FDA Grants Thermo Fisher Pre-Market Approval for Oncomine Test

Thermo Fisher says FDA grants premarket approval for Oncomine Dx Target Test that simultaneously screens tumor samples for three FDA-approved therapies for non-small cell lung cancer

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Thermo Fisher ( $TMO ) announced that the FDA has granted premarket approval for its #Oncomine Dx Target Test, which the company called the first next-generation sequencing-based test that simultaneously screens tumor samples for biomarkers associated with three FDA-approved therapies for non-small cell lung cancer.

LabCorp’s ( $LH ) Diagnostics and Covance Businesses, NeoGenomics (NEO) Laboratories, and Cancer Genetics (CGIX) are among the first laboratories that will offer the Oncomine Dx Target Test as a service to oncologists, Thermo Fisher said.

All tests will be run on Thermo Fisher’s Ion PGM Dx System, which received FDA 510k clearance in parallel for use on formalin-fixed, paraffin-embedded tissue samples.

Thermo Fisher developed the Oncomine Dx Target Test in collaboration with Novartis (NVS) and Pfizer (PFE).

“This first iteration of the test is just the beginning since the diagnostic claims of the Oncomine Dx Target Test may be expanded in the future based on the existing panel.

Thermo Fisher has entered into discussions with several pharmaceutical companies looking to use the panel for FDA-approved targeted therapy applications beyond lung cancer,” the company noted.

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Republicans draft of ACA replacement bill Boosts Hospitals, Insurers

Funding for Medicaid will be phased out from 2020 to 2024 and additional cuts would begin in 2025

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Shares of hospital and health insurance stocks are rising this afternoon after Senate Republicans released a draft of their Affordable Care Act replacement bill.

WHAT’S NOTABLE

The draft includes cuts to #Medicaid and restructures the program from an open-ended government funding commitment to a limited federal payments system.

The bill also repeals billions of tax dollars used to expand coverage and abolishes the ACA’s mandates to purchase coverage.

Under the draft, federal funding for Medicaid will be phased out from 2020 to 2024 and additional cuts would begin in 2025, as the cap on Medicaid payments begins to grow at a slower rate.

While the bill retains some of the ACA’s tax credit structure, which assists citizens in buying private coverage, senators have reshaped the credits so they are less generous and less costly to the government. The bill is expected to be voted on next week.

COMPANIES TO WATCH

Publicly traded hospital operators include HCA Holdings (HCA), LifePoint (LPNT), Tenet Healthcare (THC), Community Health (CYH) and Quorum Health (QHC) and health insurance providers include Aetna (AET), Anthem (ANTM), Centene (CNC), Cigna (CI), Humana (HUM), Molina Healthcare (MOH), UnitedHealth (UNH) and WellCare (WCG).

PRICE ACTION

HCA was up 3.8%, LifePoint rose 3.3%, Tenet was up 8.7%, Community Health rose 8.4% and Quorum was up 8.3% in afternoon trading. Aetna, Anthem and Centene also rose 1.3%, 1% and 3.6%, respectively. Cigna was up 1.1%, Humana rose 1.5%, Molina gained 2.6%, UnitedHealth was up 1.5% and WellCare was up 3.5%.

Staples is For Sale

Reuters reported Sycamore Partners is near a deal buy the retailer for $6 billion or higher, about $8.66 a share

Staples intrinsic value closer to $12 per share, says Citi

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Private equity firm Sycamore Partners is in advanced talks to acquire Staples in a deal that could top $6 billion.

The acquisition would come a year after a US federal judge killed a merger between Staples and Office Depot on antitrust grounds.

It would represent a bet by Sycamore that Staples could more quickly shift its business model from serving consumers to catering to companies if it were to go private.

Staples, the office supply retailer, reported a smaller-than-expected fall in first-quarter comparable sales last month, while its profit met analyst estimates, helped by a growth in demand for facilities, breakroom supplies and technology solutions.

Staples has 1,255 stores in the United States and 304 in Canada. It has the largest market share of office supply stores in the United States at 48 percent.

Private-equity acquisitions of retailers have become a rare occurrence due to the tough retail environment due to online retailers such as Amazon.

A number of private equity-backed retailers, from Sports Authority to Payless ShoeSource, have filed for bankruptcy in the last few quarters.

Sycamore, however, has performed much better than its peers by investing in retailers. Its previous investments include department store operator Belk Inc., discount retailer Dollar Express and specialty retailer Hot Topic.

Citi analyst Kate McShane said the $6B offer appears low considering the value of the two business segments and things intrinsic value is closer to $12 per share based on the sum-of-the-parts valuation. McShane rates Staples a Buy with a $12 price target.

SPLS last traded at $9.23. It has a 52-weeks trading range of $7.24 – $10.25.

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Chinese Internet Stocks Tumble

Chinese internet stocks fall following report of streaming ban

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Shares of Chinese internet companies Sina (SINA), Weibo (WB), Phoenix New Media (FENG), YY (YY) and Momo (MOMO) are falling following reports that Chinese regulators are cracking down on online videos and streaming in an effort to police online content.

WHAT’S NEW

The State Administration of Press, Publication, Radio, Film and Television of the People’s Republic of China has ordered internet platforms Sina Weibo, Phoenix New Media’s iFeng and ACFUN to stop all video and streaming services as China increases its efforts to cut down the dissemination of “vulgar content.”

The regulator said the companies do not have the necessary license to stream content and were “not in line with national audiovisual regulations and propagating negative speech.” The move is seen as a blow to Sina Weibo which has invested in livestreaming companies and announced a partnership in December with the National Football League to stream games.

It is unclear if the ban on streaming is temporary or permanent.

WEIBO CONFIRMS RECEIPT OF NOTICE

Following the report, Weibo announced that it became aware of a public notice issued by The State Administration of Press, Publication, Radio, Film and Television of the People’s Republic of China stating that the SAPPRFT had recently requested the local competent authorities to take measures to suspend several companies’ video and audio services due to their lacking of an internet audio/video program transmission license and posting of certain commentary programs with content in violation of government regulations on their sites, and Weibo is named as one of these companies.

The company said it is “communicating with the relevant government authorities to understand the scope of the notice” and “intends to fully cooperate with the relevant authorities.”

PRICE ACTION

Sina was down 7.5% to $85.07, Weibo fell 9.6% to $69.57, Phoenix New Media was down 2.2% to $2.69, YY dropped 3.5% to $56.90 and Momo fell 2.5% to $37.75 in morning trading.

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EnerNOC Sold for $300 Million

EnerNOC enters into agreement to be acquired by Enel Group for $7.67 per share

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EnerNOC (ENOC) announced that it has entered into an agreement to be acquired by the Enel Group, a multinational power utility and leading integrated electricity and gas operator present in over 30 countries across five continents with a managed capacity of approximately 85 GW and more than 65 million business and household customers worldwide.

Under the terms of the agreement, the Enel Group, through its subsidiary Enel Green Power North America, or EGPNA, will purchase EnerNOC for $7.67 per share in an all-cash transaction valuing the company at over $300M, including EnerNOC’s net debt.

EGPNA will commence a tender offer to acquire all of EnerNOC’s shares of common stock for $7.67 per share, representing an approximate 42% premium to the Company’s closing stock price on June 21, 2017 and a 38% premium to the 30-day volume-weighted average price.

EGPNA’s obligation to purchase the shares of EnerNOC’s common stock tendered in the tender offer is subject to certain conditions, including that holders of a majority of the shares are tendered during the tender offer period and receipt of antitrust clearance in the United States.

Following completion of the tender offer, the remaining shares will be acquired in a second step merger at the same cash price per share as paid in the tender offer.

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Novartis Reports Positive Results, Shares Rise

Novartis Phase III CANTOS study met primary endpoint

Durect (DRRX) completes enrollment in Phase 3 trial for pain relief candidate Posimir

#Novartis (NVS) announced topline results from the global Phase III CANTOS study investigating the efficacy, safety and tolerability of ACZ885 in combination with standard of care in people with a prior heart attack and inflammatory atherosclerosis.

With more than 10,000 patients enrolled in the study over the last six years, #CANTOS is one of the largest and longest-running clinical trials in Novartis’ history.

The CANTOS study met the primary endpoint, demonstrating that when used in combination with standard of care ACZ885 reduces the risk of major adverse cardiovascular events, or MACE, a composite of cardiovascular death, non-fatal myocardial infarction and non-fatal stroke, in patients with a prior heart attack and inflammatory atherosclerosis.

The full data from the study will be submitted for presentation at a medical congress and for peer reviewed publication later this year.

Durect Data

Separately, Novartis announced that #Durect (DRRX) has completed patient enrollment in PERSIST, the pivotal Phase 3 clinical trial of Posimir, an investigational locally acting, non-opioid analgesic intended to provide up to three days of continuous pain relief after surgery.

The company expects to complete patient follow-up visits during Q3 and announce top-line data in Q4.

In May 2017, Durect signed a development and commercialization agreement with Sandoz AG, a division of Novartis (NVS), covering the U.S.

Under the terms of the agreement, #Sandoz made an upfront payment to Durect of $20M following review under the HSR Antitrust Improvements Act of 1976, with the potential for up to an additional $43M in development and regulatory milestones, up to an additional $230M in sales-based milestones, as well as a tiered double-digit royalty on product sales in the U.S. Durect remains responsible for the completion of the ongoing PERSIST Phase 3 clinical trial for #Posimir as well as FDA interactions through approval.

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Qatar Airways to Buy 10% of American Airlines

Qatar Airways intends to make ‘significant’ investment in American Airlines

In a regulatory filing, American Airlines Group recently received an unsolicited notice from Qatar Airways indicating Qatar Airways’ intention to make a significant investment in American Airlines.

As a publicly traded company, American Airlines’ common stock is available for purchase on the Nasdaq Stock Market, and Qatar Airways has indicated that its purchase would be made on the open market.

Consistent with the notice, Qatar Airways has also submitted a filing under the Hart-Scott-Rodino Act with respect to its potential investment in American Airlines common stock.

A filing under the HSR Act is required for an acquisition by Qatar Airways of more than approximately $81M of American Airlines common stock, and is subject to review by the Antitrust Division of the United States Department of Justice in accordance with the HSR Act.

The notice advised that Qatar Airways intends to purchase at least $808M and, in a conversation between the CEOs of the two companies initiated by the Qatar Airways CEO, Qatar Airways indicated that it has an interest in acquiring approximately a ten percent stake.

American Airlines will respond in due course with the appropriate filings required under the HSR Act.

The company’s Certificate of Incorporation prohibits anyone from acquiring 4.75% or more of the company’s outstanding stock without advance approval from the Board following a written request in accordance with the procedures set forth therein. The Board has not received any such request.

The company also notes that there are foreign ownership laws that limit the total percentage of foreign voting interest to 24.9%.

The proposed investment by Qatar Airways was not solicited by American Airlines and would in no way change the Company’s Board composition, governance, management or strategic direction. It also does not alter American Airlines’ conviction on the need to enforce the Open Skies agreements with the United Arab Emirates and the nation of Qatar and ensure fair competition with Gulf carriers, including Qatar Airways.

American Airlines (AAL) continues to believe that the President and his administration will stand up to foreign governments to end massive carrier subsidies that threaten the U.S. aviation industry and that threaten American jobs.

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AMD EPYC’s Gain, Intel’s Loss

AMD processors seen as threat to Intel in the data center

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The shares of Advanced Micro Devices (AMD) are climbing after the company announced the launch of its EPYC series data center processors.

Analysts were upbeat on the processors, as research firms Canaccord and Craig-Hallum raised their price targets on AMD and Bank of America Merrill Lynch said the processors could create a positive “turning point” for the company.

Meanwhile, Merrill Lynch downgraded Intel (INTC) to Neutral from Buy, citing increased competition from AMD and Nvidia (NVDA).

AMD TARGETS HIKED 

Craig-Hallum analyst Christian #Schwab raised his price target on AMD to $17 from $16, stating that the company’s list of customers and partners, which includes Microsoft (MSFT), Baidu (BIDU) and Dell, is “strong.”

AMD emphasized that #EPYC offers better performance and lower prices than competing chips from Intel, according to Schwab, who said he’s more confident in AMD’s data center business following the product launch. He reiterated a Buy rating on the stock.

Meanwhile, Canaccord’s David Evanson said AMD has “built the foundation to re-emerge as a solid competitor in the enterprise, cloud and storage tiers of the server market. Evanson, who raised his price target on AMD shares to $20 from $17, said the “unique” combination of CPU and GPU technologies embodied in AMD’s processors add value to customers’ deep learning and AI endeavors. He kept a Buy rating on the shares.

TURNING POINT

BofA analyst Vivek Arya says that EPYC could be a “turning point” for the company’s data center business, as the product appears to provide “significantly better price per performance” compared to competing products from Intel. It seems that the product will enable AMD to gain market share in the server market, added Arya, who kept a $16.50 price target and a Buy rating on AMD. Increased competition from AMD in servers and market share gains by Nvidia in accelerators and artificial intelligence could limit Intel’s ability to raise prices in the future as it has done historically, wrote Arya, who downgraded Intel to Neutral from Buy.

Over the last five years, about a third of Intel’s revenue growth from data center companies has been derived from price increases, Arya noted.

Meanwhile, Intel has had to raise its operating spending to cater to large cloud customers and has been forced to increase its investments in memory products, according to the analyst, who trimmed his price target on Intel to $38 from $42.

PRICE ACTION

In Wednesday trading, AMD rose nearly 8% to $13.63 while Intel fell 1.5% to $34.33.

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Oil Stocks Downgraded

Oil entered the first bear market since August as concerns worsen over a global supply glut

The number of downgrades may, from a contrarian point, signal oil’s bottom

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A number of oil related stocks are down this morning after brokers downgraded several oil related stocks. Oil entered the first bear market since August as concerns worsen that OPEC is failing to ease a global supply glut.

Adding to an oversupplied market are Libya, which is pumping the most in four years, and shale drillers that are staging the longest drilling ramp-up on record. Meanwhile traders are hoarding an increasing amount of oil in tankers. All that crude is hindering efforts by the Organization of Petroleum Exporting Countries and its allies to reduce stockpiles to the five-year average.

The American Petroleum Institute (API) reported a draw of 2.72 million barrels in United States crude oil inventories, compared to analyst expectations that the EIA would report a 2.0-million barrel draw for the week ending June 16. This week’s inventory draw almost completely offsets last week’s API-reported crude inventory build of 2.75 million barrels.

Gasoline inventories rose this week by 346,000 barrels, as refiners continue to take crude oil out of inventory and turn it into gasoline. Surveyed analysts were close on gasoline predictions this week, expecting a 400,000-barrel build for the fuel, but even though the API report was close to projections, the three-week rise in inventories mean that demand for the fuel is not sufficient to cut into inventories as one would expect this time of year.

The Energy Department reports its inventory data at 10:30 a.m. today.  Based on the number of downgrades, it may be a bottom for oil prices!

Crude oil last traded at $43.70 per barrel.

Here is a list of oil stocks downgraded today:

Downgrades

AON Aon plc to Neutral from Buy at Janney Capital
APA Apache to Sell from Neutral at Seaport Global
AREX Approach Resources to Sell from Neutral at Seaport Global
AXAS Abraxas Petroleum to Neutral from Buy at Seaport Global
AXTA Axalta Coating to Underperform from Buy at BofA/Merrill
BAS Basic Energy to Neutral from Buy at Seaport Global
BBG Bill Barrett to Sell from Neutral at Seaport Global
BHI Baker Hughes to Neutral from Buy at Seaport Global
BP BP to Underperform from Neutral at Macquarie
CHK Chesapeake to Underperform from Neutral at Macquarie
CIR CIRCOR to Sell from Neutral at Seaport Global
CLR Continental Resources to Sell from Buy at Seaport Global
CPE Callon Petroleum to Neutral from Buy at Seaport Global
CRZO Carrizo Oil & Gas to Sell from Buy at Seaport Global
CRZO Carrizo Oil & Gas to Sell from Buy at Seaport Global
CVE Cenovus Energy to Underperform from Neutral at Macquarie
CVX Chevron to Neutral from Outperform at Macquarie
CXO Concho Resources to Neutral from Buy at Seaport Global
DO Diamond Offshore to Sell from Neutral at Seaport Global
DOV Dover to Neutral from Buy at Seaport Global
DVN Devon Energy Neutral at Seaport Global
E Eni SpA to Neutral from Outperform at Macquarie
ECA Encana to Neutral from Outperform at Macquarie
ECR Eclipse Resources to Neutral from Buy at Seaport Global
EGN Energen to Sell from Neutral at Seaport Global
ESES Eco-Stim Energy to Neutral from Buy at Seaport Global
ESTE Earthstone Energy to Neutral from Buy at Seaport Global
ESV Ensco to Sell from Neutral at Seaport Global
FI Frank’s International to Underweight from Equal Weight at Morgan Stanley
FI Frank’s International to Sell from Neutral at Seaport Global
GST Gastar Exploration to Neutral from Buy at Seaport Global
HAL Halliburton to Neutral from Buy at Seaport Global
HK Halcon Resources to Neutral from Buy at Seaport Global
HP Helmerich & Payne to Sell from Neutral at Seaport Global
HP Helmerich & Payne to Underweight from Equal Weight at Morgan Stanley
ICD Independence Contract Drilling to Equal Weight at Morgan Stanley
JONE Jones Energy to Neutral from Buy at Seaport Global
KEG Key Energy to Neutral from Buy at Seaport Global
LONE Lonestar Resources to Neutral from Buy at Seaport Global
LPI Laredo Petroleum to Neutral from Buy at Seaport Global
MRC MRC Global to Neutral from Buy at Seaport Global
MRO Marathon Oil to Sell from Neutral at Seaport Global
NBL Noble Energy to Sell from Neutral at Seaport Global
NBR Nabors Industries to Equal Weight from Overweight at Morgan Stanley
NBR Nabors Industries to Neutral from Buy at Seaport Global
NE Noble Corp. to Neutral from Buy at Seaport Global
NFX Newfield Exploration to Sell from Buy at Seaport Global
OAS Oasis Petroleum to Neutral from Buy at Seaport Global
OII Oceaneering to Sell from Neutral at Seaport Global
OII Oceaneering to Underweight from Equal Weight at Morgan Stanley
OIS Oil States to Equal Weight from Overweight at Morgan Stanley
PDCE PDC Energy to Neutral from Buy at Seaport Global
PDS Precision Drilling to Equal Weight from Overweight at Morgan Stanley
PES Pioneer Energy to Neutral from Buy at Seaport Global
PQ PetroQuest to Neutral from Buy at Seaport Global
PTEN Patterson-UTI to Neutral from Buy at Seaport Global
RDC Rowan Companies to Sell from Neutral at Seaport Global
RDS.A Royal Dutch Shell to Neutral from Outperform at Macquarie
REPYY Repsol to Neutral from Outperform at Macquarie
RES RPC, Inc. to Neutral from Buy at Seaport Global
RICE Rice Energy to Neutral from Buy at Seaport Global
SD SandRidge Energy to Neutral from Buy at Seaport Global
SM SM Energy to Neutral from Buy at Seaport Global
SN Sanchez Energy to Sell from Buy at Seaport Global
SNDE Sundance Energy to Neutral from Buy at Seaport Global
SPN Superior Energy to Neutral from Buy at Seaport Global
SRCI SRC Energy to Neutral from Buy at Seaport Global
WFT Weatherford to Neutral from Buy at Seaport Global
WLL Whiting Petroleum to Sell from Neutral at Seaport Global
WLL Whiting Petroleum to Neutral from Outperform at Macquarie
WPX WPX Energy to Sell from Buy at Seaport Global
XEC Cimarex Energy to Sell from Neutral at Seaport Global

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CA Could Be Taken Private

Companies have approached banks to finance a BMC purchase of CA

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BMC Software Inc. and CA Inc. are considering a potential deal that would see the software companies combine as part of a transaction to take CA private, reports Bloomberg.

CA, Inc. provides software and solutions that help organizations to plan, develop, manage, and secure applications and enterprise environments in the United States and internationally.

The companies have approached banks about putting together a debt package to finance a BMC purchase of CA, said the people, who asked not to be identified because the information isn’t public. Talks are at an early stage and there is no guarantee a deal will be reached, the people said.

BMC was taken private by Bain Capital and Golden Gate Capital in 2013 in a deal valued at about $6.9 billion. The firms, which took a $750 million dividend from the company in 2014, may also put in new equity to help finance the deal, the people said.

RBC Capital analyst Matthew Hedberg says “a deal is unlikely given its scale.” However, he adds that a deal “could make sense” for CA, ” given a challenging multi-year mainframe renewal portfolio, struggle for organic growth and pending 606 adoption.” The analyst adds that ” there could likely be significant cost synergies as the businesses are similar.”

CA closed at $31.58. The issue has a 52-weeks trading range of $30.01 – $34.99.

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Chipotle Warns of High Costs, Shares Slide

Chipotle falls after signaling continued high costs to win back consumers

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Shares of Chipotle Mexican Grill (CMG) fell Tuesday after the restaurant chain “clarified” its second quarter outlook, appearing to confirm that costs related to food, marketing, and promotion will remain elevated as it seeks to regain consumer trust following its 2015 food scares.

CHIPOTLE WARNS ON COSTS

In a regulatory filing after Monday’s close, Chipotle “clarified” its financial outlook in connection with an investor meeting, saying that “for Q2, we continue to expect food costs to be approximately 34.2% of sales, and marketing and promotion costs to be up approximately 20-30 basis points versus Q1 to 3.6%-3.7% of sales. As a result, we expect other operating costs as a percentage of sales for Q2 to be at or slightly higher than reported for Q1. For the full year, we continue to expect comparable restaurant sales increases in the high single digits.”

PIPER MAKES ONLY MINOR TWEAKS:

Piper Jaffray’s Nicole Regan highlighted that the news follows a “solid” Q1 report and says the Q2 guidance update necessitates only “relatively minor” tweaks to her quarterly models. The analyst maintains her earnings predictions for both 2017 and 2018, adding that the firm’s latest checks generally reflect the consensus opinion that trends are now “headed in the right direction,” likely helped by Chipotle’s TV campaign. Regan reiterated an Overweight rating and $530 target on the stock while noting that its next catalyst is “stringing together a series of steady quarterly improvements.”

MAXIM PREFERS DEEPER PULLBACK

While keeping a Hold rating and $440 target on Chipotle, Maxim’s Stephen Anderson cut his Q2 profit estimate to $2.62 from $2.87 per share on the company’s likely higher costs, adding that he had previously expected food expenses to improve as promotional activity and commodity prices eased. The analyst models double-digit comparable sales growth for the quarter while warning of impacts from the Easter holiday shift and Chipotle’s recently-disclosed data breach, saying he still prefers to wait for a “deeper pullback” before recommending the stock.

DEUTSCHE HIGHLIGHTS MARGIN CONCERNS

Writing that margin recovery “remains under pressure,” Deutsche Bank analyst Brett Levy says food, marketing, and other operating costs continue to form an “apparent drag on restaurant-level profits.” Levy lowered his second quarter EPS view by 20c to $2.04 and highlighted that management indicated sequential expense pressures are expected to persist and could near 100 basis points of additional costs versus the prior consensus forecast for restaurant-level margins. The analyst keeps a Sell rating on the shares, arguing that Chipotle “faces an uphill battle” to regain lost sales while lifting margins

PRICE ACTION: Shares of Chipotle remain down 6.7% to $428.31 in late day trading.

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Solar Stocks that Could be Taken Over

Goldman sees Vivint as top target when M&A heats up in solar space

Stocks to invest in today

 

As the potential for increased mergers and acquisitions in the U.S. solar space ramps up, Goldman Sachs analyst Brian Lee views Vivint Solar (VSLR) as a main target for possible deals citing restructuring potential in the residential solar business.

M&A RIPENING

Lee said the transaction pipeline in the U.S. solar sector appears to be picking up, a trend he views as likely to continue, and estimated that approximately $3B of announced solar deals could be on track to close in the second half of 2017.

The emergence of contracted cash-flow based models, the restructuring of business models, low-cost financing and declines in solar equity prices are increasing the likelihood of mergers and acquisitions, the analyst wrote.

RANK 1:

Based on the potential for increased M&A, Lee upgraded Vivint to Buy from Neutral and raised his price target for the shares to $6 from $3.50. Lee assigned Vivint Goldman’s highest M&A rank of 1, representing a 30% to 50% probability of a deal, up from 3, as he sees increased restructuring potential in the residential solar business.

He added the company’s renewed financing breadth, concentrated equity ownership and aggressive shift to cash/loan volumes strengthens its turn-around potential and position as an M&A target.

Lee said management has previously said it is open to a sale and Goldman’s hypothetical sensitivity analysis suggests potential mid-teens returns for an acquirer if mix shift continues.

OTHER RANK INCREASES

Lee also assigned a rank of 1 to 8point3 Energy (CAFD), up from 4, saying while the firm has not viewed the company as an attractive acquisition candidate due to high leverage and its dual-parent ownership structure, an announcement by First Solar (FSLR) and SunPower (SPWR) to explore strategic alternatives could result in a sale of the company. He added risk-reward for potential buyers is attractive at current equity prices.

Lee kept a Buy rating on the name and raised his price target to $16 to $15.

In addition, he notes Sunrun (RUN) is trading below tangible book value following underperformance but Goldman’s hypothetical sensitivity analysis suggests potential returns above 15% for an acquirer if mix shift persists. Lee ranks the company at a 2, up from a 3, reiterates a Buy rating and raises his price target to $10 from $9.

PRICE ACTION

In Tuesday trading, Vivint rose 19% to $5.18, 8point3 Energy increased 9% to $13.82, and Sunrun rose 8.3% to $6.34.

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Tesla nears China Manufacturing

The agreement with the city of Shanghai would allow Tesla to build facilities in its Lingang development zone

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Tesla Inc. (TSLA) said it is close to an agreement to produce vehicles in China for the first time.

The agreement with the city of Shanghai would allow Tesla to build facilities in its Lingang development zone. Tesla would need to set up a joint venture with at least one local partner under existing rules and it isn’t immediately clear who that would be.

Setting up local production is key for Tesla to continue growing in China, where Tesla’s revenue tripled to more than $1 billion last year.

Assembling vehicles locally would allow the company to avoid a 25 percent tax that renders Model S sedans and Model X sport utility vehicles more expensive than in the U.S.

Bringing down the costs of electric cars is crucial to Tesla’s ambitions to reach more mass market consumers. Next month, Tesla is slated to begin rolling out the Model 3, a more affordable and smaller electric sedan. Tesla has yet to launch the Model 3 in China.

In the U.S., consumers stood in long lines to place $1,000 deposits for the vehicle. Tesla sold 80,000 cars in 2016 and aims to boost it by about 7-fold to 500,000 annually by 2018.

In March, Tencent Holdings Ltd., China’s biggest internet company, bought a 5 percent stake in Tesla for $1.8 billion. Teaming up with Tencent could help the automaker gain traction in a market where more than 200 companies have announced plans to build new-energy vehicles.

Tesla purchased its only vehicle assembly plant in Fremont, California, from Toyota Motor Corp. in 2010 for just $42 million. The company has estimated the cost of its battery gigafactory near Reno, Nevada, may eventually reach about $5 billion. The company said it plans to build another 4-5 gigafactories in the next few years.

Shares of Tesla (TSLA) are trading at an all time high pre-market trading. Shares have gained 73% year-to-date in 2017.

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Parexel Sold for $5 billion

PAREXEL sold for $88.10 per share in cash for $5B, including PAREXEL’s net debt

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PAREXEL International Corporation (PRXL) and Pamplona Capital Management announced that they have entered into a definitive agreement under which Pamplona will acquire all of the outstanding shares of PAREXEL for $88.10 per share in cash in a transaction valued at approximately $5B, including PAREXEL’s net debt.

PAREXEL International Corporation provides clinical research and logistics, medical communications, consulting, commercialization, and advanced technology products and services for pharmaceutical, biotechnology, and medical device industries worldwide.

The purchase price represents a 27.9% premium to PAREXEL’s unaffected closing stock price on May 5, 2017, the last trading day prior to published market speculation regarding a potential transaction involving the Company; a 38.5% premium to the unaffected 30-day volume weighted average closing share price of PAREXEL’s common stock ended May 5, 2017; and a 23.3% premium to the Company’s undisturbed 52-week high.

“Today’s announcement is the culmination of a comprehensive review of the opportunities available to the Company, including interest solicited and received from multiple parties with the assistance of independent financial and legal advisors. Having considered these opportunities, the PAREXEL Board of Directors unanimously determined that this all-cash transaction and the significant, certain value it provides is in the best interest of PAREXEL shareholders, as well as our company,” said Josef von Rickenbach, Chairman and CEO of PAREXEL.

Bank of America Merrill Lynch (BAC) and J.P. Morgan Chase Bank, N.A. (JPM) have provided committed financing for the transaction. The transaction is expected to close early in the fourth quarter of 2017, subject to the approval of a majority of PAREXEL shareholders and the satisfaction of other customary closing conditions.

PAREXEL expects to hold a Special Meeting of Shareholders to consider and vote on the proposed agreement with Pamplona as soon as practicable after the mailing of the proxy statement to shareholders.

The PAREXEL Board of Directors unanimously approved the transaction and intends to recommend that all PAREXEL shareholders vote to approve the agreement with Pamplona.

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

Goldman Sachs & Co. LLC  (GS) is acting as financial advisor to PAREXEL, and Goodwin Procter LLP is serving as legal counsel. Perella Weinberg Partners LP is acting as financial advisor to Pamplona, and Kirkland & Ellis LLP is serving as legal counsel.

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Boeing Raises Forecast for Aircraft Demand

Boeing projects need for 41,030 new aircraft over 20 years, valued at $6.2T

The single-aisle segment will see the most growth over the forecast

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Boeing  (BA) has raised its forecast for new airplane demand, projecting the need for 41,030 new airplanes over the next 20 years valued at $6.1T.

The company’s annual Current Market Outlook, or CMO, was released today at the Paris Air Show, with total airplane demand rising 3.6 percent over last year’s forecast.

“Passenger traffic has been very strong so far this year, and we expect to see it grow 4.7 percent each year over the next two decades,” said Randy Tinseth, vice president of Marketing, Boeing Commercial Airplanes.

“The market is especially hungry for single-aisle airplanes as more people start traveling by air.”

The single-aisle segment will see the most growth over the forecast, fueled by low-cost carriers and emerging markets. 29,530 new airplanes will be needed in this segment, an increase of almost 5 percent over last year.

The forecast for the widebody segment includes 9,130 airplanes, with a large wave of potential replacement demand beginning early in the next decade.

With more airlines shifting to small and medium/large widebody airplanes like the 787 and 777X, the primary demand for very large airplanes going forward will be in the cargo market.

Boeing projects the need for 920 new production widebody freighters over the forecast period.

The Asia market, including China, will continue to lead the way in total airplane deliveries over the next two decades. Worldwide, 57 percent of the new deliveries will be for airline growth, while 43 percent will be for replacement of older airplanes with new, more fuel efficient jets.

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