Media Stocks to Watch on 2024 Olympic Announcement

Discovery Comms should move on Olympics host cities announcement 

 In the 2024 race are Budapest, Los Angeles and Paris. See Stockwinners Market Radar to see stocks to buy.

The International Olympic Committee is expected to meet today and vote on whether to accept an earlier recommendation from some of its members to award both the 2024 and 2028 Summer Olympic bids at the same time.

In the race are Los Angeles, Budapest and Paris.

Loop Capital analyst David Miller argued that Discovery Communications (DISCA), which has full European broadcast rights to the 2024 edition, may see a fair degree of volatility ahead of this decision.

A Paris win to host the 2024 summer games may drive shares higher, he contended.

BACKGROUND 

Back in 2015, Discovery Communications announced that it had secured full media rights to broadcast the next four Olympic Games in the pan-European region after the 2016 summer games in Brazil,

#LoopCapital’s David Miller pointed out in a note to investors last month. The deal takes effect with the 2018 Winter Games in South Korea, he noted, adding that at the time the host cities for the 2020, 2022 and 2024 had not been announced.

Last month, the International Olympic Committee issued a loose overture that the host cities for both the 2024 and 2028 summer editions would be announced at the same time, with those being either #LosAngeles or #Paris.

The cities have completed the required presentation of their technical plans for staging hundreds of medal events, and the full International Olympic Committee is expected to convene today and vote on whether to accept the recommendation to award both bids at the same time.

According to the Associated Press, however, the IOC may not announce this week which of Los Angeles or Paris will host the 2024 Olympics and which will get the 2028 edition. The latter has been seen as favorite for 2024, 100 years after it hosted its last Olympics, the publication noted, with Los Angeles Mayor Eric #Garcetti and Los Angeles 2024 bid chairman Casey #Wasserman open to look ahead to 2028.

DISCOVERY LOBBYING FOR PARIS:

Loop Capital’s David Miller told investors that #Discovery is “clearly lobbying” for Paris as the 2024 recipient, as that would ensure at least one Olympics within the pan-Euro time zone over the next eight years, which would be critical for advertising. The situation, however, is still fluid, the analyst noted, with no guarantees.

According to some press reports, the #IOC loves LA because most of the venues are already in place, most are relatively new or are being built, the climate is amenable to the athletes, the bid has unanimous public support, and Los Angeles has hosted the games twice before, both profitably, Miller pointed out.

On the other hand, 2024 would mark the 100th anniversary of the last time Paris hosted the games and the Committee has gone on record in recognizing that, he added. The analyst reiterated a Hold rating and $29 price target on Discovery’s shares.

PRICE ACTION

In late Tuesday morning trading, Discovery’s stock is down 0.9% to $26 per share.

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Snap Drops below IPO Price

Snap Slides below IPO price as Morgan Stanley Warns of Instagram Threat

snap

Shares of Snap Inc. (SNAP) are slipping after Morgan Stanley analyst Brian Nowak downgraded the stock to Equal Weight from Overweight saying that its ad product is not evolving as quickly as expected, while Facebook’s (FB) Instagram competition is increasing.

Meanwhile, his peer at Aegis argued that he now sees weaker June usage trends for Snapchat.

MOVE TO THE SIDELINES

In a research note to investors this morning, Morgan Stanley’s Nowak downgraded Snapchat’s parent Snap to Equal Weight from Overweight as he now sees its ad revenue growth being materially slower than he previously expected. The analyst acknowledged that he has been wrong about Snap’s ability to innovate and improve its ad product this year and user monetization as it works to move beyond “experimental” ad budgets into larger branded and direct response ad allocations.

Further, #Nowak also pointed out that he believes user growth trends have been modestly weaker than expected, though time spent per user has been strong.

Additionally, the analyst argued that the company faces rising competition from Instagram, which has become more aggressive in competing with Snap’s ad dollars. Citing industry conversations, Nowak noted that Instagram is giving advertisers sponsored lenses for free. The analyst also lowered his price target on Snap’s shares to $16 from $28.

WEAKER USAGE TRENDS

In a research note of his own, Aegis analyst Victor Anthony said Snap’s Daily Average User, or DAU, growth had decelerated more meaningfully than he had seen earlier in the month, according to his tracker. The analyst pointed out that he now sees weaker June usage trends and believes that Spectacles are not selling well, both of which are likely to exert downward pressure on estimates. While Anthony wonders if the hype around Spectacles has faded and could go the way of Google’s (GOOG; GOOGL) Glasses, the analyst said he understands that recent product updates are resonating with users, particularly, the Maps and World Lenses features, and that could help with engagement in the third quarter and beyond. He reiterated a Hold rating and $19 price target on Snap’s shares.

WHAT’S NOTABLE:

Shares of Snap ended yesterday’s trading day just below $17, which is where the company priced its initial public offering back in March. Snap Inc. opened trading at $24 per share on March 2, well above its pricing of $17 per share, and finished its first day of trading with an advance of about 44%, closing at $24.51.

PRICE ACTION:

In Tuesday morning trading, shares of Snapchat’s (SNAP) parent have dropped about 6% to $16.01 on heavy volume of 15 million shares.

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Rent-A-Center Rejects Take-Over Offer

Rent-A-Center determined Vintage’s proposal significantly undervalues company

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In a regulatory filing, Rent-A-Center (RCII) said that in a private letter, dated June 20 from Vintage Capital Management, LLC to Rent-A-Center financial advisor, Vintage made an unsolicited proposal to acquire 100% of the common stock of Rent-A-Center in a go-private transaction for $15.00 per share.

The letter from Vintage was subsequently shared with the entire Rent-A-Center Board of Directors.

“On July 5, 2017, following a thorough review by the Rent-A-Center Board of Directors, with the assistance of its financial and legal advisors, the Company formally rejected Vintage’s proposal. The Rent-A-Center Board of Directors is committed to acting in the best interests of the Company and all of its stockholders. The Board remains open-minded and regularly reviews the Company’s strategic priorities and opportunities and assesses them against a variety of strategic options.

The Board determined that Vintage’s proposal significantly undervalues the Company and that the strategic plan currently being implemented by Rent-A-Center positions the Company to deliver greater value to its stockholders than Vintage’s inadequate and opportunistic proposal.

Rent-A-Center’s strategic plan includes a renewed focus on strengthening its Core U.S. business; optimizing and growing its Acceptance Now business; and leveraging technology investments to expand distribution channels and integrate retail and online offerings.

These initiatives are already delivering substantial progress in key performance metrics, including improved same-store sales and reductions in delinquencies.

The Rent-A-Center Board of Directors and management team remain focused on expeditiously executing the strategic plan to restore growth and improve profitability and will continue to act in the best interests of the Company and all stockholders.”

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Ensco Awarded three Six-Year Contracts

Ensco awarded three drillship contracts offshore West Africa

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Ensco (ESV) announced that it has been awarded three drillship contracts offshore West Africa, representing an aggregate three years of contracted term and more than six additional years of options.

ENSCO DS-4 is expected to commence a two-year contract with Chevron (CVX) offshore Nigeria in August 2017. The contract also includes a priced customer option for one additional year of work.

Ensco recently reactivated the rig following a period during which the rig was preservation stacked in Tenerife and reactivation expenses are expected to total $28M. In addition, $15M of capital upgrades were added to the rig and are anticipated to benefit the asset over its remaining useful life.

ENSCO DS-10 is scheduled to commence work with Shell (RDS.A, RDS.B) offshore Nigeria in first quarter 2018. The contract duration is for one year and includes five one-year priced customer options. As a result of winning this contract, the rig’s delivery is expected to be accelerated into third quarter 2017 from first quarter 2019.

ENSCO DS-10 will then undergo a period of acceptance testing before mobilizing to Nigeria to begin its maiden contract. Remaining capital expenditures associated with the rig are expected to total approximately $190M inclusive of a final milestone payment to the shipyard, an upgrade to add a second seven-ram blowout preventer, acceptance testing, capitalized interest and mobilization.

#ENSCO DS-7 is contracted to Total (TOT) until November 2017.

As a result of these new contracts, contract drilling expense for second quarter 2017 is expected to be approximately $282M after adjusting for a $10M settlement of a previously disclosed legal contingency, slightly higher than the prior guidance of $270M-$280M, or $292M on an unadjusted basis.

Anticipated capital expenditures are now expected to total approximately $350M for the nine month period from second quarter 2017 through fourth quarter 2017.

This capital expenditure estimate includes approximately $240M for new rig construction, inclusive of approximately $29M of capitalized interest, and approximately $110M for rig enhancements and minor upgrades and improvements.

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Semiconductor Revenue to surpass $400B in 2017

Gartner sees worldwide semiconductor revenue surpassing $400B in 2017

Worldwide semiconductor revenue surpassing $400B in 2017, See Stockwinners Market Radar

Worldwide semiconductor revenue is forecast to total $401.4B in 2017, an increase of 16.8% from 2016, according to Gartner, Inc.

This will be the first time semiconductor revenue has surpassed $400B.

The market reached the $300B milestone seven years ago, in 2010, and surpassed $200B in 2000.

“A shortage of memory is creating a boom in the overall semiconductor market,” said Andrew Norwood, research vice president at Gartner (IT).

“Memory vendors have been able to increase their price for DRAM and NAND, driving revenue and margins higher.” The booming memory market, with revenue forecast to increase 52% in 2017, is expected to shake up semiconductor market share rankings.

“As the largest memory supplier, Samsung Electronics (SSNLF) is set to gain the most,” said Norwood.

“This gives Samsung its best shot at capturing the No. 1 position from Intel (INTC) for the first time.”

Other publicly traded companies in the space include AMD (AMD), Marvell (MRVL), Microchip (MCHP), Micron (MU), Nvidia (NVDA), Qualcomm (QCOM) and Texas Instruments (TXN).

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The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.