets and grow its customer base. Aerie is also expected to achieve significant growth from both the digital channel and retail stores, as the company plans to increase its exclusive Aerie stores in fiscal 2019. Going forward, we expect the Aerie brand to post double-digit comparable sales growth in the foreseeable future and drive overall revenue growth for the company. Digital Channel, Jeans Sales Reach Record Highs Customer shopping patterns have been shifting from brick-and-mortar locations to digital channels, and customers are increasingly more likely to shop across multiple channels that work in tandem to meet their needs. AEO’s digital sales were strong in Q4 2018, posting a positive high single digit increase in the quarter, its highest-volume quarter ever. Digital penetration rose to 31% of revenue in the fourth quarter and 28% for the full year, crossing $1.1 billion in digital annual sales. The company’s stores sales also saw a fifth consecutive quarter of comparable sales growth in Q4 2018. However, we expect the growth in digital channel sales to outpace the retail store sales for the foreseeable future. AEO surpassed $1 billion in jeans sales on an annual basis, gaining nearly 200 basis points of market share. Across age demographics, AEO became the number one women’s jeans brand and the number two overall, per management. The company’s jeans business has strengthened dramatically over the past few years, and we expect it to continue to thrive, as AEO remains focused on innovation and introducing new trend-setting products. 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 Research Like our charts? Explore  example interactive dashboards  and create your own.
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    China Unicom's Earnings Grow On Lower Costs, Rising Wireless Subscriber Base
  • By , 3/14/19
  • tags: CHU CHA CHL
  • China Unicom  (NYSE:CHU), the second largest Chinese wireless carrier, published its full-year 2018 results on March 13. The company’s net profits for the year grew almost four-fold to RMB 10.2 billion ($1.52 billion), driven by a growing mobile subscriber base as well as lower tower usage fees and reduced handset subsidy costs. Below we take a look at some of the trends that drove the company’s wireless business. Our interactive analysis on our  price estimate for China Unicom  shows our key drivers and forecasts for the company. You can adjust the key drivers to arrive at your own price estimate for the company. In addition, you can view all Trefis data for  Trefis data for Telecommunications companies  and  Consumer Staples companies. Subscriber Base Expands On 2I2C Initiative China Unicom’s mobile business added a total of about 31 million subscribers over the last year, taking its total subscriber base to 315 million. The growth was driven by the company’s increasing emphasis on online sales under its 2I2C initiative, which is seeing the company cooperate with Internet giants Baidu, Alibaba, and Tencent for new customer acquisitions. This sales model is helping the company better target customers while reducing the resources it allocates to physical retail outlets. The company noted that its 2I2C driven subscribers reached 94 million, marking a net addition of 44 million.  Separately, the company has also been offering products targeted at heavy data users, and this has been increasingly popular in China. However, the China Unicom’s wireless ARPU declined by about 5% year-over-year, coming in at RMB 45.7 ($6.81), driven by the government’s move to limit data tariffs and cut roaming and long-distance charges. This came despite the fact that data usage per handset more than doubled, with 4G penetration in the company’s user mix standing at 70%, up from around 61% a year ago. Further Expanding 4G Network, Carrying Out 5G Trials China Unicom has been focusing on improving its network – which was previously a key handicap – by deploying more towers, while also leveraging big data and analytics tools to identify traffic hotspots for more accurate capacity expansion. For 2019, the company has outlined capital expenditures of RMB 58.0 billion ($8.6 billion), up from RMB 44.9 billion ($6.69 billion) in 2018. The spending will focus on further increasing coverage and capacity, with greater deployment of 900 MHz LTE bands. The company has also been carrying out its 5G trials in 17 cities, noting that it would expand the trials based on 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 All Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
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    Will Volkswagen AG Continue The Positive Growth In 2019?
  • By , 3/13/19
  • tags: VWAGY DDAIF GM HMC HOG F TM TTM LEA
  • Volkswagen AG (OTCMKTS: VWAGY) declared its annual results for the fiscal year 2018 on March 12, 2019 early morning. The company posted revenues of €235 billion ($268 billion), up by around 2.5% year on year and earnings were reported at €23.6 ($27), up by around 2% year on year. We can say that the company is succeeding in delivering better results post the emission scandal which contributed a negative €3.2 billion ($3.6 billion) for the year. We have a price estimate of $19 per share for the company, which is in line with the market price. View our interactive dashboard – Our Outlook For Volkswagen in FY 2019 – and modify the key assumptions/expectations to arrive at a price estimate of your own. In addition, here is more  Consumer Discretionary data . The global economy has recorded weaker growth in fiscal year 2018 due to geopolitical tensions, turbulence in financial markets, and protectionist tendencies. The weaker growth has affected passenger and commercial vehicles sales as well.  Volkswagen delivered 10.8 million vehicles in 2018 which is 0.9% higher than previous year. The company also launched more than 70 new models – particularly numerous new SUVs such as the Volkswagen Touareg and T-Roc, the ŠKODA Karoq, the SEAT Arona, and the Audi Q8. The company continues to face headwinds due to changeover to the Worldwide Harmonized Light Vehicle Test Procedure (WLTP) emission standards and exchange rate effects for the segment of passenger cars. The company expects WLTP emission standards to continue to challenge the company in 2019, though on a smaller scale.  The company reported a nearly 6% increase in sales volume for Volkswagen passenger cars. Meanwhile Audi (including Lamborghini and Ducati brands) reported a decrease of 4.1% year on year. Skoda recorded better sales revenue and volume due to cost optimization and improved price positioning, but the margins were pulled down by exchange rate and product mix.  Volkswagen further posted losses in Bentley for the first nine months, largely due to delays in the start-up of new continental GT and associated costs. Also, the company’s commercial vehicles’ profits declined by 8% for the year even when revenue and volume where higher year on year, outlining the challenges by WLTP and the unfavorable exchange rate. Porsche brand continued its good year by recording an increase in operating profits, total revenues due to better product mix, and higher sales volume. Additionally, Volkswagen’s financial services profit climbed by 4.5% to approximately $2.8 billion in fiscal year 2018, exhibiting a higher business growth potential in this division. Volkswagen had a good year overall despite various headwinds, like global slowdown, WLTP, emission scandal, and reported positive growth in revenue and earnings for the year.  For the Fiscal Year 2019 we can say that the company is on the right track and is expected to perform better.   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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    Is Cleveland-Cliffs Fairly Valued?
  • By , 3/13/19
  • tags: CLEVELAND-CLIFFS CLF RIO MT VALE
  • Cleveland-Cliffs (NYSE: CLF), one of the leading iron ore miners in the US, saw its stock price decrease by more than 15% in the last one month. However, what is startling is the fact that CLF had no unfavorable news during this period. The stock fell prey to disappointing economic data from China and decreasing demand from the country’s steel companies. The volatility in the market during the last one week increased due to major investment banks like UBS lowering their forecast on iron ore prices for 2019 and downgrading Rio Tinto (NYSE: RIO). Though Cleveland-Cliffs has no exposure to the Chinese market, the stock seems to have taken a beating due to the overall iron ore market sentiment. CLF improved its profitability in 2018 and we have a positive outlook for the company for the near future. The iron ore market has recently faced bifurcation, in the form of high grade and lower grade categories, following a change in environmental policies in China. Being a high-grade iron ore miner, CLF is set to benefit from the existing high market premium for its products, and as Vale (a close competitor in the high-grade ore category) has cut its production and is still recovering from the recent dam disaster. We believe that this stock dip may have left the stock undervalued looking out over the next two years. We have summarized our key expectations about CLF’s price realization, revenue, profitability, and stock price movement in our interactive dashboard – How undervalued is CLF’s stock currently? In addition, here is more  Materials data . Rising premium for high grade ore to benefit CLF In view of rising pollution and international pressure, China altered its environmental policy in 2018 when it announced that it will curtail the import of low-grade iron ore (with Fe content of less than 62%). Since then the prices of high-grade ores have seen a sharp increase over lower-grade ore. Historically iron ore would be priced on a Dry Metric Ton Unit basis, such that if a ton of 62% Fe would sell around $62, then a ton of 65% Fe would trade around $65, with a premium of $3. However, in October 2018, when 62% Fe ore was trading at $70 per ton, the price of ore with 65% Fe was as high as $92, which marked a premium of approximately $22 per ton. This was a result of higher demand for high-grade ores in China. After the dam disaster at its Corrego do Feijao mine in Brumadinho in January 2019, Vale – the world’s largest iron ore miner – has announced a shutdown of approximately 40 million tons of iron ore production, of which a large part is expected to be high-grade pellets. In anticipation of lower supply due to this event, the premium for high grade ores has increased further in the last one month. Currently, ores with 62% Fe content are trading at about $85.77 while the ones with 65% Fe content are priced at $98.60 per ton. We believe that as Vale is still recovering from the effects of the accident and with iron ore premium rising, this is the best opportunity for CLF to increase its market share in the US. Though Rio Tinto performed well in 2018, the rising premium is expected to benefit CLF the most. This is mainly because of the ore grades that these two miners sell. RIO primarily sells Direct Shipping Ore that ranges from 60%-62% of Fe content from its Western Australian Pilbara mines and other mines where the Fe content ranges from 56%-62%, with only one exception of Iron Ore Company of Canada which has a 65% grade. On the other hand, CLF sells only high-quality iron ore pellets with Fe content of 60% to 65%. As CLF’s entire revenue is concentrated in the US following the closure of its loss-making APAC operations, it is much better positioned compared to Rio Tinto and ArcelorMittal, which are exposed to volatile emerging markets like China and mine a large portion of lower-grade ores. After a sharp rise in margins in 2018, we expect CLF’s net income margin growth to be modest over the next two years, primarily benefiting from lower interest expense and cost savings from the closure of APAC operations, coupled with higher margin per ton due to rising premium. Additionally, CLF plans to increase the productive capacity of the Toledo HBI (hot-briquetted iron) plant from 1.6 million tons to 1.9 million tons, which is an indication of good demand for the product and a catalyst for future growth and value creation. CLF v/s RIO – Expected Return on Stock We have a price estimate of $13 for CLF’s share price, which is higher than its current market price. In the current situation, we expect the price to rise to $14 in 2020 if CLF is able to take advantage of rising iron ore prices and fill the gap created by Vale. Though RIO’s share price has seen an upswing recently, the upside potential is limited with the recent downgrade and lower price realization with demand slowing down in China. Based on a current market price of $55, the stock could offer return/CAGR of about 13% in 2019 followed by 7% in 2020. However, entering into CLF’s stock at this stage (share price of $10 per share on March 13, 2019) could offer investors a potential return/CAGR of a whopping 30% in 2019 and 17% in 2020. Thus, we believe that the recent drop in CLF’s share price without any change in the company’s fundamentals, may offer opportunity.   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 Coca-Cola Manage To Increase Its Revenue And Profitability By Slashing Its Advertising And Marketing Expenditure Over The Next Two Years?
  • By , 3/13/19
  • tags: KO PEP
  • It has been a long time since both, Coca-Cola (NYSE:KO) and PepsiCo (NASDAQ:PEP), diversified into segments other than carbonated soft drinks (CSD) by selling juices, water, sports drinks, iced coffee, snacks, and other beverages. Though Coca-Cola is still the king when it comes to regular cola, PepsiCo has been able to capitalize on its diverse offerings in a much better way, which has helped the company to consistently record revenues much higher than that of Coke. In 2018, PEP reported revenues of $64.7 billion as against $31.9 billion by KO with margin improvement seen for both companies. However, if we look at how much both the companies spend on advertising and marketing (A&M), it would give a completely different picture. In spite of advertising and marketing campaigns being the main driver of sales growth for a food and beverage company, PEP’s marketing and ad expense was much lower than KO’s. We believe that Coca-Cola could consider a change in its advertising and marketing methods, making them more focused and digital, with emphasis on healthy products and minimum spending on the bottling business. This strategy is likely to help KO narrow its gap with PEP by achieving better revenue growth while cutting down on its advertising expenses, thus giving a fillip to margins and earnings, while at the same time increasing its potential upside to share price and return to investors. We have summarized the key expectations about KO’s revenue, margins, earnings, and stock price, and compared the same with that of PepsiCo in our interactive dashboard – What is the revenue and earnings potential for Coca-Cola by cutting down on its advertising and marketing expenditure over the next two years?  In addition, here is more  Consumer Staples data . Marketing Expenditure and Strategy – What was and what could be? Coca-Cola utilizes its ad and marketing budget on print, radio, television and other advertisements, marketing campaigns, point-of-sale merchandising and sales promotion. However, a major part of its advertising expense has historically been directed towards its bottling operations. With KO refranchising most of its bottling business over the last couple of years, the company’s A&M expenditure and revenue have significantly declined in tandem. However, Coca-Cola’s marketing spend ($5.8 billion or 18.3% of revenue in FY 2018) is still much higher compared to PepsiCo’s ($4.2 billion or 6.5% of revenue in FY 2018). This is mainly a reflection of PEP’s lower spending on its bottlers and much more focus on catering to the health-conscious audience with most of its marketing budget being reserved for health snacks, sports drinks and non-carbonated beverages. Additionally, compared to Coca-Cola, PepsiCo focuses much more on digital marketing. With most of its refranchising already done, Coca-Cola is expected to find it very tough to further reduce its advertising expenditure if it sticks to its current strategy. In stead, KO should cut down on its ad spend for bottlers and divert most of its budget away from soda. An increased focus on pushing healthy products, ready-to-make tea/coffee and non-carbonated beverages would provide a tough competition to PepsiCo in the segment. Additionally, KO could emphasize on digital marketing (the way Anheuser-Busch has been able to do in China) with tie-ups with e-commerce companies or enhancing its own online presence with its app, which could help the company reach a larger audience at a much lower cost. A cut-down on print and television would help the company save a lot of its cost, a part of which could be redirected towards positioning itself as a serious competitor to PepsiCo in the healthy products category. This is likely to help Coca-Cola decrease its advertising and marketing expenditure over the next two years. Additionally, such a focused strategy could increase revenue by 1.5%-2.0% during this period, as against a revenue decline over the last 3 years. Assuming that PepsiCo continues with its current, highly effective strategy, Coca-Cola would be able to significantly reduce its gap with PepsiCo with a projected A&M spending of $5 billion in 2020, as against PEP’s estimated expense of $4.3 billion. [‘Straight Blue Line’ indicates Coca-Cola, whereas the ‘dotted line’ indicates PepsiCo] Coca-Cola’s margins are higher than PepsiCo’s due to refranchising of its low-margin bottling business. However, with the expected reversal of revenue trend and decline in costs with a change in marketing strategy, KO’s net income margin is expected to increase from 20.2% in 2018 to 21% and 22% in 2019 and 2020, respectively, much higher compared to PEP’s margin which is likely to hover around 8.5% to 9% over the next two years. [‘Straight Blue Line’ indicates Coca-Cola, whereas the ‘dotted line’ indicates PepsiCo]   Expected Upside in Stock Along with higher margins, an increase in revenues (due to higher sales of non-carbonated products) would likely lead to a much healthier growth in EPS and stock price for KO as compared to PEP. We currently have a price estimate of $50 for Coca-Cola’s share. However, if the company manages to alter its marketing and advertising program, the expected fundamental stock value could rise to $55 in 2020. This would mark a CAGR of 10.4% in 2019 followed by 10.1% in 2020 over its current market price of ~$45. This potential double-digit return for two consecutive years is much more than PepsiCo’s expected CAGR of 3.3% and 4.6% in 2019 and 2020, respectively. Thus, Coca-Cola could go a long way in capturing a larger market in the healthy products category by tweaking its advertising spending, while creating value at a faster pace for its investors. [‘Straight Blue Line’ indicates Coca-Cola, whereas the ‘dotted line’ indicates PepsiCo]     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 Much Can The Partnership With Amazon Contribute To VMware's Top Line?
  • By , 3/13/19
  • tags: VMW MSFT CSCO HPE IBM SAP ORCL CRM
  • VMware (NYSE:VMW) announced a partnership with Amazon’s AWS a few years back, as the companies jointly developed the VMware Cloud on AWS offering.  Per AWS’s website,  the offering delivers “ a highly scalable, secure and innovative service that allows organizations to seamlessly migrate and extend their on-premises VMware vSphere-based environments to the AWS Cloud running on next-generation Amazon Elastic Compute Cloud (Amazon EC2) bare metal infrastructure.”  The unique selling point of this partnership is that VMware is facilitating the development of a hybrid cloud for its customers, with the cloud side being AWS and the on-premise as an open system. While the partnership is mutually beneficial, given that VMware’s overall revenue is much lower than AWS’, the impact of the partnership is likely much more significant for VMware than Amazon. Below we take a look at how much this partnership impacts VMware’s revenue and valuation. How Much Revenue Does The Partnership Drive For VMware? While VMware does not break out the revenue contribution from AWS within the broader ‘Hybrid Cloud and SaaS’, we estimate that the AWS partnership currently accounts for a low single-digit percentage of VMware’s total revenue (likely in the ~2% range). Our interactive dashboard on the VMware – AWS Partnership Revenue outlines our estimates for the impact to VMware’s revenue from this partnership. You can modify any of the key drivers to visualize the impact of changes, and see all Trefis technology company data here . Our estimates are based on management commentary about incremental growth from AWS and on the commentary across the last few quarters around VMware’s relationship with AWS and the traction in the partnership. We believe, given the current adoption momentum, by 2020, this partnership may contribute ~4% to VWware’s total revenue. For reference, this would imply estimated 2020 revenue of around $400 million from the partnership. See More at Trefis | View Interactive Institutional Research (Powered by Trefis) All Trefis Data
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    How Much Can Chinese Stimulus Impact Alibaba's Valuation?
  • By , 3/13/19
  • tags: BABA AMZN BIDU GOOG NFLX EBAY ORCL
  • With expectations that the U.S.-China trade may reach a resolution in the coming months, Chinese stocks have rallied this year. Following  Alibaba ’s (NYSE:BABA) Q3 results on January 30, we had noted that the company’s core business continues to enjoy strong momentum. Alibaba’s performance has been further protected from macroeconomic headwinds due to management’s focus on technology to drive consumption. Given Alibaba’s resilience to broader macroeconomic conditions, potential further Chinese stimulus could be significantly positive for the company’s results and stock, which has partly contributed to the rally so far this year. We believe the stock has rallied ahead of its fundamental value, which we estimate at  $173 per share . Estimating Impact To Alibaba’s Valuation With the expectations of Chinese GDP slowing down, the Chinese government has been embarking on a slew of fiscal stimulus measures including tax cuts and issuance of municipal bonds. The rationale for fiscal stimulus is that when the government releases $1 in the economy, due to the cycle of spending and tax collection, the likely actual impact of the money released to the GDP is typically greater than the stimulus amount. One way of estimating the impact of the stimulus is by using the marginal propensity to consume (MPC) or the quantification of increase in consumer spending due to an increase in disposable income. For China, we estimate the MPC to be around 0.38. Using laws of economics, we also know that the stimulus multiplier = 1/(1-MPC) (or 1.62 for China, based on our estimated MPC of 0.38). Thus, for a $1 stimulus released, the Chinese GDP is likely to grow by $1.62. We therefore estimate the potential stimulus that the Chinese government could release in the economy, the consequent expansion to GDP and percentage of this GDP expansion that is likely to occur in 2019. In addition, we also consider a base rate GDP growth (without the stimulus) to ascertain the total GDP growth. Furthermore, since Alibaba’s business performance has been dependent on the Chinese economy, we looked at the stock price performance and growth in GDP for the last three years. Over 2016-2018, the change in Alibaba’s stock price has displayed a strong correlation with the growth in GDP of 99.5%. This implies that if the GDP grows well, there is a very high chance of Alibaba’s stock price also performing well and vice versa. Using regression, and as shown on our interactive dashboard, we estimate Alibaba’s stock price could potentially return 60% over its 2018 closing price or end 2019 at $219 . This is well ahead of our $173 estimate based on the company’s fundamentals. You can modify any of the key drivers to visualize the impact of changes, and see all of our  Technology company data here . See More at Trefis | View Interactive Institutional Research (Powered by Trefis) All Trefis Data
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    How Much Can Roche's Share Price Grow If Ocrevus Doubles Its Share In Multiple Sclerosis Market?
  • By , 3/12/19
  • tags: RHHBY JNJ PFE MRK
  • Roche Holding’s  (NASDAQ:RHHBY) Ocrevus has been on a stellar run with sales exceeding $2.4 billion in 2018, reflecting a growth of 2.8x over the prior year. This can be attributed to its high efficacy and modest pricing. The drug’s peak sales are estimated to be north of  $4 billion . The drug is estimated to have a 13% share in the global multiple sclerosis market, based on its 2018 sales. In this note we discuss the potential upside to Roche’s earnings and share price if Ocrevus were to double its share by 2025. We have created an interactive dashboard analysis ~  What’s The Upside For Roche If Ocrevus Doubles Its Share of The Global Multiple Sclerosis Market By 2025? You can adjust various drivers to see the impact on the company’s earnings, and price estimate, based on Ocrevus sales. Also, here’s more  Healthcare Data . Ocrevus’ Current Market Share ~ 13% Ocrevus’ current market share of 13% is derived from its reported sales of $2.4 billion (CHF 2.35 billion), and an estimated global multiple sclerosis market size of a little over $18 billion in 2018. Ocrevus is used for the treatment of relapsing and primary progressive forms of multiple sclerosis, which is a nervous system disease that affects brain and spinal cord. Global Multiple Sclerosis Market Size Is Estimated To Grow In Mid-Single-Digits The global multiple sclerosis market is estimated to grow at a CAGR of 6.3% to $28 billion by 2025. This growth will likely be led by rising prevalence of multiple sclerosis. It is estimated that over 2.3 million people worldwide are affected by multiple sclerosis, and it is one of the most common causes of neurological disability in young adults. If Ocrevus manages to double its market share by 2025, it will result in sales of over $7 billion, which appears to be very high, and above the peak sales estimate of $4 billion. Having said that, Ocrevus has several advantages over other drugs in the market. Most importantly, its modest pricing of $65,000 per year compares with an $80,000 to $90,000 range for Novartis’ Gilenya, Teva’s Copaxone, Biogen’s Tecfidera and Avonex, among others. Apart from pricing, Ocrevus is the first drug to be approved for the treatment of both relapsing, as well as primary, progressive forms of multiple sclerosis. It also offers significant dosing advantage. For instance, Tecfidera, and Gilenya are dosed between one and three times daily, while Ocrevus is dosed just once every 6 months. Given these factors, Ocrevus will likely see continued strong growth in the coming years, and garner higher share in the global multiple sclerosis market. How Does Ocrevus’ Market Share Gains Impact Roche’s Earnings & Price Estimate? If Ocrevus manages to double its share in the multiple sclerosis market, it will result in $0.27 incremental earnings on an adjusted basis. We use 26.3% adjusted net income margin, similar to that for overall Roche in calculating the EPS impact. We use a price to earnings multiple of 16x to arrive at a $4 impact on Roche’s share price, or 13% of its current market price of $34. 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.