Ascendis Pharma reports positive data, shares jump

Phase 3 heiGHt trial met primary objective in children with pediatric growth hormone deficiency

Ascendis Pharma (ASND) announced positive top-line results from the phase 3 heiGHt Trial, a randomized, open-label, active-controlled trial that compared once-weekly TransCon Growth Hormone to a daily growth hormone in children with pediatric growth hormone deficiency.

Ascendis Pharma reports positive data, shares jump, Stockwinners

The trial met its primary objective, demonstrating that TransCon hGH was observed to be non-inferior and, additionally, superior to the daily hGH on the primary endpoint of annualized height velocity at 52 weeks.

In the primary analysis of the intent-to-treat population using ANCOVA, TransCon hGH demonstrated an AHV of 11.2 cm/year compared to 10.3 cm/year for the daily hGH.

The treatment difference was 0.86 cm/year with a 95% confidence interval of 0.22 to 1.50 cm/year.

The AHV for TransCon hGH was significantly greater than the daily hGH.

The AHV was greater for TransCon hGH than for the daily hGH at each visit, with the treatment difference reaching statistical significance from and including week 26 onward.

The incidence of poor responders was 4% and 11% in the TransCon hGH and daily hGH arms, respectively. All sensitivity analyses completed from the trial support the primary outcome, indicating the robustness of these results.

Results from the trial indicate that TransCon hGH was generally safe and well-tolerated, with adverse events consistent with the type and frequency observed with daily hGH therapy and comparable between arms of the trial.

ASND is up $44.64 to $113.95.

Cantor Fitzgerald analyst Alethia Young raised her price target for Ascendis Pharma to $185 from $100 as she was “positively surprised” that the TransCon hGH study for growth hormone achieved a superior result on annualized growth velocity of .86cm.

The analyst thinks that the expectation had been non-inferiority with a slightly favorable numerical trend. Young also thinks safety was clean as well, which has been a challenge with other long acting growth hormones.

She would expect shares to trade up 50%-100% based on her model, and sees continued upside from shares as additional programs, such as TransCon PTH, achieve proof of concept and more candidates from the proprietary TransCon platform enter the clinic. The analyst reiterates an Overweight rating on the shares.

Growth hormone (GH) has been available for management of the short stature associated with growth hormone deficiency (GHD) for more than 60 years; recombinant DNA-derived human growth hormone (rhGH) has been available since 1985. While availability is no longer a problem, there still remains a number of difficulties with the diagnosis of GHD, resulting mainly from the lack of appropriate tools to make (or exclude) the diagnosis reliably.

The incidence of short stature associated with GHD has been estimated to be about 1:4000 to 1:10000 . It is the primary indication for GH treatment in childhood, which presently requires daily subcutaneous injections for the patient and substantial cost for the healthcare system. Based on these premises, it is clear that an accurate diagnosis is essential

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Verrica Pharmaceuticals reports positive data on its molluscum contagiosum drug

Verrica Pharmaceuticals presents results from Phase 3 clinical trials of VP-102

Verrica Pharmaceuticals reports positive data on its molluscum contagiosum drug, Stockwinners

Verrica Pharmaceuticals (VRCA) presented data from the company’s pivotal Phase 3 CAMP-1 and CAMP-2 trials of lead product candidate, VP-102, at the American Academy of Dermatology annual meeting being held in Washington, DC from March 1-5.

Both trials of VP-102 in patients with molluscum contagiosum successfully met their primary endpoints.

In each trial, a clinically and statistically significant proportion of patients treated with VP-102 demonstrated complete clearance of all treatable molluscum lesions in 12 weeks.

On average, molluscum can take approximately 13 months to resolve without treatment, and in some cases can remain unresolved for several years.

The two randomized, double-blind, multicenter, placebo-controlled trials evaluated the efficacy of dermal application of VP-102 compared to placebo in subjects with molluscum.

In total, the trials enrolled 528 subjects two years of age and older with molluscum at 31 centers in the U.S. Subjects were treated once every 21 days with topical solution of 0.7% cantharidin for up to four applications.

Complete clearance of molluscum lesions was evaluated by assessment of the number of lesions at study visits over 12 weeks. Results from CAMP-1 and CAMP-2 showed 46% and 54% of subjects treated with VP-102, respectively, achieved complete clearance of all treatable molluscum lesions at the end of the trials versus 18% and 13% of subjects in the placebo groups.

By Day 84, VP-102 treated subjects had a 69% and 83% mean reduction in the number of molluscum lesions, a pre-specified endpoint, in CAMP-1 and CAMP-2 respectively, compared to a 20% increase and a 19% reduction for subjects on placebo. VP-102 was well-tolerated in both trials, with no serious adverse events reported in VP-102 treated subjects.

The most frequently reported adverse events were application site reactions that are well-known, reversible side effects related to the mechanism of action of cantharidin, a blistering agent, which is the active ingredient in VP-102.

There were no treatment-related serious adverse events reported in CAMP-1 or CAMP-2. Verrica previously announced topline results from both trials on January 3, 2019.

Based on the positive results, the company plans to submit a New Drug Application for VP-102 in the second half of 2019. If approved, VP-102 would be the first FDA-approved treatment for molluscum contagiosum.


Molluscum contagiosum is a relatively common viral infection of the skin, mainly in children, Stockwinners.com

VRCA closed at $12.11.

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Top Stories for weekend of February 22

U.S. extends trade talk deadline with China

As a result of these very… productive talks, I will be delaying the U.S. increase in tariffs now scheduled for March 1.

1. Using his Twitter account, President Donald Trump said that, “I am pleased to report that the U.S. has made substantial progress in our trade talks with China on important structural issues including intellectual property protection, technology transfer, agriculture, services, currency, and many other issues.

Assuming both sides make additional progress, we will be planning a Summit for President Xi and myself, at Mar-a-Lago, to conclude an agreement. A very good weekend for U.S. & China!”

2. Kraft Heinz (KHC) has tapped investment bank Credit Suisse to review options for its Maxwell House coffee business, which could include a potential sale, CNBC’s Lauren Hirsch reported, citing people familiar with the matter. Based off valuations for other sales of consumer brands, a sale could fetch a price of at least $3B, sources said.

3. While investors are cheering indications of progress being made toward a resolution of trade issues between China and the U.S., the battle for tech supremacy between the two global superpowers shows few signs of abating, Reshma Kapadia wrote in this week’s edition of Barron’s. Global chip makers remain highly reliant on China, which makes just 30% of the chips it actually needs, the publication noted.

Companies with revenue exposure to china include Qualcomm (QCOM), Micron (MU), Marvell Technology (MRVL), Broadcom (AVGO), NXP Semiconductors (NXPI), AMD (AMD), Maxim Integrated Devices (MXIM), Applied Materials (AMAT), Intel (INTC), Xilinx (XLNX), Skyworks (SWKS), Nvidia (NVDA), Analog Devices (ADI), Lam Research (LRCX), and KLA-Tencor (KLAC).

How to train your dragon top the box office, Stockwinners

4. Comcast (CMCSA; CMCSK) subsidiary Universal’s “How to Train Your Dragon: The Hidden World” won the weekend with a franchise-best launch of $55.5M from 4,259 theaters in North America, the top opening of the year so far. Overseas, the threequel earned another $34.7M from 53 market for a foreign total of $216.9M and $274.9M globally. The movie sports an audience grade of A and a 92% Rotten Tomatoes score.

5. Altria Group’s (MO) and WellCare Health (WCG) saw positive mentions in Barron’s, while Windstream (WIN) was mentioned cautiously.

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Achieve Life Sciences higher on smoking data

Achieve Life Sciences announces final data from cytisinicline study

Achieve Life Sciences (ACHV) announced final data from their Phase I/II multi-dose, pharmacokinetic and pharmacodynamics, or PK/PD, clinical study of cytisinicline in smokers.

The study evaluated the repeat-dose PK and PD effects of 1.5 mg and 3 mg cytisinicline in 26 healthy volunteer smokers when administered over the standard 25-day course of treatment.

Smokers in the study had a mean age of 39 years, smoked on average 17.2 cigarettes a day, and were not required to quit smoking or have a predetermined quit date while on study.

All subjects had a significant and immediate reduction in cigarettes smoked within 2 days of initiating cytisinicline treatment.

By Day 26, subjects had an average 80% reduction in cigarettes smoked, 82% reduction in expired carbon monoxide, and 46% had stopped smoking.

The biochemically verified smoking cessation rates were 39% and 54% in the 1.5 mg and 3.0 mg cytisinicline treated groups, respectively.

The PK results indicated expected increases in plasma concentration between the standard 1.5 mg and higher 3.0 mg doses of cytisinicline with no evidence of drug accumulation.

Cytisinicline at either dose was well tolerated with only transient, mild-to-moderate headache as the most common adverse event, which was not treatment limiting. No adverse events were severe, serious, or led to withdrawal from the study.

Cindy Jacobs, CMO at Achieve commented, “Given the short 25-day treatment period, the abstinence rates observed are impressive, particularly since subjects were not required to commit to quitting and received minimal behavioral support during the study. These results continue to support our belief that cytisinicline could be a well-tolerated and effective potential treatment option for the millions of people who are battling nicotine addiction.”

ACHV closed at $1.81, it last traded at $2.88.

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Bristol-Myers comments on Celgene’s purchase

Bristol-Myers sees ‘meaningful financial benefits’ from Celgene transaction.

Bristol-Myers treatment for colorectal cancer approved, Stockwinners

Bristol Meyers Comments on Celgene purchase, Stockwinners

Bristol-Myers Squibb (BMY) said an updated its investor presentation about the Celgene (CELG) transaction.

The company said, “The Celgene transaction is the natural next step in Bristol-Myers Squibb’s proven strategy that has consistently delivered results for over a decade.

Through a disciplined approach to driving innovation, focusing on high-value opportunities and sourcing innovation externally to complement its internal portfolio and pipeline, Bristol-Myers Squibb has generated consistently strong growth and increased its dividend for 10 consecutive years.

The combination with Celgene will create a leading biopharma with increased scale, while maintaining the same agility and a focus on delivering for patients in core disease areas of high-unmet medical need.

The pipeline of the combined company provides significant near-, medium- and long-term opportunities for value creation. Bristol-Myers Squibb is acquiring Celgene’s robust and complementary pipeline at an attractive price.

In addition to six expected near-term product launches representing more than $15B in revenue potential, the combination will greatly increase Bristol-Myers Squibb’s Phase I and II assets, which will provide the next set of registrational opportunities in core therapeutic areas.

With an expanded set of scientific platforms and research capabilities, Bristol-Myers Squibb will be well positioned to discover and develop highly innovative medicines and accelerate these new options to patients through one of the highest-performing commercial organizations in the industry.

Bristol-Myers Squibb is well positioned for 2025 and beyond with continued leadership across Oncology and a diversified portfolio of assets.

The combined company will have a broad, balanced and earlier life-cycle marketed portfolio with a significantly higher number of opportunities across multiple diseases to drive the growth of Bristol-Myers Squibb in the second half of the decade. These opportunities will support financial strength for continued investment and innovation.

The Celgene transaction is expected to generate meaningful financial benefits for all stockholders.

With more than $45B of expected free cash flow generation over the first three full years post-closing, the combination will enable rapid debt reduction to de-lever the balance sheet and strengthen Bristol-Myers Squibb’s credit profile.

Bristol-Myers Squibb expects to realize run-rate cost synergies of approximately $2.5B by 2022 from the combination, and the combined company is expected to grow revenue and EPS every year through 2025.”

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WalMart Earnings Outlook

Walmart (WMT) is scheduled to report results of its fourth quarter before the market open on Tuesday, February 19, with a conference call scheduled for 8:00 am EDT.

Wal-Mart reports next week. See Stockwinners.com for the report

What to watch for:

1. OUTLOOK: Walmart previously raised its fiscal 2019 EPS view to $4.90-$5.05 and narrowed its net sales view to up about 2%, but cut its EPS outlook at its investor meeting in October to $4.65-$4.80.

In its November earnings report, Walmart again raised its FY19 EPS outlook to $4.75-$4.85. The current Street forecast for FY19 EPS stands at $4.84 on revenue of $514.33B.

The company previously said it was moving to an annual guidance framework with its quarterly updates, and that while there may be fluctuations within the quarters, “we believe EPS growth will be relatively consistent across the year.”

Baird analyst Peter Benedict said he expects Walmart’s Q4 earnings to be solid, and expects guidance to remain intact, although he recognizes the uncertainty with Flipkart as the result of new regulations in India.

2. HOLIDAY SEASON:

Jet.com’s holiday weekend was “truly horrible,” with sales down 6% on Thanksgiving and Black Friday and a 39% plunge on Cyber Monday vs. last year, BuzzFeed News reported, citing data from market research firm Edison Trends.

According to the data, Target.com (TGT) sales increased 48% on Thanksgiving and Black Friday and 19% on Cyber Monday, Amazon (AMZN) increased by 25% on Black Friday and Thanksgiving and 17% on Cyber Monday, and Jet.com parent Walmart.com increased sales revenue by 23% on Thanksgiving and Black Friday and 32% on Cyber Monday.

In late December, Amazon said that it had a “record-breaking” holiday season with more items ordered worldwide than ever before. Amazon customers shopped at record levels from a wide selection of products across every department, it said.

3. COMPETITION:

Retailers like Walmart have been hurt by an increase in online shopping on sites like Amazon rather than at brick-and-mortar stores. Walmart is seeking to create a big ad business to rival that of Amazon, Bloomberg reported, adding that it has hired executives from NBC (CMCSA) and CBS (CBS) to help bolster its advertising business.

Walmart has also launched a private-label furniture brand, called MoDRN, which is “a direct hit to big furniture retailers” such as Wayfair (W) and Ikea and a challenge to rival Amazon, Erica Pandey wrote for Axios.

4. FLIPKART:

Bernstein analyst Brandon Fletcher said that India has been bandying about restrictive e-commerce regulations this past year, and finally pulled the trigger despite protestations from both Walmart and Amazon.

Walmart to pay about $16B for initial stake of about 77% in India's Flipkart, Stockwinners
Walmart to pay about $16B for initial stake of about 77% in India’s Flipkart, Stockwinners

The new rules put a damper on 1P selling models, pricing discounts, supplier exclusives, and supplier shares of sales above 25%, all of which are important to both companies’ planned models.

While not significant to Walmart’s total revenues, the analyst believes it does put a damper on its long-term growth potential in the market through Flipkart and raises the question of where Walmart will make up that growth.

Morgan Stanley analyst Simeon Gutman said Flipkart’s losses will likely rise due to new e-commerce regulations in India and Walmart investors “can’t ignore Flipkart” as it once again becomes a bigger part of the retailer’s investment narrative.

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Levi’s coming to NYSE

Levi Strauss & Co. said in a regulatory filing that it intends to seek listing on the New York Stock Exchange under the symbol “LEVI” via an initial public offering.

Levis coming to NYSE – Stockwinners.com

“Today we design, market and sell products that include jeans, casual and dress pants, tops, shorts, skirts, jackets, footwear and related accessories for men, women and children around the world under our Levi’s, Dockers, Signature by Levi Strauss & Co. and Denizen brands.

With $5.6 billion in net revenues and sales in more than 110 countries in fiscal year 2018, we are one of the world’s leading apparel companies, with the Levi’s brand having the highest brand awareness in the denim bottoms category globally,” the company disclosed.

The underwriters on the deal include Goldman Sachs, J.P. Morgan, Morgan Stanley, Evercore, BNP Paribas, Citigroup, Guggenheim, HSBC, Drexel Hamilton, Telsey Advisory and The Williams Capital Group.


Levi Strauss was founded in May 1853  when German immigrant Levi Strauss came from Bavaria, to San Francisco, California to open a west coast branch of his brothers’ New York dry goods business. 

Levi Strauss & Co. introduces its first bicycle pants in 1895. It took another 116 years for the company to come out with Levi’s® Commuter, a multi-functional performance product designed for the modern cyclist. When Levi Strauss passes away in September, his four nephews take over the business and carry out his numerous bequests to Bay Area charities serving children and the poor. On April 18, The San Francisco earthquake and fire destroy the headquarters and two factories of Levi Strauss & Co.

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Apptio sold for $1.94 billion

Apptio to be acquired by Vista Equity Partners for $38 per share 

Apptio sold for $1.94 billion, Stockwinners
Apptio sold for $1.94 billion, Stockwinners

Apptio (APTI) announced that it has entered into a definitive agreement to be acquired by an affiliate of Vista Equity Partners.

Apptio, Inc. provides cloud-based technology business management (TBM) solutions to enterprises. Its cloud-based platform and SaaS applications enable IT leaders to analyze, optimize, and plan technology investments, as well as to benchmark financial and operational performance against peers.

Under the terms of the agreement, Vista will acquire all outstanding shares of Apptio common stock for a total value of approximately $1.94B.

Apptio shareholders will receive $38.00 in cash per share, representing a 53% premium to the unaffected closing price as of November 9, 2018.

Apptio’s board unanimously approved the deal and recommended that stockholders vote their shares in favor of the transaction.

Apptio’s headquarters will remain in Bellevue, with regional offices across the U.S., EMEA and APAC.

Closing of the deal is subject to customary closing conditions, including the approval of Apptio shareholders and antitrust approval in the United States.

The transaction is expected to close in Q1 2019 and is not subject to a financing condition.

The merger agreement includes a 30 day “go-shop” period, which permits Apptio’s Board and advisors to actively initiate, solicit, encourage, and potentially enter negotiations with parties that make alternative acquisition proposals.

Apptio will have the right to terminate the merger agreement to enter into a superior proposal subject to the terms and conditions of the merger agreement.

There can be no assurance that this 30 day “go-shop” will result in a superior proposal, and Apptio does not intend to disclose developments with respect to the solicitation process unless and until the Board makes a determination requiring further disclosure.


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Finisar sold for $3.2 billion

II-VI to acquire Finisar for $26 per share in cash/stock deal

Finisar sold for $3.2 billion, Stockwinners
Finisar sold for $3.2 billion, Stockwinners

II-VI (IIVI) and Finisar (FNSR) announced that they have entered into a definitive merger agreement under which II-VI will acquire Finisar in a cash and stock transaction with an equity value of approximately $3.2B.

Under the terms of the merger agreement, which has been unanimously approved by the Boards of Directors of both companies, Finisar’s stockholders will receive, on a pro-rated basis, $15.60 per share in cash and 0.2218x shares of II-VI common stock, valued at $10.40 per share based on the closing price of II-VI’s common stock of $46.88 on November 8, 2018.

The transaction values Finisar at $26.00 per share, or approximately $3.2B in equity value and represents a premium of 37.7% to Finisar’s closing price on November 8, 2018. Finisar shareholders would own approximately 31% of the combined company.

The combination of II-VI and Finisar would unite two innovative, industry leaders with complementary capabilities and cultures to form a formidable industry leading photonics and compound semiconductor company capable of serving the broad set of fast growing markets of communications, consumer electronics, military, industrial processing lasers, automotive semiconductor equipment and life sciences.

Together, II-VI and Finisar will employ over 24,000 associates in 70 locations worldwide upon closing of the transaction. On a pro forma basis, the combined company had approximately $2.5B of annual revenue.

The combined broad base of talent, technology and manufacturing is expected to enhance the ability to better address near-to medium-term opportunities and accelerate revenue growth.

The combined company expects to realize $150M of run-rate cost synergies within 36 months of closing. Synergies are expected to be achieved from procurement savings, internal supply of materials and components, efficient research and development, consolidation of overlapping costs and sales and marketing efficiencies.

The transaction is expected to drive accretion in Non-GAAP earnings per share for the first full year post close of approximately 10% and more than double that thereafter.

II-VI intends to fund the cash consideration with a combination of cash on hand from the combined companies’ balance sheets and $2 billion in funded debt financing.

The transaction is expected to close in the middle of calendar year 2019, subject to approval by each company’s shareholders, antitrust regulatory approvals and other customary closing conditions.Upon closing of the transaction, Dr. Mattera will continue to serve as President and CEO of the combined company.

In addition, in connection with the closing of the transaction, three Finisar board members will be appointed to the II-VI board, which will be expanded to 11 directors.


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ConvergeOne sold for $1.8 billion

ConvergeOne to be acquired by CVC for $12.50 per share

ConvergeOne sold for $1.8 billion, Stockwinners
ConvergeOne sold for $1.8 billion, Stockwinners

ConvergeOne Holdings (CVON) announced that it has entered into a definitive agreement to be acquired by affiliates of CVC Fund VII in an all-cash transaction valued at approximately $1.8B.

ConvergeOne Holdings, Inc. provides collaboration and technology solutions for large and medium enterprises in the United States. The company offers unified communications solutions, including communications applications, such as voice, email, presence, chat/text, and video technologies; voice and text messaging solutions; mobility and bring your own device solutions for business continuity with the seamless connection of mobile, landline, cellular, and Wi-Fi enabled devices.

Subject to customary closing conditions and regulatory approvals, ConvergeOne expects the transaction to close in the fourth quarter of 2018 or the first quarter of 2019.

ConvergeOne will maintain its corporate headquarters in Eagan, MN and continue to be led by its current executive team.

Pursuant to the terms of the merger agreement, affiliates of CVC will commence a tender offer for all of the outstanding shares of the company in an all-cash transaction valued at $12.50 per share of common stock of the company, representing a 35% premium to the thirty-day VWAP prior to October 25, 2018 and representing over a 56% premium to the closing price on ConvergeOne’s debut date on the Nasdaq on February 23.

John McKenna Jr., Chairman and CEO of ConvergeOne commented, “Today’s announcement is a tremendous accomplishment for ConvergeOne and highlights the continued success of the Company. We are extremely proud of the ConvergeOne team, and we truly appreciate our phenomenal partnership with Clearlake and our other shareholders that has resulted in significant value creation. Our team is thrilled to partner with CVC to execute on the compelling growth opportunities in the rapidly evolving collaboration and technology services market.”

CVON closed at $9.43.


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Red Hat sold for $34 billion

 IBM to acquire Red Hat for $190 per share

Red Hat sold for $34 billion, Stockwinners
Red Hat sold for $34 billion, Stockwinners

IBM (IBM) and Red Hat (RHT) announced that the companies have reached a definitive agreement under which IBM will acquire all of the issued and outstanding common shares of Red Hat for $190 per share in cash, representing a total enterprise value of approximately $34B.

With this acquisition, IBM will remain committed to Red Hat’s open governance, open source contributions, participation in the open source community and development model, and fostering its widespread developer ecosystem.

In addition, IBM and Red Hat will remain committed to the continued freedom of open source, via such efforts as Patent Promise, GPL Cooperation Commitment, the Open Invention Network and the LOT Network. IBM and Red Hat also will continue to build and enhance Red Hat partnerships, including those with major cloud providers, such as Amazon Web Services (AMZN), Microsoft (MSFT) Azure, Google (GOOG; GOOGL) Cloud, Alibaba (BABA) and more, in addition to the IBM Cloud.

At the same time, Red Hat will benefit from IBM’s hybrid cloud and enterprise IT scale in helping expand their open source technology portfolio to businesses globally.

Upon closing of the acquisition, Red Hat will join IBM’s Hybrid Cloud team as a distinct unit, preserving the independence and neutrality of Red Hat’s open source development heritage and commitment, current product portfolio and go-to-market strategy, and unique development culture.

Red Hat will continue to be led by Jim Whitehurst and Red Hat’s current management team.

Jim #Whitehurst also will join IBM’s senior management team and report to Ginni #Rometty.

IBM intends to maintain Red Hat’s headquarters, facilities, brands and practices.

The acquisition will accelerate IBM’s revenue growth, gross margin and free cash flow within 12 months of closing.

It also will support a solid and growing dividend. The company will continue with a disciplined financial policy and is committed to maintaining strong investment grade credit ratings.

The company will target a leverage profile consistent with a mid to high single A credit rating. The company intends to suspend its share repurchase program in 2020 and 2021.

The company intends to close the transaction through a combination of cash and debt. The acquisition has been approved by the boards of directors of both IBM and Red Hat.

It is subject to Red Hat shareholder approval. It also is subject to regulatory approvals and other customary closing conditions. It is expected to close in the latter half of 2019.


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Tesla jumps on results, upgrades

Tesla rises as analysts digest first profit in two years

Tesla Model 3 named Popular Mechanics' Car of the Year
Tesla Model 3 named Popular Mechanics’ Car of the Year

Shares of Tesla (TSLA) are on the rise after the company reported third quarter results, with a net profit of $312M, the electric-vehicle maker’s largest ever.

Tesla also said deliveries of its Model 3 grew to 56,000, adding that it “was the best-selling car in the U.S. in terms of revenue and the 5th best-selling car in terms of volume.”

Following the announcement, Wolfe Research analyst Dan Galves upgraded Tesla to Outperform, while several other firms raised their targets on the stock. Nonetheless, some Wall Street analysts remain bearish on Tesla, telling investors to “not get used to [this quarter’s profitability.]”

stockwinners.com/blog
Tesla jumps on results, upgrades – See Stockwinners Market Radar

RESULTS

Last night, Tesla reported third quarter adjusted earnings per share of $2.90 and revenue of $6.82B, both above consensus of (19c) and $6.3B, respectively.

The company said that, “Model 3 quarterly production and deliveries should continue to increase in the fourth quarter compared to the third quarter.

Our target of delivering 100,000 Model S and X vehicles this year remains unchanged.

We expect gross margin for Model 3 to remain stable in the fourth quarter as manufacturing efficiencies and fixed cost absorption offset a slightly lower trim mix and the negative impact of tariffs from Chinese sourced components.

https://stockwinners.com/blog/
Stockwinners.com,Tesla jumps on results, upgrades

For all three vehicles, additional tariffs in the fourth quarter on parts sourced from China will impact our gross profit negatively by roughly $50M […] The third quarter of 2018 was a truly historic quarter for Tesla.

Model 3 was the best-selling car in the U.S. in terms of revenue and the 5th best-selling car in terms of volume.

With average weekly Model 3 production through the quarter, excluding planned shutdowns, of roughly 4,300 units per week, we achieved GAAP net income of $312M.”

WOLFE RESEARCH SAYS BUY TESLA

In a post-earnings research note, Wolfe Research’s Galves upgraded Tesla to Outperform from Peer Perform, with a $410 price target.

Saying that “Tesla became a real company,” the analyst argued that third quarter non-GAAP earnings of $2.90 and free cash flow of $881M are proof that Tesla’s earnings power is likely to outperform traditional automakers.

Management’s focus on cost and capital efficiency boosted Galves’ confidence that priorities have changed from unit growth at all cost to profitable growth and self-funding.

Further, the analyst argued that demand and margin outlook appear “very positive” and the fact that 50% of trade-ins on the Model 3 are non-luxury vehicles indicates the buyer base is likely bigger than expected.

Also bullish on the stock, Piper Jaffray analyst Alexander Potter raised his price target for Tesla to $396 from $389 as he believes the company reported a “milestone quarter,” with margins, earnings, and cash flow easily beating expectations.

While there is a still a lot of “hair” on the company, bears will struggle to poke holes in the results, Potter contended, adding that Tesla appears increasingly likely to achieve financial self-sufficiency.

The analyst reiterated an Overweight rating on Tesla shares. Oppenheimer, JMP Securities, and RBC Capital also raised their price targets on the stock.

‘DON’T GET USED TO IT’

Still bearish on Tesla shares, UBS analyst Colin Langan reiterated a Sell rating on the stock in a research note titled “Profitability at last, just don’t get used to it.”

The analyst continues to expect Model 3 average selling prices to decline into fourth quarter and 2019 as Tesla begins delivering the new $46,000 mid-range model.

Voicing a similar opinion, Needham analyst Rajvindra Gill told investors that while Tesla posted its first quarterly profit and positive free cash flow in over two years thanks to higher-margin Model 3 sales, he remains concerned over margin in the first half of 2019 given an “unfavorable mix shift of Model 3s, decline in ZEV sales, service margins stay in -35%-40% and pricing pressure on Model S/X.” Gill also questions the speed and profitability of Tesla’s production of a $45K car, “not to mention the $35K version”, in order to match its backlog of orders.

The analyst reiterated an Underperform rating on the shares.

PRICE ACTION

In Thursday’s trading, shares of Tesla have gained about 5% to $302.46.


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JetPay sold for $184 million

NCR Corp. to acquire JetPay for $5.05 per share

JetPay sold for $184 million, Stockwinners
JetPay sold for $184 million, Stockwinners

NCR Corporation (NCR) announced a definitive agreement to acquire Allentown, PA-based JetPay (JTPY).

The transaction will be a cash tender offer of $5.05 per JetPay share, which represents a multiple of 2.9 times 2018 consensus revenue forecast of $63.4 million.

The purchase price is approximately $184 million and will be financed with a combination of cash on hand and existing capacity under NCR’s revolving credit facility.

The offer has been approved by each company’s board of directors.

This acquisition will enable NCR to integrate a cloud-based payments platform into its enterprise point-of-sale solutions for retail and hospitality industries.

It also accelerates NCR’s strategy of increasing recurring revenue growth and expanding margins by enhancing its mix of software and services.

The transaction is anticipated to close by year-end, subject to regulatory approval and other customary closing conditions. The two companies anticipate a smooth transition for customers, channel partners and employees.

Two of JetPay’s major stockholders, Flexpoint Ford, a private equity investment firm that specializes in the financial services and healthcare industries, and Larry Stone, a longstanding executive in the payment processing industry, have agreed to tender their shares in support of the transaction.


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Musk’s tweet sends Tesla shares lower

Tesla slides after Elon Musk mocks SEC on Twitter

https://stockwinners.com/blog/
Musk’s tweet sends Tesla shares lower

Shares of Tesla (TSLA) dropped in Friday’s trading after Elon Musk, the company’s CEO, mocked the Securities and Exchange Commission in a tweet, calling the agency the “Shortseller Enrichment Commission.”

Last weekend Musk reached an agreement with the SEC to settle fraud charges, and that charge is currently pending approval from a federal judge.

MUSK MOCKS SEC

On Thursday, Musk tweeted, in apparent reference to the SEC, “Just want to [sic] that the Shortseller Enrichment Commission is doing incredible work. And the name change is so on point!”

Musk’s tweet came just hours after Musk and the SEC were told by U.S. District Court Judge Alison Nathan, who must approve the deal, to explain why the settlement is “fair and reasonable” by October 11, Bloomberg reported.

Separately, Musk took aim at BlackRock (BLK) and other large fund managers for fueling short sellers.

Musk alleged in a tweet that BlackRock and other firms pocket “excessive profit from short lending while pretending to charge low rates for ‘passive’ index tracking.”

SEC SETTLEMENT

This past weekend, the SEC announced that Musk agreed to settle the securities fraud charge brought against him last week.

The settlement requires that Musk will step down as Tesla’s chairman and will be ineligible to be re-elected chairman for three years.

Additionally, Tesla will appoint two new independent directors to its board and both the CEO and company will each pay $20M penalties to settle allegations that Musk misled investors in August by tweeting that he was considering taking Tesla private and had secured funding for the effort.

According to the SEC’s complaint, Musk’s misleading tweets caused Tesla’s stock price to jump by over 6% on August 7, and led to “significant market disruption.”

Additionally, the SEC is requiring that Musk get approval from the company’s lawyer before tweeting anymore company news, which reports had said could clamp down on Musk’s “headline-grabbing, unpredictable approach to promoting Tesla’s brand.”

Recode’s Teddy Schleifer reported via Twitter after the “Shortseller Enrichment Commission” tweet that the SEC agreement on Musk’s tweets “does not take effect for 90 days from the settlement date, per source. So he still has ~80 days to tweet whatever he wants.”

The SEC declined to comment on Musk’s tweet, Schleifer said.

Additionally, Fox Business Network’s Charlie Gasparino also tweeted, saying that the “@SEC_Enforcement continues to investigate @Tesla over possible misstatements on production/profitability targets-sources focus is on stated targets for Model 3/co profitability.

SEC sources say case is tougher case than @elonmusk ‘funding secured’ tweet.”

PRICE ACTION

In Friday morning trading, shares of Tesla are down 4.2% to $270.17.


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Toyota enters self-driving car services

Toyota, SoftBank agree to form JV for self-driving car services

Toyota enters self-driving car services, Stockwinners
Toyota enters self-driving car services, Stockwinners

Shares of Toyota (TM) are in focus on Thursday after the company announced plans to team up with SoftBank (SFTBF) to develop self-driving car services.

The news follows an announcement from General Motors (GM) on Wednesday that Honda (HMC) will invest $2.75B and take a 5.7% stake in its Cruise self-driving vehicle unit, in which SoftBank is also an investor.

TOYOTA, SOFTBANK TO FORM JV

Toyota announced in a statement that it and SoftBank will form a joint venture called MONET, short for mobility network, to develop businesses that will use driverless-car technology to offer new services, such as mobile convenience stores and delivery vehicles in which food is prepared en route.

MONET will provide coordination between Toyota’s Mobility Services Platform, Toyota’s information infrastructure for connected vehicles, and SoftBank’s Internet of Things Platform, which was built to create new value from the collection and analysis of data acquired from smartphones and sensor devices, the companies said.

MONET will roll out an autonomous driving service using e-Palette, Toyota’s dedicated battery electric vehicle for mobility services, by the second half of the 2020s, Toyota and SoftBank added.

The venture will have initial capital of Y2B, and SoftBank will own just over half of the business, which will initially focus on Japan and eventually go global, according to a Reuters report.

Junichi Miyakawa, chief technology officer at SoftBank who will be CEO of the new company, commented that “SoftBank alone and automakers alone can’t do everything… We want to work to help people with limited access to transportation.”

WHAT’S NOTABLE

Earlier this year, Toyota set up a new company dedicated to the research and development of self-driving vehicles, with plans to invest $2.8 billion to develop a commercially viable autonomous car.

RECENT PARTNERSHIPS IN AUTONOMOUS VEHICLES

On Wednesday, Cruise and GM announced that they partnered with Honda to work towards large-scale deployment of autonomous vehicle technology.

Honda will work jointly with Cruise and General Motors to fund and develop a purpose-built autonomous vehicle for Cruise that can serve a wide variety of use cases and be manufactured at high volume for global deployment.

Honda will contribute approximately $2B over 12 years to these initiatives, which, together with a $750M equity investment in Cruise, brings its total commitment to the project to $2.75B.

SoftBank’s Vision Fund committed $2.3B to Cruise earlier this year.

Additionally, Renault (RNSDF)-Nissan (NSANY) and Daimler (DDAIF) are considering expanding their collaboration to battery and autonomous vehicle technology as well as mobility services, Reuters reported on Wednesday, citing comments made by the CEOs of both companies.

“The industry being in transformation in the area of connectivity, autonomous cars and connected services, there are plenty of areas of cooperation for our entities,” Renault Nissan CEO Carlos Ghosn said.


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