Apple Annual Net Revenue to Reach $292 Billion by 2022, says Munster

Munster lays out five-year Apple model, sees ‘Apple Glasses’ wearable in 2020

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Gene #Munster, a longtime analyst at #Piper Jaffray who recently departed to found #Loup Ventures, this week published the venture capital firm’s five year model for Apple.

Munster wrote: “We are publishing our Apple model with forecasts out to 2022 including Apple Glasses, an AR wearable, starting in 2020.

By year end of 2022, we see net revenue of $292B and EPS of $13.20, up from $221B and $8.74 in FY17…

Gross margin stays close to constant as Apple Services’ higher margin offsets declining iPhone hardware gross margin.

The auto opportunity is not in our model.” Among the key takeaways from his report, Munster said he expects iPhone growth to peak in FY19 before “slowly” declining as Apple Glasses emerge, with the iconic mobile phone eventually comprising a “much smaller part” of the company’s business.

How Will Apple Go to Market in Auto?

There are three ways Munster sees Apple potentially bringing its car technology to market. The first option would be to partner with a manufacturer to bring an Apple-branded car to market. The second option would be to focus on developing software and implementing it across as many car platforms as possible. Lastly, but unlikely, the could enter as a fleet service.

Services: Steady, Growing, Profitable.

Munster expects steady growth from Services over the next 5 years. In Mar-17, Services accounted for 13% of revenue and grew at 18% y/y. He believes that in 2022 Services will account for 21% of revenue and grow at 14% y/y. His confidence is supported by the predictability of Services over the past two years, along with the belief that AR apps will be a catalyst for consumer spending on apps over the next 5 years. This segment should remain about 2x more profitable than Apple’s hardware business with a ~60% gross margin, with gains in margin from Services offsetting the loss of margin in hardware.


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Sprint Rises on Charter, Comcast Talk

The two-month exclusivity agreement puts any merger talks between Sprint and T-Mobile “on hold”

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Shares of Sprint (S) jumped Tuesday after the Wall Street Journal said the company is in exclusive talks with Charter (CHTR) and Comcast (CMCSA) on several possible transactions, putting its oft-rumored merger talks with T-Mobile (TMUS) on hold.

WSJ REVEALS CABLE TALKS

The Wall Street Journal reported late Monday that Sprint has entered exclusive talks with Charter and Comcast as the cable giants explore a deal to potentially boost their wireless offerings, according to its sources.

The two-month exclusivity agreement puts any merger talks between Sprint and T-Mobile “on hold,” the sources told the Journal.

Under one of the contemplated plans, the cable operators would invest in Sprint’s network in exchange for favorable terms for offering wireless service on its network, the sources said, adding that such a deal could involve an equity stake in Sprint.

The negotiations also include the possibility of the companies jointly acquiring Sprint, according to the Journal’s sources, though that idea was “thought to be the much less likely scenario.”

Any wireless resale deal wouldn’t preclude a merger between Sprint and T-Mobile, some of the publication’s sources said. The report also noted that John Malone, whose Liberty Broadband is the largest investor in Charter, has been trying to persuade Comcast CEO Brian Roberts over the past year that the companies should jointly acquire a carrier such as Sprint, though Roberts — more interested in a resale deal — has been reluctant as of yet, according to sources.

CNBC DOWNPLAYS STAKE POSSIBILITY

Following the Wall Street Journal report, CNBC’s David Faber added that his sources indicated the talks are focused on a resale, or MVNO, deal and that an equity investment from either company is unlikely.

PREVIOUS M&A REMARKS

Speculation of a merger between Sprint and T-Mobile have swirled over the past several months, with company executives going as far as openly cheering the concept at recent investor events.

On June 8, T-Mobile CFO Braxton Carter spoke about the “significant” synergy potential of a Sprint deal, which built on similar comments on May 18.

Meanwhile, Germany’s Handelsblatt reported as recently as June 20 that T-Mobile owner Deutsche Telekom (DTEGY) was preparing to merge the company with Sprint.

JEFFERIES SEES T-MOBILE HURDLES

Jefferies analyst Mike McCormack writes that the Journal’s report is “not surprising” given the interest from cable companies in securing better resale terms, though an equity stake or outright acquisition of Sprint is “less likely” but not impossible in his view. Notably, the news “likely suggests major hurdles” in any talks between Sprint and T-Mobile, potentially reigniting speculation around a Dish (DISH)-T-Mobile tie-up should those negotiations collapse.

NOMURA SEES NEGATIVE FOR T-MOBILE

Nomura Instinet analyst Anthony DiClemente views a potential deal as positive for Charter and Comcast, and a negative for T-Mobile given investor anticipation of a synergy-rich merger with Sprint.

Joint ownership of a wireless carrier “has appeal” for the cable operators, but DiClemente believes Comcast currently prefers the resale approach for the inexpensive experimentation it allows.

Turning to T-Mobile, the analyst argues that a merger of the two carriers would offer more synergies than the cable companies, though he considers regulatory barriers “high” and says the probability of a deal “has likely declined.”

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Bank of America Ups Homebuilders

Homebuilders advance after Bank of America raises estimates, targets

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Bank of America Merrill Lynch increased its estimates for single-family housing starts and new home sales in 2018 and 2019.

As a result, the firm raised its estimates and price targets for multiple homebuilders while calling out D.R. Horton (DHI) and PulteGroup (PHM) as its favorite names in the sector.

ESTIMATES INCREASED:

Bank of America analyst John #Lovallo now expects single family housing starts and new home sales to rise 9% year-over-year in 2018, up from his previous forecast for 6% increases for both metrics. In 2019, he predicts that the metrics will increase about 8%, versus his previous forecast for 5% gains.

DEMAND/SUPPLY DRIVERS:

Homebuilders have said that demand has accelerated over the past six months, partly due to increased consumer confidence, an improved labor market, and the “return of the first-time home buyer,” according to Lovallo. Supply constraints should weaken “over the next few years” because builders are more confident and consequently more willing to build further from city centers, the analyst stated. Additionally, there are signs that the sector’s labor shortage is beginning to ease, while the potential reform of banking regulations could stimulate lending, Lovallo wrote. Finally, the analyst believes that “easing land entitlement burdens could reduce builder cost and increase available lot supply.”

TOP PICKS:

D.R. Horton could be a “primary beneficiary” of labor market easing, given its “high volume and even-flow production strategy,” Lovallo wrote. Additionally, its consistent execution and solid exposure to entry-level buyers are positive, the analyst stated. Pulte’s valuation is below the average of large homebuilders, while its “solid return on equity and balanced capital” are positive, the analyst stated. Pulte’s orders could accelerate next year as it increases the number of communities that it builds, the analyst added.

TARGET INCREASES

Lovallo increased his price target on D.R. Horton to $42 from $41, on Pulte to $30 from $29, on Toll Brothers (TOL) to $46 from $43, on Meritage Homes (MTH) to $38 from $36, on KB Home (KBH) to $19 from $17, and on M.D.C. Holdings (MDC) to $27 from $24.

 

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Goldcorp to Buy Exeter Resource

Exeter Resource, Goldcorp enter agreement to proceed with acquisition

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Exeter Resource (XRA) has entered into an arrangement agreement with Goldcorp (GG) pursuant to which Goldcorp has agreed to acquire all common shares of Exeter not already owned by Goldcorp by way of a plan of arrangement.

The arrangement, which is subject to the approval of the holders of Exeter, will constitute the subsequent acquisition transaction proposed by Goldcorp in order to acquire all Exeter shares it did not acquire under its offer to purchase dated April 20.

Goldcorp currently owns a total of roughly 78M Exeter Shares, representing approximately 83.16% of issued and outstanding Exeter shares.

A special meeting of Exeter shareholders has been called for July 31 to consider, and if thought advisable, pass a special resolution in relation to the arrangement.

The consideration payable under the arrangement is the same as the consideration received by Exeter shareholders under the offer. Exeter shareholders will be entitled to receive 0.12 of a Goldcorp share for each Exeter share.

Closing of the arrangement is expected to take place on or about August 2. At that time, Exeter will become a wholly-owned subsidiary of Goldcorp, the Exeter shares will be delisted, and Exeter will apply to cease to be a reporting issuer.

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Ameresco Selected by Chicago to Update City Lights

Amerseco selected by Chicago for Smart Street Lighting Project

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Ameresco receives contract from Chicago

Ameresco (AMRC) announced it has contracted with the City of Chicago for the city’s comprehensive Smart Street Lighting Project to modernize its infrastructure.

Working with Silver Spring Networks (SSNI), a networking platform and solutions provider for the Internet of Important Things, the project is believed to be the largest city-led wireless smart street light program in the U.S., and will connect more than 250,000 street light fixtures across Chicago.

The four-year modernization project is expected to transform Chicago’s street light system by replacing approximately 85% of the city’s existing street lights with smart LEDs.

The multi-phase project will commence this summer.

The new smart LED street lights will be owned and operated by the City of Chicago, supported by Silver Spring Networks’ managed services and its Streetlight.Vision Control and Management System software.

The new LED street lights are expected to consume between 50 and 75% less electricity than the city’s existing lighting infrastructure.

Silver Spring’s IPv6 platform will enable the City to remotely dim or brighten street lights as needed, as well as to remotely monitor street lights for proactive maintenance and faster repairs if failures do occur.

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OraSure’s HIV Test Gets $20M Contract from Gates Foundation

OraSure’s HIV self-test supported by Gates Foundation for accelerated adoption

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Orasure receives $20 million order from Gates Foundation

OraSure entered a new agreement with the Bill & Melinda Gates Foundation that will enable OraSure to offer its OraQuick HIV Self-Test at an affordable price in 50 developing countries with funding from the Gates Foundation.

The funding will consist of support payments tied to the volume of product sold by OraSure and reimbursement of certain related costs.

Under a four-year Charitable Support Agreement, OraSure will make its OraQuick HIV Self-Test available for purchase in 50 developing countries located in Africa and Asia.

Funding from the Gates Foundation will enable non-governmental organizations in eligible countries that receive funding from government or public sector agencies and donors to access HIV self-testing at reduced pricing.

The funding from the Gates Foundation will be in an aggregate amount not to exceed $20M over the four-year term or $6M each year of the agreement. The OraQuick(R) HIV Self-Test is a rapid, point-of-care test that allows an individual to detect antibodies to both HIV-1 and HIV-2 with an oral swab, with results in 20 minutes.

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