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.]”

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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.

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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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Worldwide IT spending to reach $3.7T in 2018

Gartner says worldwide IT spending to reach $3.7T in 2018 

worldwide IT spending to reach $3.7T in 2018. Stockwinners.com
Worldwide IT spending to reach $3.7T in 2018

Worldwide IT spending is projected to total $3.7 trillion in 2018, an increase of 4.5 percent from 2017, according to the latest forecast by Gartner, Inc.  (IT)

“Global IT spending growth began to turn around in 2017, with continued growth expected over the next few years. However, uncertainty looms as organizations consider the potential impacts of Brexit, currency fluctuations, and a possible global recession,” said John-David Lovelock, research vice president at Gartner.

“Despite this uncertainty, businesses will continue to invest in IT as they anticipate revenue growth, but their spending patterns will shift.

Projects in digital business, blockchain, Internet of Things, and progression from big data to algorithms to machine learning to artificial intelligence (AI) will continue to be main drivers of growth.”

The devices segment is expected to grow 5.6 percent in 2018. In 2017, the devices segment experienced growth for the first time in two years with an increase of 5.7 percent.

End-user spending on mobile phones is expected to increase marginally as average selling prices continue to creep upward even as unit sales are forecast to be lower.

PC growth is expected to be flat in 2018 even as continued Windows 10 migration is expected to drive positive growth in the business market in China, Latin America and Eastern Europe.

The impact of the iPhone 8 and iPhone X was minimal in 2017, as expected. However, iOS shipments are expected to grow 9.1 percent in 2018.


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Scana Corporation sold for $14.6 billion

Dominion, Scana announce all-stock merger valuing Scana at $55.35 a share

 Scana Corporation sold for $7.9 billion. Stockwinners.com
Scana Corporation sold for $7.9 billion.

Dominion Energy (D) and Scana Corporation (SCG) announced an agreement for the companies to combine in a stock-for-stock merger in which Scana shareholders would receive 0.6690 shares of Dominion Energy common stock for each share of Scana common stock, the equivalent of $55.35 per share, or about $7.9B based on Dominion Energy’s volume-weighted average stock price of the last 30 trading days ended Jan. 2.

Including assumption of debt, the value of the transaction is approximately $14.6B.

The agreement also calls for significant benefits to Scana’s South Carolina Electric & Gas Company subsidiary electric customers to offset previous and future costs related to the withdrawn V.C. Summer Units 2 and 3 project.

After the closing of the merger and subject to regulatory approvals, this includes: A $1.3B cash payment within 90 days upon completion of the merger to all customers, worth $1,000 for the average residential electric customer.

Payments would vary based on the amount of electricity used in the 12 months prior to the merger closing; An estimated additional 5% rate reduction from current levels, equal to more than $7 a month for a typical SCE&G residential customer, resulting from a $575M refund of amounts previously collected from customers and savings of lower federal corporate taxes under recently enacted federal tax reform; A more than $1.7B write-off of existing V.C. Summer 2 and 3 capital and regulatory assets, which would never be collected from customers.

This allows for the elimination of all related customer costs over 20 years instead of over the previously proposed 50-60 years; Completion of the $180M purchase of natural-gas fired power station at no cost to customers to fulfill generation needs.

Scana would operate as a wholly owned subsidiary of Dominion Energy.

It would maintain its significant community presence, local management structure and the headquarters of its SCE&G utility in South Carolina.

The transaction would be accretive to Dominion Energy’s earnings upon closing, which is expected in 2018 upon receipt of regulatory and shareholder approvals.

The merger also would increase Dominion Energy’s compounded annual earnings-per-share target growth rate through 2020 to 8% or higher.

The merger is contingent upon approval of Scana’s shareholders, clearance from the U.S. Federal Trade Commission/the U.S. Department of Justice under the Hart-Scott-Rodino Act, and authorization of the Nuclear Regulatory Commission and Federal Energy Regulatory Commission.

Scana and Dominion Energy also will file for review and approval from the public service commissions of South Carolina, North Carolina, and Georgia.


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Canadian Solar receives go-private offer

Canadian Solar announces receipt of ‘go-private’ offer of $18.47 per share

canadian-solar receives going private offer. Stockwinners.com
Canadian Solar receives going private offer

Canadian Solar (CSIQ) announced that its board has received a preliminary, non-binding proposal letter, dated December 9, from its Chairman, President and CEO Shawn Qu, to acquire all of the outstanding common shares of the company not already beneficially owned by Dr. Qu and his wife, Hanbing Zhang, in a “going-private” transaction for cash consideration of $18.47 per common share.

The board has formed a special committee of independent and disinterested directors to consider the proposed transaction.

The company expects that the Special Committee will retain independent advisors, including independent legal and financial advisors, to assist it in this process.

“The Board cautions the Company’s shareholders and others considering trading in the Company’s securities that the Board has just received the Proposal Letter and has not had an opportunity to carefully review and evaluate the Proposed Transaction or make any decision with respect to the Company’s response to the Proposal Letter.

The Board also cautions that there can be no assurance that any definitive offer relating to the Proposed Transaction or any other transaction will be made by Dr. Qu or any other person, that any definitive agreement with respect to the Proposed Transaction or any other transaction will be executed or that the Proposed Transaction or any other transaction will be approved or consummated,” the company stated.

ANALYST COMMENTS

Coker Palmer analyst Brad Meikle believes the offer to take Canadian Solar private by its CEO and Founder “puts in a floor value for the company.” The analyst, however, believes Canadian Solar’s fair value is “significantly higher” than the $18.47 per share offer. If the company does end up going private, it will be at a “significantly” higher price than today’s offer, Meikle tells investors. The analyst notes his fair value estimate for Canadian Solar is $32 per share and his upside target is $45 per share.

CSIQ closed at $18.20.


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JA Solar goes private at $7.55 per share

JA Solar enters into definitive agreement for going private transaction

JA Solar sold for $7.55 per share. See Stockwiners.com for details

JA Solar (JASO) announced that it has entered into a definitive agreement and plan of merger with JASO Holdings Limited, JASO Parent Limited, a wholly owned subsidiary of Holdco, and JASO Acquisition Limited, a wholly owned subsidiary of Parent, pursuant to which the company will be acquired by an investor consortium in an all-cash transaction implying an equity value of the company of approximately $362.1M.

Pursuant to the terms of the Merger Agreement, at the effective time of the merger, each ordinary share of the company issued and outstanding immediately prior to the Effective Time will be cancelled and cease to exist in exchange for the right to receive $1.51 in cash without interest, and each American depositary share of the company, representing 5 Shares, will be cancelled in exchange for the right to receive $7.55 in cash without interest.

The merger consideration represents a premium of 18.2% to the closing price of the company’s ADSs on June 5, 2017, the last trading day prior to the company’s announcement of its receipt of a revised “going-private” proposal, and a premium of 17.2% to the average closing price of the company’s ADSs during the 3-month period prior to its receipt of a revised “going-private” proposal.

The Buyer Group comprises Baofang Jin, chairman and CEO of the company, Jinglong, a British Virgin Islands company of which Baofang Jin is the sole director, and/or its affiliates, and the other Rollover Shareholders.

The Buyer Group intends to fund the merger with a combination of debt and equity.

The Buyer Group has delivered an executed debt commitment letter to the company pursuant to which CSI Finance Limited, Credit Suisse AG, Singapore Branch and certain other parties will provide, subject to the terms and conditions set forth therein, a loan facility to fund the merger in the amount of $160M.

The company’s board, acting upon the unanimous recommendation of a committee of independent and disinterested directors established by the board, approved the Merger Agreement and the merger and resolved to recommend that the company’s shareholders vote to authorize and approve the Merger Agreement and the merger.

The Special Committee negotiated the terms of the Merger Agreement with the assistance of its financial and legal advisors.

The merger is currently expected to close during the first quarter of 2018.


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Barron’s is bullish on Applied Materials and Expedia

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

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BULLISH  MENTIONS

Applied Materials, TSMC among ‘heroes’ of AI – Shares of Applied Materials (AMAT), the largest vendor of tools to Intel (INTC) and others, and TSMC (TSM), the largest contract manufacturer of circuits, which serves chip vendors such as Nvidia (NVDA) seem a good bet for the foreseeable future as computer-chip technology enters a bold new phase, Tiernan Ray writes in this week’s edition of Barron’s.

General Dynamics most promising amid corporate aircraft comeback – The business-jet market is showing signs of a comeback and the plane maker that offers the most promise to investors appears to be General Dynamics (GD), whose Gulfstream models are among the most popular corporate jets, Lawrence Strauss writes in this week’s edition of Barron’s.

First Solar to benefit from potential aggressive tariff hike – Cheap imported solar cells have fueled an alternative-energy boom in the U.S., but now President Donald Trump is considering tariffs that could slow the flow of foreign cells, Avi Salzman and Bill Alpert write in this week’s edition of Barron’s. If the White House pushes ahead with an aggressive tariff hike, the major beneficiary would be First Solar (FSLR), the U.S. industry leader, whose products would become cheaper than those sold by foreign competitors, while residential solar firms such as Sunrun (RUN) would be hurt, as they would no longer have access to cheap cells, they added.

Expedia still has room to rise – In a follow-up story, Barron’s says that Expedia’s HomeAway is starting to look like a “home run” as it is contributing a hefty portion of overall growth. That bodes well for Expedia (EXPE) stock, the publication notes, adding that a double-digit return seems likely over the next year.

Senate Health funding helps Thermo Fisher – In a follow-up story, Barron’s says that by blocking President Trump’s proposed research funding cuts, the Senate helps Thermo Fisher’s (TMO) key market.

Target lifts pay as retailers bid for workers in tight market – In a follow-up story, Barron’s notes that with the jobless rate at a 16-year low, it could be challenging for retailers to find sufficient holiday sales help this year. As retailers bid for workers in a tight labor market, Target (TGT) followed Wal-Mart (WMT) in lifting hourly pay, the publication noted.

BEARISH MENTIONS

Competition may be coming after Tesla – While electric vehicles currently sell for about $8,000 more than gas guzzlers, they will be cheaper than traditional cars by the early to mid-2020s, Emily Bary writes in this week’s edition of Barron’s, citing Cowen analyst Jeffrey Osborne. The increasing affordability of electric vehicles may not be good news for Tesla (TSLA), as rivals may see it as an incentive to take the space seriously, Bary adds


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GE to Build Wind Farm in Australia

GE, AGL to develop Australian wind farm in Coopers Gap, Queensland

GE gets $15B contract from Saudi Arabia

GE announced an agreement with the Powering Australian Renewables Fund to supply and install 123 wind turbines for the Coopers Gap wind farm project at Cooranga North, 250 kilometres north-west of Brisbane.

PARF is a partnership between AGL Energy Limited and Queensland Investment Corporation. Upon completion in 2019, the 453 MW wind farm will produce approximately 1,510,000 MWh of renewable energy annually – enough to power the equivalent of more than 260,000 average Australian homes and reduce CO2 emissions by 1,180,000 tonnes each year. Coopers Gap Wind Farm is a landmark project for GE.

It will be the largest wind farm in the country on completion, and GE’s first wind project in Queensland. It is the second major renewables project that GE and AGL have announced this year, following the Silverton Wind Farm in western New South Wales.

GE will deliver 91 of its 3.6 MW turbines with 137m rotors, and 32 of its 3.8 MW turbines with 130m rotors.

GE will also undertake a 25-year full service agreement to maintain the windfarm over its lifetime.

The project is expected to create up to 200 jobs during the peak of construction, and an additional 20 ongoing operational jobs. The construction firm CATCON will be responsible for the wind farm’s construction.

The Coopers Gap development is GE’s fifth wind farm project to begin construction in Australia in 2017. On completion in 2019, GE will be responsible for a fleet of wind turbines with a capacity of almost 1.4 GW.

Watch shares of TPI Composite (TPIC) as it is a provider of wind blades to GE.


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The Fear Index Soars as Stocks Tumble

U.S. VIX Volatility Surges over 30% to clear 15.00

Buying Opportunity for Some Stocks this afternoon

VIX surges over 30% to above 15.00. See Stockwinners.com Market Radar to read more.

U.S. VIX (VIX) equity volatility surged over 30% to briefly clear 15.00 en route to 15.36, a 3-month highs after taking out 15.16 from June 29th, having cleared the 11.98 or its 200-day moving average earlier this week.

The spikes in the VIX represent a market sell-off.

That puts the double top near 16.30 from April/May within reach, ironically after recent rounds of trader layoffs in the financial sector due to persistently low volatility.

A breakout higher amid record speculative VIX short interest could put 23.01 November 2016 and 26.72 from July 2016 in scope.

Pullbacks will eye 11.98 and 11.56 session lows for support, along with all-time lows of 8.84 from July 26.

U.S. VIX equity volatility surges, See Stockwinners.com Market Radar

The S&P 500 (SPX) meanwhile is fast approaching its 2,448.3 or it’s 50-day moving average support line, which has provided investors a buying opportunity for the past several months.

It appears that investors may forgive legislative impasse, but are less generous about a nuclear war!

NASDAQ is off 1.2% and the Euro Stoxx 50 is 1.2% lower.

REBOUND POSSIBLE

Based on the charts show above, we expect the sell-off to continue into late afternoon on Thursday with a recovery into close, followed by a short-covering rally on Friday August 11th. Use this afternoon sell off to buy stocks that should be sold on Friday.

STOCKS TO WATCH

NFLX, EXEL, TTD, XXII, NVDA, AAPL, PEGA, SINA, SQ, USCR, YY.

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Crude Oil Higher as Inventories Fall

Crude oil is higher as inventories fall

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The American Petroleum Institute (API) reported a draw of 7.839 million barrels in United States crude oil inventories, compared to analyst expectations of a draw of 2.272 million barrels for the week ending August 4.

The Energy Department will report its inventory data today at 10:30 a.m.

Gasoline inventories rose by 1.529 million barrels for the week ending August 4, compared to analyst expectations that inventories would fall by 1.5 million barrels.

Crude oil inventories in the US began its downward move in April, and have continued to fall, erasing all of the inventory that was built between January and April.

According to the API, yesterday’s build brings the total inventory for crude oil in 2017 to a net draw of 13.594 million barrels.

Distillate inventories rose by 157,000 barrels, while inventories at the Cushing, Oklahoma, site increased by 319,000 million barrels.

U.S. crude output will average 9.35 million barrels a day this year, according to the EIA’s monthly Short-Term Energy Outlook released Tuesday. That’s up from a July projection of 9.33 million. Production will average 9.91 million barrels a day next year, up from 9.9 million forecast previously.

Meanwhile, Iraq and the U.A.E. said at the Abu Dhabi meeting that OPEC’s estimates of their production — based on data from external sources — were at fault for any apparent failures to comply with output caps, according to two people familiar with the matter.

Crude prices have fluctuated around $49 a barrel this month as investors weigh rising global supply against output reductions from the Organization of Petroleum Exporting Countries and its allies. OPEC said Tuesday that Iraq, the United Arab Emirates and Kazakhstan, which have lagged behind in their pledged curbs, reaffirmed their commitment to cuts at a meeting in Abu Dhabi.

Crude oil (WTI) is up 35 cents to $49.52 pr barrel. Brent is up 36 cents to $52.50 per barrel.

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Rig Counts Rise Again!

Baker Hughes reports U.S. rig count up 8 to 958 rigs

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Baker Hughes (BHGE) reports that the U.S. Rig Count is up 8 rigs from last week to 958, with oil rigs up 2 to 766 and gas rigs up 6 to 192.

The U.S. Rig Count is up 495 rigs from last year’s count of 463, with oil rigs up 392, gas rigs up 106, and miscellaneous rigs down 3 to 0.

The U.S. Offshore Rig Count is up 1 rig from last week to 24 and up 5 rigs year over year.

The Canadian Rig Count is up 14 rigs from last week to 220, with oil rigs up 11 to 129 and gas rigs up 3 to 91.

The Canadian Rig Count is up 101 rigs from last year’s count of 119, with oil rigs up 69, gas rigs up 33, and miscellaneous rigs down 1 to 0.

WTI crude edged a few cents lower after the report, and though remains less than 20 cents below its earlier trend high of $49.80.

#WTI  =  West Texas Intermediate

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Hyperloop Goes to Washington!

Musk gets verbal approval to build NYC to D.C. hyperloop 

 

Hyperloop, Tesla Stock, SpaceX, Stocks to Watch, Stock to Watch today, Stock of the day, Stock Movers, stock mergers

Elon Musk just tweeted, “Just received verbal govt approval for The Boring Company to build an underground NY-Phil-Balt-DC Hyperloop.

NY-DC in 29 mins. City center to city center in each case, with up to a dozen or more entry/exit elevators in each city.”

Musk, among his other endeavors, is the CEO of #Tesla (TSLA).

A #hyperloop is a mode of passenger and/or freight transportation, first named as such in an open-source vactrain design released by a joint team from Tesla and SpaceX. Drawing heavily from Goddard’s vactrain, a hyperloop comprises a sealed tube or system of tubes through which a pod may travel free of air resistance or friction conveying people or objects at optimal rates of speed and acceleration.

Elon Musk’s version of the concept, first publicly mentioned in 2012, incorporates reduced-pressure tubes in which pressurized capsules ride on an air bearings driven by linear induction motors and air compressors.

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OTHER STOCKS TO WATCH

ANSYS, Inc.  (ANSS) develops and markets engineering simulation software and services used by engineers, designers, researchers, and students in the aerospace and defense, automotive, industrial equipment, electronics, biomedical, energy, materials and chemical processing, and semiconductors industries and academia worldwide.

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Stock Upgrades Downgrades for July 18, 2017

Stockwinners’ analysts upgrades, downgrades and initiations for July 18, 2017

Everyday, we will e-mail our readers a list of analysts actions as shown below. Please see below on how to sign up for Stockwinners’ Service.

 

STOCK UPGRADES

CMG Chipotle to Buy from Hold at Maxim
CMG Chipotle to Buy on queso launch at Maxim
IPXL Impax to Neutral from Underweight at Piper Jaffray
MMP Magellan Midstream to Buy from Neutral at UBS
NFLX Netflix to Buy from Neutral at Rosenblatt
OAS Oasis Petroleum to Buy from Hold at Williams Capital
ORLY O’Reilly Automotive to Buy from Neutral at Northcoast
QDEL Quidel to Outperform from Market Perform at William Blair
SC Santander Consumer to Outperform from Market Perform at JMP Securities
SEAS SeaWorld to Neutral from Sell at Goldman Sachs
SEDG SolarEdge to Outperform at Oppenheimer
SEDG SolarEdge to Outperform from Perform at Oppenheimer
SKX Skechers to Positive from Mixed at OTR Global

DOWNGRADES

ADP ADP to Equal Weight from Overweight at Barclays
CCJ Cameco to Underperform at Credit Suisse
COG Cabot Oil & Gas to Hold from Buy at Williams Capital
DDC Dominion Diamond to Market Perform from Outperform at BMO Capital
DDC Dominion Diamond to Hold from Buy at Gabelli
DNN Denison Mines to Underperform from Neutral at Credit Suisse
EXLS ExlService to Neutral from Buy at Citi
FMC FMC Corporation to Neutral from Buy at Seaport Global
FPI Farmland Partners to Market Perform from Outperform at FBR Capital
IPGP IPG Photonics to Hold from Buy at Canaccord
NYLD NRG Yield to Hold from Buy at Deutsche Bank
OAS Oasis Petroleum to Hold from Buy at Deutsche Bank
OAS Oasis Petroleum to Hold at Deutsche Bank
QEP QEP Resources to Hold from Buy at Deutsche Bank
SSL Sasol to Neutral from Overweight at JPMorgan
UAA Under Armour to Negative from Mixed at OTR Global

STOCK INITIATIONS

DC Agree Realty with a Buy at Canaccord
ADRO Aduro Biotech with an Outperform at Cowen
ALBO Albireo Pharma with a Buy at Needham
BFAM Bright Horizons with a Buy at Citi
BHGE Baker Hughes resinstated with a Sell at Goldman Sachs
CVNA Carvana with a Neutral at Wedbush
FANG Diamondback Energy with an Outperform at Imperial Capital
FCPT Four Corners Property Trust with a Hold at Canaccord
GOOD Gladstone with a Hold at Canaccord
GPMT Granite Point Mortgage with an Overweight at JPMorgan
GPMT Granite Point Mortgage with a Market Perform at Keefe Bruyette
GTY Getty Realty with a Buy at Canaccord
INFN Infinera with a Buy at Craig-Hallum
MSCI MSCI with an Equal Weight at Barclays
MTDR Matador with an Outperform at Imperial Capital
O Realty Income with a Buy at Canaccord
OMF OneMain Holdings with a Buy at DA Davidson
REN Resolute Energy with an Outperform at Imperial Capital
RM Regional Management with a Neutral at DA Davidson
TAL TAL Education with a Neutral at Citi
TWOU 2U with a Buy at Citi
WPX WPX Energy with an Outperform at Imperial Capital

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Stocks to Watch: Tesla Cheap or Expensive

Tesla stock low if you believe in company’s future, Elon Musk says

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In a recent tweet, clarifying earlier comments, Tesla CEO Elon Musk tweeted:

“I should clarify: Tesla stock is obviously high based on past & present, but low if you believe in Tesla’s future. Place bets accordingly …”

Earlier in the day, according to CNBC, Musk said, “I’ve gone on the record several times that the stock price is higher than we have the right to deserve and that’s for sure true based on where we are today,” Musk told Nevada Gov. Brian Sandoval at the National Governors Association summer meeting on Saturday.

According to media reports, Musk added when speaking at the meeting that Tesla’s current stock price reflects a “lot of optimism” adding that he has tried to bring expectations in line.

Musk noted that it has been “quite tough” to temper expectations in a euphoric environment.

Shares of Tesla (TSLA) dropped to an intraday low of $313.45 per share after his comments from the governor’s meeting but have regained some ground and are currently down 2.6% to $319.50 per share in afternoon trading.

Stockwinners

We believe TSLA shares will continue to be under pressure till they reach around $275-$285 level.

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Barron’s is Bullish on Adidas, Cisco, Whirlpool and Gilead

Barron’s, the weekly publication owned by the Wall Street Journal, in its latest issue is bullish on several names. They include:

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Adidas could double as profit margins expand, Barron’s says – Despite the nearly 40% run up in the past 12 months, adidas (ADDYY) shares still have significant upside, particularly if the company can make good on its goal of achieving the lofty profit margins of rival Nike (NKE), Victor Reklaitis writes in this week’s edition of Barron’s, citing portfolio managers for European equities at Hermes Investment Management.

Vertex, Gilead seen as innovators, Barron’s says – Jason #Kritzer and Samantha Pandolfi, co-managers of Eaton Vance Worldwide Health Sciences fund, believe it is “a great time” to invest in the health care sector, with a lot of innovation under way by drugmakers, medical-device companies and companies developing technologies used to deliver health care, Johanna Bennett writes in this week’s edition of Barron’s. Eaton Vance finds innovation in Vertex (VRTX), Zoetis (ZTS), and Gilead (GILD), publication notes.

Visteon rally far from over, Barron’s says – In a follow-up story, Barron’s tells readers that while shares of Visteon (VC) are up sharply this year, due to the popularity of the company’s auto electronics, the stock could have more room to run. Rapid earnings growth could power Visteon’s shares to $116 from $105, and a deal could lift them even higher, the publication notes, adding that potential buyers include nontraditional auto plays, such as Apple (AAPL) and Alphabet (GOOGL; GOOG), which are developing driverless cars.

Cisco seems undervalued as future looks brighter, Barron’s says – Seen as “Old Tech,” Cisco (CSCO) seems overlooked, while Verint Systems appears overvalued, Vito Racanelli writes in this week’s edition of Barron’s. With its 3.7% dividend yield, the former could be just “the ticket for a healthy-double-digit annual return” with somewhat low downside over the next 24 months, the publication notes.

Trade policy may favor some Americans over others, Barron’s say – Steel tariffs and import restrictions may secure profits for steel mills and employment for steel workers, but will inevitably drive up the cost of any product, Thomas Donlan writes in this week’s edition of Barron’s, noting that other American companies are the customers of the U.S. steel industry and protectionism will not put them first. While protecting steel is supposed to solidify national defense, protectionism actually “hardens the economic arteries of commerce,” Donlan added. Companies that may be impacted by Trump’s potential steel tariffs include U.S. Steel (X), AK Steel (AKS), Nucor (NUE), Steel Dynamics (STLD), ArcelorMittal (MT), Alcoa (AA), and Century Aluminum (CENX).

Whirlpool could rise 35% next year, Barron’s says – Whirlpool (WHR) is a “cash machine” for shareholders, and despite coping with the aftermath of the U.S. housing crisis, price competition from South Korean rivals, and troubled markets like Brazil, the maker of washers, dryers, dishwashers, ovens, and refrigerators has more than doubled earnings since 2012, Robin Goldwyn Blumenthal writes in this week’s edition of Barron’s. The shares remain cheap, the publication noted, but the stock may be worth about $260 a share, or 35% higher, if Whirlpool can continue to execute well in the year ahead.

Orion Engineered aiming for continued gains, Barron’s says – The carbon-black market is growing twice as fast as the commodity business and is more profitable, Nicholas #Jasinski writes in this week’s edition of Barron’s. Orion Engineered (OEC) is the smallest of the three key global players, after Cabot (CBT) and Aditya Birla, but is the largest in the specialty carbon-black market, and “a little gem hiding in all of this black dust,” the publication noted. Orion’s long-term relationships with customers give the company the bargaining power to negotiate contracts indexed to the cost of carbon black’s main input, namely oil, the report added.

Bearish Names

Premium video on demand may pressure movie-theater operators, Barron’s says – This year, stocks of AMC Entertainment (AMC), Regal Entertainment (RGC) and Cinemark (CNK) have declined due to a “mediocre” summer box office on franchise fatigue, more beguiling choices on Netflix (NFLX) or Amazon (AMZN), and as technology is changing people shop, Kopin Tan writes in this week’s edition of Barron’s. Studios and distributors like Comcast’s (CMCSA; CMCSK) Universal Pictures or Walt Disney (DIS) are now debating how to roll out “premium video-on-demand,” which lets viewers watch a movie within a day to 50 days after it hits the big screen, the publication adds, pointing out that while this can benefit the studios, theaters will have much to lose.

Verint looks overvalued given performance, Barron’s says – Riding the “tech momentum” but looking overvalued, Verint Systems weakening track record over the past four years suggests that investor enthusiasm is misplaced, Vito Racanelli writes in this week’s edition of Barron’s. Verint Systems (VRNT) does not look like a tech company with sustainable growth, with its revenue growth dropping steadily, the report notes.

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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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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.