Ransomware Fears Send Security Stocks Higher

ransomRansomware is a type of malicious software that carries out the extortion attack from cryptovirology that blocks access to data until a ransom is paid and displays a message requesting payment to unlock it. Simple ransomware may lock the system in a way which is not difficult for a knowledgeable person to reverse. More advanced malware encrypts the victim’s files, making them inaccessible, and demands a ransom payment to decrypt them. A total of 150 countries have been affected in the past 72 hours.

Oppenheimer notes that according to media reports, a global ransomware attack was launched and infected up to 200,000 computers in at least 150 countries on Friday.

The analyst believes the “biggest ransomware outbreak ever” could serve as a wake-up call for many organizations and countries delaying a review of their cybersecurity hygiene.

In that regard, the analyst believes all cybersecurity vendors under his coverage, namely #Check Point $CHKP , CyberArk $CYBR , Fortinet $FTNT , Imperva  $IMPV , Mimecast $MIME , Palo Alto Networks $PANW , #Splunk $SPLK , #Symantec $SYMC , #Verint $VRNT , but most notably #FireEye $FEYE , are poised for increased demand, particularly in the Europe, Mideast and Africa region where the attacks were largely focused.

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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.

Crude Oil Higher as Saudis and Russians Call for Extending OPEC Production Cut

crude-oil-trades-up-as-japanese-economic-data-impressesCrude oil jumped nearly 2% in electronic trading on Sunday evening to reach $48.68 per barrel, its highest price since May 1. Russian and Saudi Arabia’s oil ministers meeting in Beijing said they see the oil-cut deal working, and inventories are decreasing. They are in favor of extending OPEC’s output-cut deal for nine months.

OPEC and Russia have openly discussed a potential production cut extension. Other Non-OPEC producers, such as Turkmenistan and Azerbaijan have also expressed support for an extension. Around 1.8 million bpd will be removed from the market, making enough room on the market to counter the expected 1 million bpd of additional shale oil from the U.S., combined with possible additional volumes from Canada and Brazil, there is still a drawdown of stocks in place. World oil demand growth for 2017 has been left unchanged by OPEC at 1.27 million bpd.

This week’s EIA report surprised the market, as the it reported a much higher than expected stock draw of U.S. storage volumes than expected. On 10 May the EIA said U.S. inventories fell by 5.2 million barrels last week vs. the 1.8 million barrel decline analysts expected.

OPEC and major non-OPEC producers, such as Russia, should be bracing themselves for a continuation of the current production cut strategy for a pro-longed period of time, for sure into 2018. There has however been a major change in risks for both sides. U.S. Shales production increase has offset most of upward price pressure on prices due to OPEC productions.

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Rig Count Rise Weighs on Crude Oil

oil_rig#BakerHughes $BHI reports that the U.S. rig count is up 8 rigs from last week to 885, with oil rigs up 9 to 712, gas rigs down 1 to 172, and miscellaneous rigs unchanged at 1.

The U.S. Rig Count is up 479 rigs from last year’s count of 406, with oil rigs up 394, gas rigs up 85, and miscellaneous rigs unchanged.

The U.S. Offshore Rig Count is up 2 rigs from last week to 21 and down 1 rig year over year.

The Canadian Rig Count is down 2 rigs from last week to 80, with oil rigs up 2 to 29 and gas rigs down 4 to 51. The Canadian Rig Count is up 37 rigs from last year’s count of 43, with oil rigs up 13, gas rigs up 25, and miscellaneous rigs down 1 to 0.

On the news, Crude oil prices (WTI) dropped to $47.35 per barrel before rebounding to its current price of $47.35 per barrel.

#WTI – West Texas Intermediate

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Apple $AAPL Stock Reaches its All Time High on $1000+ iPhone 8

apple-cash#Merrill Lynch and Goldman Sachs upped their price targets on #Apple $AAPL , while reiterating their Buy ratings on the shares, citing the potential for new products and “significant upside” in iPhone Average Selling Price, or ASPs.

NEW CATEGORIES: In a research note to investors, Bank of America Merrill Lynch raised its price target for Apple to $180 from $155. While noting that last year Apple accounted for 10% of global consumer spending, the analyst told investors that he believes the markets that the company currently addresses can be about $550B in 2020 and close adjacencies can be $300B. This excludes potential Total Available Market, or #TAM, from healthcare and automotive, he pointed out. He also noted that given the iPhone maker’s “immense” net cash, Apple can easily enter most markets through M&A.

Moreover, the analyst argued that new products and categories add to its already “significant” growth opportunity in its existing areas, and that ignoring the “shadow TAM” of new product opportunities understates Apple’s true potential. The analyst believes the tech giant still has room to grow and gain share in the traditional areas of smartphones, tablets, wearables and desktops/laptops, while new areas to explore include game consoles/handheld games, cameras/camcorders, DVD players/Blu-ray players, set-top boxes, streaming audio and video services, wearables, TVs/HDTVs and Virtual Reality.

HIGHER IPHONE PRICES: Meanwhile, Goldman Sachs was also bullish on Apple this morning, raising her price target on the shares to $170 from $164 ahead of the upcoming iPhone 8 product cycle. The analyst told investors in a research note of her own that she sees “significant upside” in iPhone ASPs, expecting the 128GB model to be priced at $999 and the 256GB at $1,099. Given the analyst iPhone SKU analysis, the analyst believes the iPhone 8 will drive well over 50% of total new iPhone shipments in the first four quarters.

Based on the higher mix and ASP of the iPhone 8, the analyst also estimates blended iPhone ASPs to be up 16% year over year in FY18, and sees a relatively modest 40bp headwind to iPhone gross margins in 2018 as additions to the bill of materials and higher memory costs are largely offset by the expected $130 ASP increase in the iPhone 8.

PRICE ACTION: Since start of the month, shares of Apple more than $11. They last traded at $156.10. Earlier in the session the stock hit an all time high of $156.42 per share.

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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.

Retail Sales Rebound in April

retailsalesU.S. #retail sales rose in April, slightly beat estimates with a 0.4% April bounce and a 0.3% ex-auto increase that followed upward revisions versus the last reported March levels and prior levels through February revealed with annual revisions on April 26.

Analysts saw April retail sales boosts from gains of 0.7% for auto dealers, 1.2% for building materials, and 0.2% for gasoline after big upward revisions. Analysts saw a likely March and April sales lift from big tax refund delays from February.

Analysts left Q2 GDP growth estimates at 3.2%, though analysts now expect a 3.7% (was 3.6%) Q2 pace for real consumption. Analysts still expect a Q1 GDP growth boost to 0.9% from 0.7% with no consumption revision from 0.3% growth.

Analysts now assume a 0.6% (was 0.5%) April #PCE rise in nominal terms with a 0.4% (was 0.3%) rise in “real” terms, alongside a 0.2% PCE chain price rise that tracks today’s CPI gain.

The savings rate should slip to 5.8% from 5.9% in March.

The business inventory report later this morning will reveal a flat March sales figure after a 0.2% February increase. Today’s retail sales data are consistent with a 0.4% business sales rise in next month’s April report.

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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.

Abercrombie & Fitch $ANF is for Sale

anfAfter #Abercrombie & Fitch $ANF confirmed that it had preliminary talks with several parties regarding a potential deal, RBC Capital analyst says there is less than a 25% chance of a deal occurring.

Among the hurdles are the large declines in the stocks of a number of companies that have bought retailers recently, Abercrombie & Fitch’s high overseas exposure, and its “still struggling adult brand,” according to the analyst. However, he says there is some strategic rationale for a deal between #AmericanEagle $AEO and Abercrombie & Fitch.

Such a transaction would give the combined company “landlord clout and real estate rationalization control; and “promotional and positioning control over three teen/young adult brands,” according to the analyst.

He thinks the combined company could generate EPS of about $1.50 by fiscal 2019, but warns that the deal would be dilutive to Abercrombie & Fitch in the nearer term and could erode value as other recent deals in the sector have done.

The analyst keeps an Underperform rating on Abercrombie & Fitch and an Outperform rating on American Eagle.

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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.

Puma Biotechnology $PBYI Could Double by the end of May

pbyiAs #PumaBiotechnology $PBYI nears an FDA advisory panel meeting for its breast cancer treatment candidate #neratinib, #Citi argues that a recent hiring push by Puma signals its confidence in securing approval, an event which the research firm says could send shares soaring by 100% or more.

BACKGROUND: The FDA has scheduled a May 24 Advisory Committee meeting for Puma’s neratinib in extended adjuvant treatment of “HER2” early stage breast cancer. In its Q1 earnings report last night, the company confirmed that “we look forward to presenting” at the May 24 meeting. #HER2

CITI SEES POTENTIAL DOUBLE: In a post-earnings research note, Citi’s analyst highlights that Puma accelerated plans for final five-year data from the ” #ExteNET ” neratinib trial to Q2 from the second half, as it will be used during the drug’s May 24 #AdComm. The analyst confirmed with Puma that additional data from the “CONTROL” prophylactic trial will also be presented at the meeting.

Notably, the analyst says he “noticed” that Puma appears to be actively hiring for commercial operations, with the company’s website now showing 18 job listings for roles within outreach, commercial supply chain, market access, reimbursement, and other areas. Though critics may interpret the news as signaling that Puma doesn’t expect to be acquired, the analyst counters that such an argument “doesn’t work too well tactically,” as the stock should gain at least 100% on what he calls an “expected positive” AdComm.

Indeed, the analyst views the hiring push as “obviously reflecting confidence” in approval while both maximizing future sales potential and remaining open to future strategic options, with the analyst reminding investors that Puma CEO Alan Auerbach successfully sold his last company to big pharma.

PRICE ACTION: Shares of Puma Biotechnology are up fractionally to $30.75 in afternoon trading.

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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.

Reverse Stock Splits Destroy Shareholders Value

Reverse-stock-split-thumbnail#NYSE and #Nasdaq are the two major stock exchanges in the U.S.  Both exchanges require stock prices that are traded on their platforms to have a price of one dollar or higher. Stocks that fall below this threshold are delisted. These stocks are then moved to other exchanges such as #OTC or Pink Sheet #PinkSheet which have very low liquidity.

In order to avoid this, companies with sub dollar share prices reverse split their shares. In finance, a reverse stock split or reverse split is a process by which shares of corporate stock are effectively merged to form a smaller number of proportionally more valuable shares. A reverse stock split is also called a stock merger.

If a company has 10 million shares that are trading at $1, it can declare a 1-for-5 reverse stock split. Theoretically, the book value of the company remains the same instead now the company will have 2 million shares that are trading at $5 per share.

Higher share prices however, do not necessarily mean better stock fundamentals. The higher share price, following the split, has now simply masked the company’s declining fundamentals, and market’s view of the company. The higher share price now allows short seller to short the stock although it would be harder to find shares to borrow but this is offset by those investors who give up on the stock and sell at any price.

Below are several examples of such companies:

  • Pain Therapeutics $PTIE engages in developing drugs and focuses its drug development on disorders of the nervous system, such as chronic pain. The company recently declared a 7-for-1 reverse stock split. Shares were trading at 59 cents.

 

  • #NeuroMetrix, Inc. $NURO develops and markets products for the detection, diagnosis, and monitoring of peripheral nerve and spinal cord disorders. The company recently declared an 8-for-1 reverse stock split. Shares were trading at 48 cents.

 

  • Rex Energy $REXX is an independent oil, natural gas liquids and natural gas company operates in the Appalachian Basin. The company recently declared a 10-for-1 reverse stock split. Shares were trading at 42 cents.

 

  • #Rubicon Technology $RBCN is a materials provider focusing in monocrystalline sapphire for applications in optical and industrial systems. Co. designs, assembles and maintains its own proprietary crystal growth furnaces to grow sapphire crystals. The company recently declared a 10-for-1 reverse stock split. Shares were trading at 82 cents.

 

  • The mother of all reverse stock splits award should go to #DryShips $DRYS . DryShips Inc. owns and operates ocean going cargo
    drys
    DryShips stock over the past 12 months

    vessels worldwide. The company has reverse split its shares seven times over the past thirteen months at the expense of its shareholders. The last split was today for 7-for-1, the one before that was in April for 4-for-1. The one prior to that was in February for 8-for-1. This puts the 52-week trading range for this stock at (this is not a typo!) $4.55 to $37,900.80. Shares last traded at $5.35.

 

 

Snap just snapped $6 billion from investors

snapSnap, home of the disappearing photo messages, just managed to disappear more than $6 billion from its market capitalization. Shares are down more than 22% in Thursday trading after it reported its quarterly results.

A number of analysts have commented on the company’s results, some upgrading while others are downgrading the stock. In any event, shares are down sharply.

On May 10, #Snap $SNAP reported slower revenue growth and a bigger loss than analysts expected. Its $2.21 billion loss or $2.31 a share was $1.10 higher than the loss expected

That 36% sequential increase in revenue to $149.6 million fell $8.7 million below the consensus and below the 53% growth it enjoyed in the same quarter of 2016. To make matters worse, Snap’s average revenue per user fell 14.3% from the previous quarter to 90 cents on a 36% boost to 166 million daily active users.

#Facebook $FB is eating Snap’s lunch. In April, Facebook’s Instagram said it had “200 million daily users of Instagram Stories, a feature of the photo-sharing app that mimics Snapchat’s popular function,” according to the WSJ.

Users say they prefer the Facebook feature. 25% of respondents in an April survey of 3,000 Americans prefer Stories on one of Facebook’s platforms — 13 percentage points more than those who said they like Snapchat’s Stories better.

Many investors blame the company’s CEO and his lack of maturity as the main reason for the company’s misfiring. Others believe they are paying for the CEO’s education. Even CEO’s conduct in Snap’s May 10 conference call reflects the most frightening issue for investors in its stock. Thanks to the voting control of CEO and CTO who hold nearly 89% of its voting power, investors in its shares have no recourse but to pay the tuition for the CEO’s on the job training.

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Calpine is in-play below $16

CalpineThe Wall Street Journal reported yesterday that #Calpine $CPN , the largest power producer, is exploring a sale.
#Deutsche Bank sees few strategic acquirers for Calpine (CPN), making going private or remaining public the most likely outcomes in the analyst’s view.
Market power issues in #Texas make a combination with Vistra Energy $VST or NRG Energy $NRG unlikely, and while #PSEG $PEG and #Exelon $EXC could afford buying Calpine, such a deal would be a shift in strategy for both.
The analyst finds it unlikely that a go-private deal gets done much north of $16 per share.
The analyst believes, however, that a mid-teens per share takeout is possible “with some creative structuring.”
Even without a deal, Calpine offers value based on its cash flow profile, Deutsche contends. The analyst reiterates a Buy rating on Calpine with a $14 price target.
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.

Moody’s Lowers its view of Canadian Banks

canada-banks#Moody’s Investors Service downgraded the #Baseline Credit Assessments (BCA), the long-term ratings and the #Counterparty Risk Assessments  (CRA) of six Canadian banks and their affiliates, reflecting Moody’s expectation of a more challenging operating environment for banks in Canada for the remainder of 2017 and beyond, that could lead to a deterioration in the banks’ asset quality, and increase their sensitivity to external shocks.

The banks affected are: #Toronto-Dominion Bank $TD , Bank of Montreal $BMO , Bank of Nova Scotia $BNS , Canadian Imperial Bank of Commerce $CM , National Bank of Canada $NTIOF , and Royal Bank of Canada $RY .

The BCAs, long-term debt and deposit ratings and CRAs of the banks and their affiliates were downgraded by 1 notch, excepting only Toronto-Dominion Bank’s CRA, which was affirmed.

The short term Prime-1 ratings of the Canadian banks were affirmed.

All relevant ratings for these banks continue to have negative outlooks, reflecting the expected introduction of an operational resolution regime in Canada.

“Today’s downgrade of the Canadian banks reflects our ongoing concerns that expanding levels of private-sector debt could weaken asset quality in the future. Continued growth in Canadian consumer debt and elevated housing prices leaves consumers, and Canadian banks, more vulnerable to downside risks facing the Canadian economy than in the past.” said David Beattie, a Moody’s Senior Vice President.

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Boeing 737 Woes drag DJIA Lower

737maxDJIA component #Boeing $BA is lower, dragging the index lower due to issues with its long awaited 737 Max airplane. The company announced the suspension of #737 Max flights due to a manufacturing issue with low-pressure turbine discs.

Engine supplier CFM International, a joint venture between #General Electric $GE and #Safran $SAFRY , notified Boeing of the manufacturing issue, Boeing said in a statement.

The 737 Max remains in testing and is yet to commence commercial flights.

Shares of plane suppliers #Spirit AeroSystems $SPR , #Textron $TXT , #United Technologies $UTX and #Rockwell Collins $COL followed Boeing lower on the news. Boeing in afternoon trading is down $2.59 to $182.90. DJIA is down 54 units while GE is down 1% to $28.67.

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SEC fines Barclays $97M

barclaysThe #SEC announced an enforcement action requiring Barclays Capital to refund advisory fees or mutual fund sales charges to clients who were overcharged.

In a settlement of more than $97M, Barclays agreed to settle three sets of violations that resulted in clients being overbilled by nearly $50M, according to the SEC.

The SEC’s order finds that two Barclays $BCS advisory programs charged fees to more than 2,000 clients for due diligence and monitoring of certain third-party investment managers and investment strategies when in fact these services weren’t being performed as represented.

#Barclays also collected excess mutual fund sales charges or fees from 63 brokerage clients by recommending more expensive share classes when less expensive share classes were available. Another 22,138 accounts paid excess fees to Barclays due to miscalculations and billing errors by the firm.

Without admitting or denying the SEC’s findings, Barclays agreed to create a “Fair Fund” to refund advisory fees to harmed clients.

The Fair Fund will consist of $49.79M in disgorgement plus $13.75M in interest and a $30M penalty. Barclays will directly refund an additional $3.5M to advisory clients who invested in third-party investment managers and investment strategies that underperformed while going unmonitored.

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Peanuts and Strawberry Shortcake Sold for $345M

Peanuts#Iconix Brand $ICON has entered into a definitive agreement to sell its interest in the #Peanuts and #Strawberry Shortcake brands to #DHX Media for $345M in cash, subject to a customary working capital adjustment.

The company intends to use the net proceeds from this transaction plus additional cash on the balance sheet to pay down approximately $362M of debt.

This includes a mandatory payment of approximately $152M of the company’s Senior strawberrySecured Notes issued under its securitization facility, and the full extinguishment of the $210m outstanding balance of its Senior Secured Term Loan. Going forward, the entertainment segment will be reported as a discontinued operation.

The company expects the elimination of earnings from the entertainment segment to be offset by interest savings from the reduction of debt. The total acquisition cost of these brands was $246M. This transaction is expected to close by the end of Q2.

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