Smartphone Sales in China Decline!

Market research firm #IDC yesterday released its estimates of Q1 #smartphone shipments in China, reporting that total shipments to the country rose just 1% to 104.1M partly due to “high inventory” from the previous quarter.china-phone

Breaking the quarter down by company-specific performance, #Huawei took the top spot with shipment growth of 25.5%, while #Apple $AAPL took fourth place on a 26.7% decline in shipments.

IDC commented, “Despite a soft first quarter in China, the second quarter should pick up sequentially given not only’s $JD June promotions, but also activity around a number of new products like vivo with its Y53, #Xiaomi with its Mi 6, Meizu with its E2, and Gionee with its M6S Plus.

Apple has been seeing double-digit YoY declines for the fifth quarter in a row, but we believe that Chinese consumers are holding out for the launch of Apple’s 10-year anniversary iPhone at the end of the year.” Other publicly traded companies in the space include #Samsung $SSNLF .

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Crude Oil Tumbles on Domestic Production

#NYMEX #crude crashed through the $47.00 level in early Thursday N.Y. trade, with sell-stops kicking in on the break under the March low of $47.01.

The contract has printed $46.77 lows, levels last seen on November 30. A smaller than expected inventory draw reported on Wednesday set the stage for this morning’s sell-off, as did #f1feee7a-1c3b-4f99-983c-97c756824c70EIA data showing gasoline demand over the past month falling 3% versus this time in 2016.

Rig count continues to climb. Another 9 oil rigs were deployed in America’s shale fields, a sign that the industry is undaunted by falling oil prices. But the ability to produce profitably at $50 per barrel suggests downward pressure on prices, as more production is slated to come online later this year.

OPEC Production: Production from Saudi Arabia remained low in April, and output fell in Nigeria and Libya, although the latter two countries are exempted from the OPEC deal. Meanwhile, Angola and the UAE actually added production, leading to a slight fall in the OPEC-wide compliance rate from 92 percent in March to just 90 percent in April.

Russia also reported incremental progress on its pledge, reducing output to 11 million barrels per day from 11.05 mb/d in March, still a bit shy of the 300,000 bpd that it promised to cut.

Hedge funds Turn Bearish. Investors are losing confidence in oil prices – hedge funds and other money managers slashed their net-long positions once again, according to the latest data. For the week ending on April 25, the reduction was the largest weekly decline on record. Investor sentiment, according to the makeup for their long and short positions, now looks more bearish than it did at the start of the year.

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S&P Boosts Disney’s rating to A+ from A

#S&P Global Ratings said today that it raised its long-term corporate credit rating and debt ratings on The Walt Disney $DIS disneyto A+ from A. At the same time, S&P raised short-term corporate credit rating on the company to A-1+ from A-1. The rating outlook is stable.

“We recently completed an extensive peer review of the major U.S. investment-grade and high-speculative grade media, telecommunications, and cable companies we rate… As a result of this review, we have a more favorable view of Disney’s long-term business prospects relative to its peers. We believe Disney will continue to successfully tap its deep reservoir of intellectual property to generate high demand content through its film and television studios… The stable rating outlook on Disney reflects our expectation that the company’s overall business performance will remain strong, particularly at its film and TV studio division and at the cable networks, despite secular pressures in the U.S. We also expect that management will maintain its current financial policy, with adjusted leverage of less than 2x,” the ratings agency and its analysts said.

The rating directly affects how much Disney will be paying on its Corporate debts

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Fed says labor market strengthened even as economic activity slowed

The Federal Reserve said in today’s statement, “Information received since the Federal Open Market Committee met in Marcropped-527178_434502233267150_400064991_n.jpgch indicates that the labor market has continued to strengthen even as growth in economic activity slowed. Job gains were solid, on average, in recent months, and the unemployment rate declined. Household spending rose only modestly, but the fundamentals underpinning the continued growth of consumption remained solid. Business fixed investment firmed.

Inflation measured on a 12-month basis recently has been running close to the Committee’s 2 percent longer-run objective. Excluding energy and food, consumer prices declined in March and inflation continued to run somewhat below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.”

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China Woes Send Optical Communication Shares Lower!

Investors have been skittish on the prospects for RMB#optical communication companies since late last year, mostly centered on a slowdown in #China spending.

IHS Markit pointed out in a report from December 2016 that the pace of China’s spending on optical network equipment slowed in Q3 of 2016. Sales in China dropped more than 19% sequentially, according to the report. Operators in the country still spent 14% more than in Q3 of 2015, thanks to deployments of 100G infrastructure led by China Mobile.

A recent report from MKM Partners on #Oclaro $OCLR peer #Finisar $FNSR noted concerns on a number of fronts, “including China, for all products and 10G Datacom and Fibre Channel/SAN in the U.S. and Europe.” The analyst saw Q4 demand in China weak due in part to lower demand from Huawei with weakness in product demand across the board, including WSS,10G Datacom and Telecom, and CFP2.

According to the note, FiberHome and ZTE are also sluggish for Finisar. Oclaro CEO Greg Dougherty expanded on China during the company’s earnings call on Tuesday night. “In April, we were informed by both of our major Chinese customers that demand would be even slower than previously anticipated for Q4. While both customers have signaled a slowdown for demand in the China market, the majority of the projected Q4 impact is coming from one customer. This slide-dark-fibercustomer cited both the reduction in demand for the Chinese market as well as in inventory correction,” the CEO said.

On a positive note, #Dougherty sees the fundamental demand drivers in China still intact, and believes growth will return later this year from metro and provincial networks deployment.

ANALYSTS WEIGH IN: In a report out Wednesday morning, Jefferies analyst James Kisner said he believes the post-earnings selloff in shares of Oclaro brings a compelling entry point. The analyst was pleased with the gross margin performance and thinks the outlook suggests “healthy industry dynamics and product differentiation.” He lowered his price target for the shares to $12 from $14 and reiterated a Buy rating on the name. In a separate note out Wednesday, Needham analyst Alex Henderson pointed out that a C-Suite mandate to improve cash flow at Huawei is causing a more dramatic inventory correction than expected and that there was a “modest” amount of inventory to mop up at #ZTE.

OPTICALS DOWN: Shares of other companies in the space are also lower, including Finisar (FNSR), #Lumentum $LITE , #NeoPhotonics $NPTN , #Acacia Communications $ACIA , #Viavi $VIAV , and Applied Optoelectronics $AAOI .

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Straight Path Receives Superior Offer

#StraightPath Communications $STRP announced that its board of directorsresize_StraightPath determined that a revised offer from an unnamed “multi-national telecommunications company” to acquire 100% of the issued and outstanding shares of Straight Path for $135.96 per share, reflecting an enterprise value of approximately $2.3B, which will be paid in bidder stock in an all-stock transaction constitutes a “Superior Proposal” as defined in Straight Path’s previously announced definitive agreement and plan of merger with #AT&T $T and Switchback Merger Sub Inc., dated as of April 9.
The bidder previously submitted an unsolicited offer on April 24 to acquire 100% of the issued and outstanding shares of Straight Path for $104.64 per share, reflecting an enterprise value of $1.8B, which has been superseded by the revised offer announced today.
Under the terms of the AT&T Merger Agreement, AT&T agreed to acquire Straight Path in an all-stock transaction in which Straight Path stockholders would receive $95.63 per share, reflecting an enterprise value of $1.6B, which would be paid using AT&T stock.
Under the AT&T Merger Agreement, Straight Path is required to pay a $38M termination fee to AT&T if the Straight Path Board terminates the AT&T Merger Agreement in order to enter into an agreement with the Bidder. The bidder has agreed to pay the termination fee to AT&T on Straight Path’s behalf in such event. Straight Path would be required to repay the bidder for the AT&T termination fee under certain circumstances in connection with a termination of the Bidder’s merger agreement.
At this time, Straight Path remains subject to the AT&T Merger Agreement and the Straight Path board has not changed its recommendation in support of the AT&T transaction, the existing AT&T merger agreement, or its recommendation that Straight Path’s stockholders adopt the AT&T merger agreement.

Wireless Charging Coming to iPhone!

#JPMorgan tell investors #Apple $AAPL will integrate #Broadcom’s $BRCM wireless charging chip into its upcoming iPhone launch in the second half of 2017.

In February, the bank was unclear whether or not Apple would be integrating wireless broadcom_chipcharging into this year’s iPhone launch. The February report sent shares of #Energous $WATT lower.

Since that report, Broadcom is getting set to commence manufacturing production of the wireless charging chip with its foundry partners in May.

The broker believes Apple will also use Broadcom’s next generation WiFi/Bluetooth combo chip and maybe two ASIC chips instead of one. There is at least a $2-$3 step-up in dollar content per phone from the new wireless charging chip, new touch controller chips and upgraded wireless connectivity content in the upcoming iPhones, which is “significantly” higher than what the market is anticipating.

#JPMorgan reiterates an Overweight rating on Broadcom with a $260 price target.


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After 40 years, Boeing to deliver first jets to Iran next year

#Boeing $BA is planning to deliver initial planes in a $16.6B 80-jetliner sale to Iran Air starting next year, #Bloomberg reports. “That remains on track,” CEO Dennis Muilenburg told reporters, according to Boeing Business Jet Family
K63803Bloomberg. “It’s really important that at every step of the process, we’re working on this hand-in-hand with the U.S. government.”

The company also has a separate $3B agreement with #Iran #Aseman Airlines. #Airbus $EADSY has already delivered initial planes in a $19B sale after international restrictions on trade were lifted following a nuclear accord.

“The prospect of renewed aircraft deliveries to the Islamic republic continues to rankle conservatives, who say the jetliners will be used for military purposes or to support terrorist groups,” according to Bloomberg.

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Dunkin is next now that Panera is gone!

Following #Panera Bread’s $PNRA recent announcement that Europe’s panera-bread-300x300#JAB Holding has agreed to acquire the company in a transaction valued at approximately $7.5B, market chatter has it that #Dunkin’ Brands $DNKN could be next. Maxim says “one of the strongest candidates” for a potential acquisition in the Quick Service restaurant space.

This comes a few days after #Longbow told investors the do not expect the company to be acquired anytime soon. Meanwhile, #RBC Capital upgraded Dunkin’ Donuts’ parent to Outperform, as the bank anticipates a “more profitable system.”

STRONG BUYOUT CANDIDATE: In a research note to investors this morning, Maxim’s Anderson said he still views Dunkin’ Brands as “one of the strongest candidates” for a potential acquisition in the Quick Service restaurant space, even after JAB Holdings’ deal for Panera takes it out of the running for now. Moreover, the analyst argued that he sees comp growth and geographic expansion opportunities for Dunkin’ Donuts and Baskin-Robbins in both the U.S. and overseas and sees a potentially lucrative licensing business for the company as an “increasingly important attribute.” Dunkin’ Brands’ best likelihood for M&A will come from a multinational, multi-concept franchise operator, such as #Yum! Brands $YUM , Anderson contended, adding that he believes the latter isdunkin seeking franchise-driven growth concepts to complement its existing brand portfolio. The analyst estimates a range of $70-$75 for a potential takeout, and assigns a 25% likelihood of a possible acquisition in the next 12 months. Anderson acknowledged that #McDonald’s $MCD has recently gained market share through beverage discounting, but noted that Dunkin’ Brands held its own during the quarter with limited menu price increases. He reiterated a Buy rating on the stock ahead of quarterly results and raised his price target on Dunkin’ to $64 from $61.

ACQUISITION ‘HIGHLY UNLIKELY’: Conversely, Longbow analyst Alton Stump told investors in a research on his own on Friday that he believes a takeout of Dunkin’ Brands is “highly unlikely” to happen anytime soon. While an acquisition of the company by either JAB or Restaurant Brands $QSR may make sense on the surface, Dunkin’ Brands’ all-franchised operating model is “not a good fit” for JAB and its leveraged balance sheet would likely steer Restaurant Brands away, the analyst argued. Furthermore, he noted that Dunkin’ Brands’ decelerating same-store sales and net unit growth fundamentals are likely hard for any potential acquirer, including private equity players, to ignore. In the absence of a takeout, the analyst believes the shares of Dunkin’ Brands contain substantial downside risk based on the company’s weakening core fundamentals and, therefore, reiterates an Underperform rating and $35 price target on the shares.

WHAT’S NOTABLE: This morning, RBC Capital’s Palmer upgraded Dunkin’ Brands to Outperform from Neutral and increased his price target on the shares to $64 from $54 based on his outlook for improving franchisee profitability and improved long-term unit and earnings per share growth. Additionally, the analyst told investors that he sees upside from potential cash back to shareholders, either through accelerated buybacks or a higher dividend payout. A “dramatic reduction” in menu items and heightened focus on core coffee could bolster franchisee profitability by as much as hundreds of basis points over the next year, he argued, adding that improving margins could enable a better commitment to national value platforms and deter menu price inflation.

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Intel Paid to Play!

#Intel $INTC agreed to make a $742M investment in software startup #Cloudera intc$CLDR for a 17% stake in March 2014, double the share price other investors paid, in part because “it would help guard against an acquisition of the startup by another company,” the Wall Street Journal reports, citing people familiar with Intel’s thinking.

The report follows Cloudera’s initial public offering which resulted in the worth of Intel’s investment decreasing to about $434M. “The resulting $4.1B valuation-compared with $1.8B earlier that month when venture investors bought in-was bound to scare away prospective buyers,” according to WSJ.

Cloudera CEO Tom Reilly said in an interview after the company’s IPO that the higher price Intel paid reflected the companies’ deep partnership.

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Dish Could be a winner, says Barcaly

Shares of #Dish $DISH are higher today after Barclays upgraded the stock to Overweight from Equal Weight, saying that the company “could emerge as a preferred partner” for “most” of the wireless carriers.Dish_network

DEAL POSSIBILITIES: #Sprint $S could combine with #T-Mobile $TMUS , and the combined entity could be forced to make a mobile virtual network available to a competitor, said Barclays.

Given the spectrum owned by Dish, the company could obtain a network from Sprint/T-Mobile and enter the wireless business, either on a wholesale or retail basis, Venkateshwar. believes. Dish could also combine with AT&T’s $T #DirecTV, the analyst stated. Such a transaction has been blocked by regulators in the past, but the competitive environment for video distribution has been altered significantly since then, according to the broker. #AT&T could use synergies to completely fund the deal, and the transaction would give the telecom giant “unprecedented scale in video,” wrote Venkateshwar. The analyst believes that #Verizon $VZ already faces tough competition and the pressure on it could intensify if Dish pursues one of the alternatives outlined above. Consequently, it may decide to try to buy Dish, according to Barclay.

VALUE HIGHLIGHTED: As carriers pursue Dish, the “strategic value” of its satellite business, which is under-appreciated by investors, will be “highlighted,” according to the analyst. The analyst raised his price target on Dish to $74 from $62.

WHAT’S NOTABLE: On April 25, The Wall Street Journal reported that Verizon had submitted a $104.64 per share offer for spectrum owner Straight Path $STRP , which has previously agreed to be acquired by AT&T for $95.63 per share. Straight Path has confirmed that its board determined that an “unsolicited offer from a multi-national telecommunications company” of $104.64 per share, reflecting an enterprise value of $1.8B, constitutes a “Superior Proposal” to the one accepted from AT&T, but did not name the rival bidder.

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Synchronoss Technologies shares sink

#cropped-527178_434502233267150_400064991_n.jpgSynchronoss Technologies $SNCR shares are down about 40% in premarket trading after the company’s chief executive officer and chief financial officer resign to “pursue other interests.” To make matters worse, the cloud computing company,   expects total revenue in the first quarter to come in $13 million to $14 million well below the company’s guidance, which was $173 million to $178 million.

The company also said it expects operating margins to come in below its guidance.

Video game makers boosted by continued shift to digital

Pacific Crest Securities resumed coverage of the interactive entertainment sector with a positive outlook. Fueled by higher digital distribution rates, the sector video-gameshould generate additional gross margin gains going forward, the analyst stated.

Additionally, the broker believes that companies in the sector should be able to use data they obtain from online users to improve their games and raise their monetization levels.

The analyst recommends investors own the shares of video game makers Electronic Arts $EA , #Activation Blizzard $ATVI and #Take-Two Interactive $TTWO , as he resumed coverage of all three stocks with Overweight ratings.

ELECTRONIC ARTS: Broker says that Electronic Arts’ “high value” games with “predictable” sales volumes should enable its revenue and margins to increase over time. Additionally, he believes that the company is poised to lower its development costs going forward. He placed a $112 price target on the stock.

ACTIVISION: The video game maker’s “tremendous” intellectual property and popular digital games leave it well-positioned to benefit from increased spending on digital, the broker stated. Moreover, the large audiences of its digital games should enable it to continue attracting more users and allow its profits to beat expectations, according to Wingren, who set a $60 price target on the stock.

TAKE-TWO: The success of the company’s Red Dead Redemption 2 game, along with the “sustainability” of its GTA Online and NBA 2K franchises should enable its earnings power to exceed “historical norms,” Wingren wrote. He set a $74 price target on the stock.

WHAT’S NOTABLE: Video game and hardware retailer GameStop $GME announced this morning that it has just received a limited supply of Nintendo’s $NTDOY popular Switch systems, which are “available immediately for customers in-store only and while supplies last.” The shift of physical games to more digital delivery has frequently been cited in the past as a risk for GameStop.

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S&P announces changes to its Indices

S&P Dow Jones Indices will make the following changes to the S&P #MidCap 400 and S&P #SmallCap 600 indices effective prior to the open on Friday, April 28:

PBF Energy $PBF will replace Waddell & Reed Financial $WDR in the S&P MidCap 400, and Waddell & Reed Financial will replace Stillwater Mining $SWC in the S&P SmallCap 600.

Sibanye Gold (SBGL) is acquiring Stillwater Mining in a deal expected to be completed soon pending final conditions. Apollo Commercial Real Estate Finance $ARI will replace ZELTIQ Aesthetics $ZLTQ in the S&P SmallCap 600. S&P 100 and 500 constituent Allergan $AGN is acquiring #ZELTIQ Aesthetics in a deal expected to be completed on April 27 pending final conditions.

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