Online retailers fall on Amazon concerns

Online retailers slide as Amazon reportedly testing recommendation service

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Online retailers fall on Amazon concerns

 

Shares of several retailers and online personal shopping services are slipping in afternoon trading after CNBC reported that Amazon (AMZN) is testing a new on-site recommendation service known as Scout.


WHAT’S NEW:

 

CNBC reported that Amazon is testing a new service called Scout, a shopping site for consumers who don’t know specifically what they want to buy but are willing to take some automated recommendations.

 

Scout asks shoppers to like or dislike a product and responds by showing other products based on user responses, according to CNBC.

 

Scout is currently available for home furniture, kitchen and dining products, women’s shoes, home decor, patio furniture, lighting and bedding, with more categories coming soon.
“This is a new way to shop, allowing customers to browse millions of items and quickly refine the selection based solely on visual attributes,” an Amazon spokesperson said in an emailed statement. “
Amazon uses imagery from across its robust selection to extract thousands of visual attributes for showing customers a variety of items so they can select their preferences as they go.”

WHAT’S NOTABLE

The CNBC report noted that Amazon is utilizing machine learning technology to address one of the major criticisms of its service, namely that it’s a great place to buy things but not a great place to browse.
While Amazon is easily the biggest U.S. e-commerce company, e-retailers such as Stitch Fix (SFIX) and Walmart’s (WMT) Bonobos provide a more personalized experience and have given social media services such as Instagram (FB) and Pinterest more room to use their large collections of data in turning their networks into fledgling commerce sites, CNBC said.

PRICE ACTION

Following the news, Wayfair (W) slipped 4.3%, Williams-Sonoma (WSM) fell 1.9%, Stitch Fix dropped nearly 9%, and Steven Madden (SHOO) slid 1.3%. Meanwhile, Amazon (AMZN) shares are 1.5% lower in Wednesday afternoon trading.


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L Brands drops after PINK CEO departs

L Brands slides after slashing earnings forecast, PINK brand CEO departure 

L Brands drops after PINK CEO departs, Stockwinners
L Brands drops after PINK CEO departs, Stockwinners

Shares of L Brands (LB) are sliding after the parent of Victoria’s Secret and Bath & Body Works reported better than expected quarterly earnings and revenue but lowered its profit outlook.

While Jefferies analyst Randal Konik reduced his price target for L Brands and recommended investors sell the shares, his peer at Citi argued that the guidance cut was expected and reiterated a Buy rating on the stock.

QUARTERLY RESULTS

Last night, L Brands reported second quarter adjusted earnings per share of 36c and revenue of $2.98B, both above the consensus of 34c and $2.93B, respectively.

The company also lowered its FY18 earnings per share view to $2.45-$2.70 from $2.70-$3.00, with consensus at $2.77.

Additionally, L Brands said second quarter consolidated same-store sales for Stores and Direct were up 3%, while same-store sales for the quarter at Victoria’s Secret were down 1% and up 10% at at Bath & Body Works.

Alongside quarterly results, the company announced that Denise Landman, CEO of Victoria’s Secret PINK, has made the decision to retire at the end of this year.

Pink CEO departs, Shares slide

Amy Hauk, currently president for merchandising and product development of Bath & Body Works, will replace Landman as CEO of Victoria’s Secret PINK.

JEFFERIES SAYS SELL SHARES

In a research note to investors this morning, Jefferies’ Konik lowered his price target for L Brands to $20 from $23 and recommended investors sell the shares.

The analyst argued that the company’s fiscal year earnings guidance cut is still not low enough, and sees PINK on “precipice of massive declines.” Further, the analyst thinks L Brands’ free cash flow guidance is too high as its net debt continues to grow.

The dividend is at risk in the medium-term and the company needs to save cash now “before the next recession,” Konik contended.

The analyst reiterated an Underperform rating on the stock.

Meanwhile, his peer at JPMorgan also lowered his price target for L Brands to $26 from $28.

While the stock was bracing for an earnings forecast reduction, the magnitude of management’s near-term third quarter cut was greater than expected, calling for break-even earnings at the low-end, the first time in more than a decade, analyst Matthew Boss contended.

He reiterated a Neutral rating on the shares. Voicing a similar opinion, Wells Fargo analyst Ike Boruchow lowered his price target for L Brands to $30 from $42 and kept a Market Perform rating on the shares as the core Victoria’s Secret concept continues to struggle.

Pointing out that the second quarter results “raised a number of red flags,” including “severe” margin contraction, “bloated” inventory, Bath & Body Works returning to margin contraction and issues at PINK, Nomura Instinet analyst Simeon Siegel reiterated a Neutral rating and $31 price target on L Brands’ shares.

CITI SAYS RISK/REWARD STILL ATTRACTIVE

Still bullish on the stock, Citi analyst Paul Lejuez told investors that while the turnaround path for Victoria’s Secret “remains unclear,” the market expected last night’s fiscal 2018 guidance cut.

With a 7.5% dividend yield, the stock’s risk/reward is attractive, particularly given actions by management that suggest “they have more than enough liquidity to continue funding the dividend,” Lejuez argued.

The analyst reiterated a Buy rating on the shares and said he views the dividend as safe.

While lowering her price target for L Brands to $44 from $49, B. Riley FBR analyst Susan Anderson kept a Buy rating on the stock as she believes Bath & Body Works continues to excel and Victoria’s Secret remains a work in progress.

While weaker PINK performance is “disappointing,” the analyst believes management is taking steps to correct lounge performance as well as improve performance in lingerie.

Further, Anderson highlighted that L Brands reiterated its commitment to share repurchases and dividend, and reiterated that the company has substantial liquidity to fund the dividend and other expenditures.

PRICE ACTION

In Thursday’s trading, shares of L Brands have plunged over 12% to $28.50.


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SodaStream sold for $3.2 billion

PepsiCo agrees to acquire SodaStream for $144 per share in cash

SodaStream sold for $3.2 billion, Stockwinners
SodaStream sold for $3.2 billion, Stockwinners

PepsiCo (PEP) and SodaStream (SODA) announced that they have entered into an agreement under which PepsiCo has agreed to acquire all outstanding shares of SodaStream for $144.00 per share in cash, which represents a 32% premium to the 30-day volume weighted average price.

PepsiCo’s strong distribution capabilities, global reach, R&D, design and marketing expertise, combined with SodaStream’s differentiated and unique product range will position SodaStream for further expansion and breakthrough innovation.

Under the terms of the agreement between PepsiCo and SodaStream, PepsiCo has agreed to acquire all of the outstanding shares of SodaStream International for $144.00 per share, in a transaction valued at $3.2B.

The transaction will be funded with PepsiCo’s cash on hand.

The acquisition has been unanimously approved by the boards of both companies.

The transaction is subject to a SodaStream shareholder vote, certain regulatory approvals and other customary conditions, and closing is expected by January 2019.

“SodaStream is highly complementary and incremental to our business, adding to our growing water portfolio, while catalyzing our ability to offer personalized in-home beverage solutions around the world,” said Ramon Laguarta, CEO-Elect and President, PepsiCo.

“From breakthrough innovations like Drinkfinity to beverage dispensing technologies like Spire for foodservice and Aquafina water stations for workplaces and colleges, PepsiCo is finding new ways to reach consumers beyond the bottle, and today’s announcement is fully in line with that strategy.”


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Tribune Media terminates merger agreement with Sinclair Broadcast

Tribune Media terminates merger agreement with Sinclair Broadcast, files suit

Tribune Media terminates merger agreement with Sinclair Broadcast, Stockwinners
Tribune Media terminates merger agreement with Sinclair Broadcast, Stockwinners

Tribune Media (TRCO) announced that it has terminated its merger agreement with Sinclair Broadcast Group (SBGI), and that it has filed a lawsuit in the Delaware Chancery Court against Sinclair for breach of contract.

The lawsuit seeks compensation for all losses incurred as a result of Sinclair’s material breaches of the Merger Agreement.

In the Merger Agreement, Sinclair committed to use its reasonable best efforts to obtain regulatory approval as promptly as possible, including agreeing in advance to divest stations in certain markets as necessary or advisable for regulatory approval.

Instead, in an effort to maintain control over stations it was obligated to sell, Sinclair engaged in unnecessarily aggressive and protracted negotiations with the Department of Justice and the Federal Communications Commission over regulatory requirements, refused to sell stations in the markets as required to obtain approval, and proposed aggressive divestment structures and related-party sales that were either rejected outright or posed a high risk of rejection and delay-all in derogation of Sinclair’s contractual obligations.

Ultimately, the FCC concluded unanimously that Sinclair may have misrepresented or omitted material facts in its applications in order to circumvent the FCC’s ownership rules and, accordingly, put the merger on indefinite hold while an administrative law judge determines whether Sinclair misled the FCC or acted with a lack of candor.

As elaborated in the complaint we filed earlier today, Sinclair’s entire course of conduct has been in blatant violation of the Merger Agreement and, but for Sinclair’s actions, the transaction could have closed long ago.

“In light of the FCC’s unanimous decision, referring the issue of Sinclair’s conduct for a hearing before an administrative law judge, our merger cannot be completed within an acceptable timeframe, if ever,” said Peter Kern, Tribune Media’s CEO.

“This uncertainty and delay would be detrimental to our company and our shareholders. Accordingly, we have exercised our right to terminate the Merger Agreement, and, by way of our lawsuit, intend to hold Sinclair accountable.”


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Dun & Bradstreet sold for $6.9 billion

Dun & Bradstreet to be acquired by investor group for $145 per share cash

Dun & Bradstreet sold for $6.9 billion, Stockwinners
Dun & Bradstreet sold for $6.9 billion, Stockwinners

Dun & Bradstreet (DNB) announced that it has entered into a definitive merger agreement to be acquired by an investor group led by CC Capital, Cannae Holdings and funds affiliated with Thomas H. Lee Partners, L.P., along with a group of other distinguished investors.

Under the terms of the agreement, which has been unanimously approved by Dun & Bradstreet’s Board of Directors, Dun & Bradstreet shareholders will receive $145.00 in cash for each share of common stock they own, in a transaction valued at $6.9 billion including the assumption of $1.5 billion of Dun & Bradstreet’s net debt and net pension obligations.

The purchase price represents a premium of approximately 30% over Dun & Bradstreet’s closing share price of $111.63 on February 12, 2018, the last day of trading prior to Dun & Bradstreet’s announcement of a strategic review and an indication of its willingness to consider all options for value creation.

The transaction is expected to close within six months, subject to Dun & Bradstreet shareholder approval, regulatory clearances and other customary closing conditions.

The Dun & Bradstreet Board is unanimously recommending that shareholders vote to adopt the merger agreement at an upcoming special meeting of the shareholders.

Upon the completion of the transaction, Dun & Bradstreet will become a privately held company and shares of Dun & Bradstreet common stock will no longer be listed on any public market.

DNB closed at $122.80.


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Supreme Court ruling moves retail stocks

Physical retailers rise, online retailers drop after Supreme Court tax ruling

Supreme Court ruling moves retail stocks, Stockwinners
Supreme Court ruling moves retail stocks, Stockwinners

Shares of brick-and-mortar retailers are rising, while shares of e-commerce firms are slipping, after the Supreme Court ruled that online retailers can be required to collect sales taxes in states where they have no physical presence.

SUPREME COURT RULING

On Thursday, the Supreme Court sided with the state of South Dakota in a fight it brought against Wayfair (W) to require a business that has no physical presence in the state to collect its sales tax.

Supreme Court ruling moves retail stocks, Stockwinners
Supreme Court ruling moves retail stocks, Stockwinners

The Supreme Court ruled in a 5-to-4 vote that a 1992 judgement in Quill Corporation v. North Dakota regarding the physical presence rule was “unsound and incorrect,” according to a judgement posted to the high court’s website.

Justice Anthony Kennedy, in writing for the majority opinion, said the Quill decision had distorted the economy and resulted in states losing annual tax revenues between $8B-$33B.

“Quill puts both local businesses and many interstate businesses with physical presence at a competitive disadvantage relative to remote sellers,” he wrote.

“Remote sellers can avoid the regulatory burdens of tax collection and can offer de facto lower prices caused by the widespread failure of consumers to pay the tax on their own.”

WHAT’S NOTABLE:

Following the ruling, industry trade organization National Retail Federation issued a statement saying,

“Retailers have been waiting for this day for more than two decades. The retail industry is changing, and the Supreme Court has acted correctly in recognizing that it’s time for outdated sales tax policies to change as well.

This ruling clears the way for a fair and level playing field where all retailers compete under the same sales tax rules whether they sell merchandise online, in-store or both.”

ANALYST COMMENTARY

KeyBanc analyst Edward Yruma called the ruling a negative for Wayfair, arguing that it may reduce some of the price differential that has helped it gain share from traditional peers.

The ruling is also a negative, but to a lesser degree, for eBay (EBAY) and Etsy (ETSY), said Yruma, who views the impact on those two as more related to compliance and implementation.

He adds that the news could be a modest positive for retailers of high-ticket and branded products, such as Best Buy (BBY), Home Depot (HD), Lowe’s (LOW), La-Z-Boy (LZB), Kirkland’s (KIRK), RH (RH) and Williams-Sonoma (WSM).

PRICE ACTION

At Thursday midday, Target (TGT) rose 1.8%, Walmart (WMT) was up 0.7%, Costco (COST) rose roughly 1.1% while Amazon (AMZN) was down 0.4%, Etsy dropped about 2.5%, eBay fell 1.4% and Wayfair (W) was down 1.2%.

In addition, Avalara (AVLR), a software company focused on automated tax compliance that recently held its initial public offering, gained 17.1%.


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Newell Brands sells its Waddington Group for $2.3B

Newell Brands to sell The Waddington Group to Novolex for about $2.3B

Newell Brands tumbles on outlook, Stockwinners.com
Newell Brands sells its Waddington Group for $2.3B

Newell Brands (NWL) announced that it has signed a definitive agreement to sell The Waddington Group, its global consumer and commercial package manufacturing business, to Novolex Holdings, a leading provider of paper and plastic packaging products backed by The Carlyle Group (CG).

The Waddington Group, based in Covington, KY, comprises a global brand portfolio including Eco-Products, the leader in the green packaging space; POLAR PAK containers, serving ware, drink-ware and cutlery; WNA upscale disposable plastic products; and other industry-leading brands.

The sale is part of Newell Brands’ previously announced Accelerated Transformation strategy, designed to create a simpler, faster, stronger consumer-focused portfolio of leading brands.

Gross proceeds from the divestiture are expected to be approximately $2.3B, subject to customary working capital and transaction adjustments. Waddington’s 2017 net sales were $907M.

The company expects the transaction to result in after-tax proceeds of approximately $2.2N, which will be applied to deleveraging and share repurchase.

The transaction is expected to close within approximately 60 days, subject to customary closing conditions, including regulatory approval. J.P. Morgan Securities acted as financial advisor to Newell Brands on the transaction.

NWL closed at $26.69


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Comcast offers to buy Sky News

Comcast announces GBP12.50 per share cash offer for Sky

Comcast tops Fox offer for Sky. Stockwinners.com
Comcast tops Fox offer for Sky

Comcast (CMCSA) published a Rule 2.7 announcement under the City Code on Takeovers and Mergers announcing its pre-conditional “superior” cash offer for the entire issued and to be issued share capital of Sky (SKYAY).

In the UK Announcement, Comcast announced that it intends to make the following commitments regarding Sky and investment in the UK: Maintain annual expenditure in Sky News for ten years, at a level not less than incurred in Sky’s 2017 financial year; Establish an editorial Sky News board with the responsibility to ensure the editorial independence of Sky News for ten years; Maintain Sky’s UK headquarters in Osterley for five years; and Not acquire any majority interest in UK newspapers for five years.

Additionally, Comcast reaffirmed the following statements of intention given in its Rule 2.4 announcement on February 27, 2018: Continue to support the creative industries in the UK and increase investment in UK film and TV production; Support innovation in the UK by continuing to support Sky’s technology hub in Leeds; Continue to support young people in the UK by maintaining Sky’s Software Engineering Academy scheme; and Continue to support Sky’s local community sports programs in the UK.

Comcast believes that, combined, Comcast and Sky will create a business equipped to compete more effectively in a rapidly changing and highly competitive industry.

Together, the companies would be well positioned to drive growth to provide attractive returns to Comcast shareholders and to benefit the employees and customers of both organizations.

Under the terms of the Acquisition, Sky shareholders will be entitled to receive GBP 12.50 in cash for each Sky share.

In addition, Sky shareholders shall be entitled to receive any final dividend in respect of Sky’s financial year ended June 30, 2018, up to an amount of 21.8 pence per Sky share, which is declared and paid prior to the Effective Date.

Comcast’s cash offer represents a 16 percent premium to the existing Twenty-First Century Fox, (FOXA) offer, and implies a value of $31 billion for the fully diluted share capital of Sky.

To provide financing in connection with the Acquisition, Comcast entered into an unsecured bridge credit agreement in an aggregate principal amount of up to GBP 16 billion and an unsecured term loan credit agreement in an aggregate principal amount of up to GBP 7 billion.

The Acquisition is subject to a number of pre-conditions and conditions as set forth in the UK Announcement, including receipt of antitrust and regulatory approvals and securing valid acceptances carrying in aggregate more than 50 percent of the voting rights then normally exercisable at a general meeting of Sky.


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Twitter is urged to combat fake news

Twitter investors urge it to report on steps it’s taking to combat fake news

Twitter is urged to combat fake news; Stockwinners
Twitter is urged to combat fake news;
A group of Twitter (TWTR) shareholders is urging the company for an update on how it is fighting fake news, abuse, and to specify the regulatory risk it faces.

 

Twitter’s board responded that the company is “taking action.”

 

The New York State Retirement Fund and Arjuna Capital have filed a shareholder proposal that would encourage Twitter to put together a detailed report about how well it’s doing enforcing its social network’s terms of service, the company disclosed in a regulatory document on Wednesday.
The shareholders are also urging the company to include in the report the possible financial and other risks it faces from fake news and similar controversies.
“Shareholders are concerned that Twitter’s failure to address these issues proactively has created regulatory, legal, and reputational risk,” the investors said in their proposal.
“We believe Twitter has an obligation to demonstrate how it manages content to prevent violations of its terms of service. Yet, disclosures have been inadequate.”
Twitter also noted its statement of opposition, saying “Our board of directors has considered this proposal and, for the reasons described below, believes that adopting this proposal is not in the best interests of Twitter and our stockholders and unanimously recommends that you vote ‘AGAINST’ this proposal.
Our board of directors and management have devoted, and continue to devote, significant effort to ensure that we are aware of and able to properly address public policy issues of importance to our business.
Because we believe that the issues raised in the proposal are or have already been addressed as part of our ongoing business operations through our existing robust systems, structures, processes and controls, with significant oversight from our board of directors and management at the highest levels, we do not believe that establishing a separate public policy committee of the board of directors is necessary.”

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Piper says big game publishers to catch up quickly to ‘Fortnite,’ ‘PUBG’

Piper says big game publishers to catch up quickly to ‘Fortnite,’ ‘PUBG’

https://stockwinners.com/blog/
Piper says big game publishers to catch up quickly to ‘Fortnite,’ ‘PUBG’

Shares of video game makers are in focus after Piper Jaffray noted that while so-called “battle royale” style games such as “Fortnite” and “PlayerUnkonwn’s Battlegrounds,” or “PUBG,” are drawing a great deal of player engagement now, bigger publishers will catch up quickly to the trend.

WHAT’S NEW

In a research note to investors, Piper Jaffray analyst Michael J. Olson said Epic Games’ “Fortnite” and PUBG Corporation’s “PUBG” may have some short-term impact on time/wallet share for the major game publishers, but he expects this impact to be temporary as these publishers incorporate similar battle royale modes into existing titles.

Olson said that the “mode,” not the game, has attracted users to “Fortnite” and “PUBG,” and therefore he expects major publishers to win back engagement as this style of play is included in their games.

The analyst noted that these battle royale games are most likely to steal time/wallet from other shooter titles, and as such, Activision Blizzard (ATVI) may have the most overlap, followed by EA (EA) and then Take-Two (TTWO).

The analyst maintained an Overweight rating on Activistion, EA, Take-Two and Zynga (ZNGA).

WHAT’S NOTABLE

Meanwhile, mobile versions of “Fortnite” and “PlayerUnknown’s Battlegrounds” have launched this week. Currently, both are the most downloaded games on the iOS (AAPL) App Store.

JEFFERIES ON ACTIVISION

Yesterday, Jefferies analyst Timothy O’Shea maintained a Buy rating on Activision Blizzard, saying he sees a buying opportunity with the shares pulling back over the past week.

The analyst attributed the selloff to fears that “Fortnite” could siphon engagement and monetization away from games like “Call of Duty,” potentially pressuring near-term results. O’Shea said that while channel checks indicate “Fortnite” is in fact pulling some engagement away from Activision, the monetization fears are overblown.


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FDA proposed rules to lower nicotine in cigarettes

FDA takes steps to reduce smoking rates by lowering nicotine in cigarettes

FDA proposed rules to lower nicotine in cigarettes. Stockwinners.com
FDA proposed rules to lower nicotine in cigarettes

FDA Commissioner Scott Gottlieb earlier today issued a statement on steps to “dramatically reduce smoking rates by lowering nicotine in combustible cigarettes to minimally or non-addictive levels.”

The FDA issued an advance notice of proposed rulemaking, or ANPRM, to explore a product standard to lower nicotine in cigarettes to minimally or non-addictive levels.

“This new regulatory step advances a comprehensive policy framework that we believe could help avoid millions of tobacco-related deaths across the country,” Gottlieb said.

The ANPRM provides a “wide-ranging review of the current scientific understanding about the role nicotine plays in creating or sustaining addiction to cigarettes and seeks comments on key areas, as well as additional research and data for public review, as we continue our consideration of developing a nicotine product standard,” he added.

He went on, “We believe the public health benefits and the potential to save millions of lives, both in the near and long term, support this effort. Notably, new estimates included in the ANPRM that are being published in the New England Journal of Medicine evaluate one possible policy scenario for a nicotine product standard.

If this scenario were implemented, this analysis suggests that approximately 5 million additional adult smokers could quit smoking within one year of implementation.”

Publicly traded companies in the space include Altria Group (MO), British American Tobacco (BTI) and Philip Morris (PM). A beneficiary could be 22nd Century Group (XXII). The latter has a patent on a modified tobacco plant with 95% less nicotine than ordinary tobacco plants.


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Netflix introduces PIN protection, Shares jump

Netflix introduces PIN protection, enhancements for ‘informed’ viewing

Disney loss having minimal impact on Netflix subscribers. See Stockwinners.com Market Radar to read more
Netflix introduces PIN protection, enhancements for ‘informed’ viewing

Mike Hastings, a director of enhanced content at Netflix (NFLX), said in a blog post: “At Netflix, we offer a wide variety of series and films catering to an equally broad variety of tastes and sensibilities.

With that in mind, we are improving some long-standing Netflix features that provide members with the information and tools they need to make wise decisions about what’s right for themselves and for their families.

We’re rolling out these improvements across the many devices used by Netflix members, and across our global markets, in the coming months. The first change involves introducing a PIN parental control for individual movies and series to give parents and guardians more specific control over what children can watch on the service.

We understand that every family is different and that parents have differing perspectives on what they feel is appropriate to watch at different ages.

While we already provide PIN protection for all content at a particular maturity level for Netflix accounts, PIN protection for a specific series or film provides families with an additional tool to make decisions they are comfortable with.

In addition, we will also begin displaying more prominently the maturity level rating for a series or film once a member hits play on a title. While these maturity ratings are available in other parts of the experience, we want to ensure members are fully aware of the maturity level as they begin watching.

We are also continuing to explore ways to make this information more descriptive and easier for our members to understand with just a quick glance. One of the great benefits of internet TV is that it allows for amazing variety and provides viewers with complete control over their experience.

At Netflix, we are proud to create and deliver to our members a large catalog of compelling stories crossing many genres from all over the world, while also giving them great control over how and when to enjoy them.

These latest steps are part of our continuous efforts to keep members better informed, and more in control, of what they and their families choose to watch and enjoy on Netflix.”

NFLX is up $11.0 to $312.89.


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Barron’s is bearish on Fitbit, L Brand and Nokia

Barron’s, the weekly publication owned by the Wall Street Journal, in its latest issue mentions several names:

Stockwinners offers Barron's review of Stockwinners offers stocks to buy, stocks to watch, upgrades, downgrades, earnings, Stocks to Buy On Margin
Stockwinners offers Barron’s review of stocks to buy

BULLISH   MENTIONS:

Invesco stock weakness a buying opportunity – U.S. stocks are down 5% from their January 26 peak, while shares of Invesco (IVZ) have fallen much more, which gives investors a buying opportunity, Jack Hough writes in this week’s edition of Barron’s. Driven by strong exchange-traded fund lows, BlackRock’s (BLK) shares have skyrocketed in recent years while Invesco’s have lagged behind, he notes, adding that the latter’s forward price-earnings multiple now represents a bargain-basement 44% discount to BlackRock’s.

Nordstrom, TJX appear to have most staying power– Department store stocks have rebounded in recent months, but they are not all likely to emerge as winners, Avi Salzman writes in this week’s edition of Barron’s. Nordstrom (JWN) and TJX (TJX) appear to have the most staying power, with the former the more attractive choice in terms of valuation, he notes. Kohl’s (KSS) and Macy’s (M) are showing new life but need to prove they can repeat their fourth quarter performances, Salzman says, adding that JCPenney (JCP) and Dillard’s (DDS) remain “tricky.”

BEARISH  MENTIONS:

L Brands shares may still go lower given multiple problems – Shares of L Brands  (LB) tumble after quarterly results, with the stock trading at just 13.5 times 12-month earnings forecasts, Ben Levisohn writes in this week’s edition. While it may look tempting, Levisohn cannot help think that the multiple problems facing the company could send them lower still.

Not much time left for Fitbit – In a follow-up story, Barron’s notes that plenty of people still use fitness trackers and Fitbit (FIT) still sells millions of them, but the company has acknowledged that the market is “rapidly changing.” Fitbit CEO James Park has pledged to expand the company’s line of watches, putting it in direct competition with Apple (AAPL), but there is no indication that Fitbit knows how to nurture an “ecosystem” of software developers.

VMware investors not happy with possible Dell deal – VMWare (VMW) fell on Thursday and Friday in the wake of a CNBC report that Dell and VMware are considering a reverse merger in which the latter would issue shares to Dell Technologies and allow it to go public without doing an IPO, Andrew Bary writes in this week’s edition of Barron’s. A Dell/VMware combination could benefit Dell’s tracking stock for VMware, he notes, while adding that VMware investors are not happy about a possible transaction as it would link a thriving, cash-rich company with a highly leveraged Dell.

5G cannot deploy fast enough for Ericsson/Nokia – While the battle to dominate the future of wireless networks would be a boon for any wireless arms merchant such as Nokia (NOK) or Ericsson (ERIC), the race to build the new technology dubbed 5G is not going to produce a boom in revenue overnight, and both companies are struggling to get back on their feet, Tiernan Ray writes in this week’s edition of Barron’s. If they stabilize this year, and sentiment starts to warm about 5G, it could boost their stock prices even if 5G takes a while to pay off, he adds.


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Macy’s rises on strong earnings

Macy’s rises as turnaround plan fuels better-than-expected earnings

Macy's rises as turnaround plan fuels better-than-expected earnings. Stockwinners.com
Macy’s rises as turnaround plan fuels better-than-expected earnings. Stockwinners.com

Shares of Macy’s (M) rallied after the company reported better-than-expected earnings, including a surprise increase in same-store sales, and offered 2018 guidance.

EARNINGS AND GUIDANCE

Macy’s reported fourth quarter adjusted earnings per share of $2.82, beating analysts’ estimates of $2.71, on revenue of $8.67B, essentially in line with the $8.68B consensus but up 1.8% from the year-ago period.

Comparable sales on an owned basis were up 1.3% and up 1.4% on an owned plus licensed basis. Macy’s also offered guidance for 2018, including EPS of $3.55-$3.75, excluding anticipated settlement charges related to the company’s defined benefit plans, which compares to analyst estimates of $3.66. The retailer sees comp sales on both an owned and an owned plus licensed basis flat to up 1% and expects total sales to decline 0.5% to 2%.

EXECUTIVE COMMENTARY

In a statement, Chairman and CEO Jeff Gennette said, “We are committed to returning Macy’s to comparable sales growth in 2018 and will build on the momentum we created in the fourth quarter of 2017… We head into 2018 with an improved base business, healthy inventories, a focused and engaged organization and a clear path to return Macy’s to growth.”

On the company’s quarterly earnings call, CFO Karen Houget said Macy’s expects stronger sales in the second half of 2018 than the first half and that first half owned plus licensed comp sales are expected to be “approximately flat to slightly down.”

UPDATE ON BROOKFIELD ALLIANCE

Macy’s this morning also provided an update on its agreement with Brookfield Asset Management (BAM), noting that it recently agreed to sell seven floors of its State Street store in Chicago to a private real estate fund sponsored by Brookfield.

As part of the transaction, Macy’s will receive a total of $30M as well as upside participation in the ultimate value creation associated with the conversion of the upper floors to office space. The company anticipates closing this transaction in the first half of fiscal 2018.

The company is also exploring opportunities to sell the approximately 240,000 gross square footI. Magnin portion of the main Union Square building in San Francisco.

The companies have also agreed to certain terms on nine assets, which Brookfield will redevelop once it has received approval. Macy’s said it hopes to reach a deal on the nine assets in 2019. Macy’s said it “continues to opportunistically evaluate its real estate portfolio to identify opportunities where the redevelopment value of its real estate exceeds that of non-strategic operating locations.”

PEERS

Macy’s and other mall-based retailers and department stores have been hurt by the increasing popularity of fast-fashion retailers like Zara, Forever 21 and H&M, as well as an increase in online shopping on sites such as Amazon (AMZN).

Additionally, in January, Macy’s reported that its comparable sales on an owned basis increased 1% in the months of November and December 2017 combined, which lagged rivals J.C. Penney (JCP) and Kohl’s (KSS). J.C. Penney posted same-store sales growth of 3.4% during the November-December holiday period, while Kohl’s reported that total and comparable sales were up 6.9% for the period over the last year. Kohl’s , J.C. Penney, and Nordstrom (JWN) are expected to report later this week.

PRICE ACTION

Shares of Macy’s are off earlier highs and are now up about 4% to $28.51 in Tuesday’s trading.

OTHERS TO WATCH

J.C. Penney is up 2.3%, Nordstrom is down about 2% and Kohl’s is down 1.5%.


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Comcast tops Fox offer for Sky

Comcast tops Fox offer for Sky with $31B acquisition proposal 

Comcast tops Fox offer for Sky. Stockwinners.com
Comcast tops Fox offer for Sky

Comcast (CMCSA) announced a possible offer which it says is a “superior cash proposal” to acquire Sky (SKYAY).

Comcast’s announcement of a superior cash proposal of GBP 12.50 per share represents a 16% increase in value over the existing 21st Century Fox offer (FOXA) for Sky.

Comcast’s superior cash proposal implies an equity value of $31B for Sky.

“A combination would bring attractive financial benefits to Comcast shareholders, and is expected to be accretive to Comcast’s free cash flow per share in year one…The acquisition would enhance the entertainment, distribution, and technology leadership of Comcast, and importantly expand Comcast’s international footprint to more effectively compete in the rapidly changing and intensely competitive entertainment and communications landscape.

The combined business would create compelling opportunities for growth and innovation,” Comcast said in a statement.

“We think Sky is an outstanding company. It has 23 million customers and leading positions in the UK, Italy, and Germany. Sky has been a consistent innovator in its use of technology to deliver a fantastic viewing experience and has a proud record of investment in news and programming. It has great people and a very strong and capable management team.

Comcast intends to use Sky as a platform for growth in Europe. We already have a strong presence in London through our NBCUniversal international operations, and we intend to maintain Sky’s UK headquarters. Adding Sky to the Comcast family of businesses will increase our international revenues from 9% to 25% of Company revenues,” said Brian Roberts, CEO of Comcast.

SKYAYA closed at $61.60.


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