United to increase capacity by 5 percent

United’s plan to increase capacity drags down airline stocks 

United plan to increase capacity by 5%. Stockwinners.com
United plan to increase capacity by 5%.

Shares of United Continental (UAL) are sliding after the company said in its earnings conference call that it plans to grow capacity by 4%-6% in 2018, likely threatening its profit margin.

This comes as United looks for a competitive edge in its fight against low-cost carriers such as Southwest Airlines (LUV) and JetBlue (JBLU).

This morning, Evercore ISI analyst Duane Pfennigwerth downgraded United to a neutral-equivalent rating.

RESULTS, OUTLOOK

Last night, United Continental reported fourth quarter adjusted earnings per share of $1.40 and revenue of $9.4B, with consensus at $1.34 and $9.42B, respectively.

The company also said Q4 2017 consolidated passenger revenue per available seat mile was up 0.2% compared to Q4 2016.

Additionally, the carrier noted it sees 2018 capacity growth of 4%-6%, and a similar growth rate in 2019 and 2020.

United expects 2018 EPS to be $6.50-$8.50 and sees 2018 capital expenditures of $3.6B-$3.8B.

CAPACITY CONCERNS

In a research note to investors this morning, Evercore ISI’s #Pfennigwerth downgraded United Continental to In Line from Outperform, with a $75 price target, following its quarterly report.

The analyst noted that while United’s belief appears as high as ever in the view that restoring domestic share in its hubs is the shortest path to margin expansion, the “biggest missing ingredient” from its presentation was any evidence that the strategy is working.

The company’s higher growth pitch likely plays well with labor ahead of another round of contract negotiations in 2019 but limits broader participation from longer term investors seeking confidence at this point in the cycle, he contended.

Furthermore, the analyst argued that growth acceleration following poor pricing execution in 2017 and in the face of a significantly higher fuel curve is “surprising.”

Meanwhile, his peer at Stephens also voiced concern over the company’s capacity growth plans. While analyst Jack #Atkins acknowledged that he was encouraged that United issued both 2018 and long-term EPS guidance, he believes its plan to grow its system capacity by 4%-6% for each of the next three years is “concerning” as it implies about 6%-8% growth in the domestic market.

This level of capacity growth risks muting unit revenue growth in the market as well as potentially sparking a competitive response from one of United’s network peers, Atkins added.

The analyst told investors he expects the group to come under pressure as investors work to determine who has the most exposure to its incremental capacity growth and what it means for domestic revenue trends for the industry. He reiterated and Equal Weight rating and $78 price target on United Continental shares.

REMAINS TOP PICK

In a note of his own, UBS analyst Darryl #Genovesi told investors he expects estimates for United Continental to move higher over the next few days and that he came away from the company’s guidance meeting more positive on the fundamental go-forward strategy.

The analyst pointed out that he believes the capacity concerns will likely get swept under the rug if industry RASM continues to be strong. Genovesi reiterated a Buy rating and $90 price target on United shares.

PRICE ACTION

UAL is down 10.5% to $69.80.


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FDA votes against Lipocine’s TLANDO

Lipocine announces FDA voted 13-6 against TLANDO

Lipocine announces FDA voted 13-6 against TLANDO. Stockwinners.com
Lipocine announces FDA voted against TLANDO

Lipocine (LPCN) announced that the Bone, Reproductive and Urologic Drugs Advisory Committee of the U.S. Food and Drug Administration voted six in favor and thirteen against the benefit/risk profile of TLANDO, the Company’s oral testosterone product candidate for testosterone replacement therapy in adult males for conditions associated with a deficiency of endogenous testosterone, also known as hypogonadism.

The role of BRUDAC is to provide recommendations to the FDA.

The FDA decision on whether or not to approve the TLANDO New Drug Application is anticipated by the assigned Prescription Drug User Fee Act goal date of May 8, 2018.

CEO Mahesh Patel says: “We continue to believe that efficacy and safety results from numerous clinical studies with TLANDO are consistent with other FDA approved TRT products… We look forward to continuing to work with the FDA through the remainder of the review process.”

LPCN closed at $3.46.


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Honda recalls 465,000 vehicles with faulty airbag

Honda to recall additional 465,000 vehicles with faulty airbag inflators

Honda to recall additional 465,000 vehicles with faulty airbag inflators. Stockwinners.com
Honda to recall additional 465,000 vehicles with faulty airbag inflators

In the third phase of planned recalls announced by NHTSA in May 2016 and based on recent Defect Information Reports from the airbag inflator supplier Takata (TKTDY), Honda (HMC) will conduct recalls covering approximately 717,000 Honda and Acura automobiles in the United States to replace, for free, Takata passenger front airbag inflators that do not contain a moisture absorbing desiccant.

Excluding vehicles subject to the earlier Takata airbag inflator recalls, approximately 465,000 additional Honda and Acura vehicles in the U.S. will become subject to recall for the first time as a result of this action.

Including the recall announced today, Honda has adequate replacement part supplies to repair all Honda and Acura models currently included in inflator recalls in the United States.

Owners of affected vehicles can seek repair immediately at authorized Honda and Acura dealers.

No additional driver front airbag inflators in Honda or Acura automobiles will be subject to recall in this action, as all potentially affected driver inflators already are subject to prior recalls.

However, some vehicles previously repaired under earlier driver front inflator recalls will now require replacement of those vehicles’ passenger front inflators under this new action.

In addition, 960 Honda Gold Wing Airbag motorcycles from the 2009-2016 model years will be recalled to replace optional Takata non-desiccated airbag inflator modules installed on those vehicles.

Due to the relatively small vehicle population and an adequate supply of replacement inflators, Honda has elected to pull forward the recall of motorcycles that would have been included in Phase 4 of NHTSA’s recall plan (scheduled for January 2019), placing them under recall earlier than required.

With this action, all Honda motorcycles equipped with defective inflators in the U.S. are now eligible for repair. There have been no Takata airbag inflator ruptures involving Honda motorcycles globally.

With this new action, a total of approximately 11.9 million Honda and Acura automobiles have been or now are subject to recall for replacement of a Takata driver and/or passenger front airbag inflator in the United States, with approximately 4,540 Honda motorcycles subject to recall for the replacement of the Takata airbag inflator module.

HMC closed at $36.00


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Bulls vs Bears on Principal Financial

Wells Fargo cautious on Principal Financial as Goldman says buy

Bulls vs Bears on Principal Financial. Stockwinners.com
Bulls vs Bears on Principal Financial

 

This morning, Goldman Sachs analyst Alex Scott upgraded Principal Financial (PFG) to Buy on his view that the company has potentially positive earnings growth drivers and the stock has limited downside risk.

 

Meanwhile, his peer at Wells Fargo downgraded the stock to Market Perform, arguing that its current valuation already reflects the relative growth in earnings derived from the company’s niche of fee-based businesses, aided by healthy equity market performance.

 

BUY PRINCIPAL FINANCIAL

 

In a research note to investors this morning, Goldman Sachs‘ Scott upgraded Principal Financial to Buy from Neutral after his work suggested a number of potentially positive earnings growth drivers.

 

The analyst noted that he sees organic growth in the Spread and International segments, upside to estimates driven by margins, potential for inorganic growth through deploying excess capital, and a possibility that the pension partnership with the China Construction Bank will be finalized in 2018.

 

Nonetheless, Scott pointed out that he believes the company could experience some pricing pressure within the Specialty Benefits segment during the year, but the improved growth related to tax reform and scale positions the segment well. The analyst also raised his price target on the shares to $80 from $71.

 

MOVING TO THE SIDELINES

Conversely, Wells Fargo analyst Sean Dargan downgraded Principal Financial to Market Perform from Outperform, with a $79 price target, saying the stock’s valuation already reflects the relative growth in earnings.

 

While the analyst acknowledged that Principal’s earnings per share will benefit from tax reform, like all companies under his coverage, #Dargan noted that its push to show growth in spread earnings via pension risk transfer exposes the company to “greater longevity risk,” which deserves a lower multiple than “pure” spread earnings.

 

The analyst told investors that he now prefers Voya Financial (VOYA), pointing out that the company should look more like Principal over time after shedding its capital-intensive annuity business. Furthermore, Dargan argued that he sees more upside in Voya at current valuation levels.

 

Principal Financial (PFG) is  up 1% to $73.12.


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Barron’s is bullish on Gold and FedEx, bearish on Caterpillar

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

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BULLISH  MENTIONS:

FedEx EPS (FDX) growth should more than triple next year – U.S. postal rates look likely to rise, pinching Amazon (AMZN) and benefiting FedEx and UPS (UPS), Jack Hough writes in this week’s edition of Barron’s. While for now UPS enjoys higher profit margins, investors should favor FedEx as years-long investment in automating and expanding its hubs has given the company a speed and efficiency advantage over the former, he adds. Earnings per share growth for FedEx should more than triple next year as tax cuts kick in, the report notes.

Deal makers now ‘on the clock.’  – Deal makers may be on the clock, especially if one believes that the bull market is in its waning stages and the Federal Reserve is serious about interest rate hikes, Alex Eule writes in this week’s edition of Barron’s. 2018 merger speculation already kicked off in a big way, with headlines that Amazon (AMZN) could buy Target (TGT) and Apple could acquire Netflix (NFLX), he notes, adding that M&A may be necessary to grow and even to survive.

Valero, Home Depot among companies expected to raise dividend – Charles Schwab (SCHW), Home Depot (HD), Valero Energy (VLO), NextEra Energy (NEE), Allstate (ALL) and Cisco Systems (CSCO) are among the large companies expected to announce healthy dividend increases soon, Lawrence Strauss writes in this week’s edition of Barron’s. These projected boosts come amid a solid outlook for dividend growth in the U.S. and globally, he adds.

Intel not to be blamed for failures of computer security – Intel (INTC) came under fire for the revelation that its chips were vulnerable, but the nature of technology and how the industry approaches computer security are the real problem, not Intel chips, Tiernan Ray writes in this week’s edition of Barron’s. There may be things Intel can do, and in fact AMD (AMD), whose chips run the same software, said its products are less vulnerable than Intel’s, he notes, but difference here are just relative as hackers’ inventiveness will continue.

Kohl’s making right moves to grow earnings. – Until recently, Kohl’s (KSS) was largely written off as a casualty of Amazon’s (AMZN) domination of the retail sector, but the stock has become one of the hottest plays in retail as investors increasingly believe that the e-Commerce giant could acquire the company, Steven Sears writes in this week’s edition of Barron’s. Even without Amazon, Kohl’s seems to be making the right moves to grow earnings, he adds.

Gold rally may be ‘just the start.’  – Gold’s recent rally could be just the start, and investors betting on a new bull market in gold can buy physical gold, mining stocks or funds that track the metal and mining shares, with junior miners typically outperforming big-caps in a gold bull market, John Kimelman writes in this week’s edition of Barron’s. Publicly traded companies in the sector include Newmont Mining (NEM), Barrick Gold (ABX), Goldcorp (GG) and Agnico Eagle (AEM).

BEARISH  MENTIONS:

Bank earnings could ‘be messy.’ – The backdrop for banks could not be much better but earnings season is about to begin – with JPMorgan (JPM), Wells Fargo (WFC) and PNC Financial (PNC) expected to report on Friday – and it could “be messy,” Ben Levisohn writes in this week’s edition of Barron’s. While tax reform should be a boon for banks, it will also produce one-time charges and gains that will need to be accounted for, he adds.

Time to sell Caterpillar – In a follow-up story, Barron’s says that with Caterpillar (CAT) soaring, it is time to sell. Investors should not expect the stock to move quickly from here, as cyclical companies like Caterpillar tend to trade at high multiples of earnings at the bottom of the cycle and low multiples at the top, it adds.


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Dexcom tumbles after Abbott receives Medicare approval for Libre

Dexcom falls after Abbott receives Medicare approval for Libre

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Dexcom falls after Abbott receives Medicare approval for Libre

Shares of Dexcom (DXCM) are sinking after Abbott (ABT) announced that FreeStyle Libre, its new continuous glucose monitoring system, is now available to Medicare patients.

ABBOTT ANNOUNCES MEDICARE COVERAGE

This morning, Abbott announced that the FreeStyle Libre System, the company’s new continuous glucose monitoring system, is now available to Medicare patients, having met the codes for therapeutic CGM systems used for coverage by the U.S. Centers for Medicare & Medicaid Services.

Coverage includes all Medicare patients with diabetes who use insulin and who meet the eligibility criteria.

Abbott said that the factory-calibrated FreeStyle Libre system is the only CGM system recognized by Medicare that requires no user calibration whatsoever and also does not require the need for routine fingersticks.

BUYING OPPORTUNITY

Following Abbott’s announcement, Piper Jaffray analyst JP #McKim said he believes Abbott’s Medicare approval for #Libre is “more market-expanding than share-taking” for Dexcom, and maintained an Overweight rating on Dexcom shares, seeing the pullback as a buying opportunity for longer-term investors.

The analyst believes the sooner-than-expected Medicare coverage minimizes upside potential for Medicare revenue in 2018, but added that CGM adoption is expected to accelerate and he thinks “the superior product” of Dexcom will win more Medicare patients.

NORTHLAND DOWNGRADES

Northland analyst Suraj #Kalia downgraded Dexcom to Underperform from Market Perform after Abbott announced Medicare coverage for the Libre FGM.

The analyst believes it undercuts Dexcom’s competitive advantages, and contends that there is additional headline risk vis-a-vis Medtronic’s (MDT) Guardian Connect CGM approval in the pipeline.

Further, #Kalia believes Dexcom’s stock is bound to be under pressure over the next 12-18 months. The analyst added that Dexcom does have the best in class sensor and the company has an “excellent” pipeline but argued that the Libre FGM may be “good enough” for a large chunk of patients, especially as its about one-tenth the cost of Dexcom’s upfront price.

OTHER ANALYST COMMENTARY

Cowen analyst Doug Schenkel believes shares of Dexcom are down too much following Abbott’s announcement and that a 10% sellof “appears disproportionate” on a three month timing swing on an expected event. Baird analyst Jeff Johnson said he believes today’s news may not be create as much near-term risk to Dexcom numbers as investors believe.

PRICE ACTION

In Thursday’s trading, Dexcom is down 10.8%, or $6.29, to $51.79.


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Apple lower on soft iPhone X demand

Apple slides as Taiwanese report raises fears about iPhone X

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Apple lower on weak iPhone X demand

Apple (AAPL) shares are weaker as U.S. investors return from the long holiday weekend after a Taiwanese newspaper report said the tech giant is trimming its first-quarter sales forecast, according to Bloomberg.

Adding to the caution are analysts following suit, reportedly due to worries about demand for the high-end iPhone X.

ANALYSTS, APPLE SAID TO TRIM FORECASTS

Taiwanese newspaper Economic Daily News quoted unidentified supply chain officials as having said that Apple is lowering its first-quarter iPhone sales forecast to 30 million units from 50 million, according to Bloomberg.

It also said Hon Hai Precision Industry Co.’s main iPhone X manufacturing hub in Zhengzhou, China, stopped recruiting workers. The company also known as Foxconn is the sole iPhone X assembler, and also makes the handsets in Shenzhen and Chengdu.

An Apple representative declined to comment on production decisions, the report noted.

Additionally, Bloomberg noted that analysts at New York-based JL Warren Capital and China’s Sinolink Securities have each lowered iPhone X shipment projections for the first quarter of next year.

Apple has been counting on a redesigned 10th anniversary iPhone to boost shipments as its market value advances toward $1 trillion. The Cupertino, California-based company is facing new challenges from Samsung Electronics Co., which is quickly recovering from the Galaxy Note 7’s recall after fires. In the meantime, Chinese brands such as Huawei, Oppo and Xiaomi are also luring away potential customers in China and other emerging markets such as India.

SUPPLIERS TO WATCH

Suppliers to Apple that may be volatile following Bloomberg’s cautious report regarding signs of slack iPhone X demand include Skyworks (SWKS), Cirrus Logic (CRUS), Broadcom (AVGO), Qorvo (QRVO), Qualcomm (QCOM), STMicroelectronics (STM), Analog Devices (ADI), Knowles (KN) and Micron (MU).

PRICE ACTION

In pre-market trading, Apple shares are down $4.73, or 2.7%, to $170.28.


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Ra Pharmaceuticals tumbles on data, downgrade

RA Pharma slides after data as analyst voices competitive concerns

RA Pharma slides after data as analyst voices competitive concerns
RA Pharma slides after data as analyst voices competitive concerns

Ra Pharmaceuticals (RARX) announced that its RA101495 SC for the treatment of paroxysmal nocturnal hemoglobinuria met the primary endpoint in the Eculizumab native cohort in a clinical trial.

However, Piper Jaffray analyst Christopher Raymond argued that the data “underwhelms on efficacy” in comparison to Alexion’s (ALNX) Soliris.

TRIAL RESULTS

Ra Pharmaceuticals has announced interim results from the company’s ongoing, global Phase 2 clinical program evaluating RA101495 SC for the treatment of paroxysmal nocturnal hemoglobinuria.

RA101495 SC met the primary endpoint in eculizumab naive patients. In these patients, a rapid, robust, and sustained reduction in lactate dehydrogenase levels from baseline to the mean of Weeks 6-12 and near-complete suppression of complement activity were observed.

Interim results from the ongoing switch cohort demonstrate near complete, sustained, and uninterrupted inhibition of complement activity during and after eculizumab washout. In the U.S.-based cohort of inadequate responders to eculizumab, who have a history of elevated LDH, 3 patients have been enrolled.

LDH stabilization and relief of side effects associated with eculizumab intolerance have been observed in the first patient enrolled in this cohort. Across all cohorts, no meaningful safety or tolerability concerns have been identified after more than 300 patient weeks of cumulative exposure, the company reported.

DATA ‘UNDERWHELMS’ COMPARED TO SOLIRIS

Piper Jaffray‘s Raymond told investors that he believes the paroxysmal nocturnal hemoglobinuria data from RA Pharmaceuticals “underwhelms on efficacy” in comparison to Alexion’s Soliris “and for that matter” ALXN1210.

Noting that inferior efficacy to Soliris on its own should put the threat from Ra Pharmaceuticals to bed, he reminded investors nonetheless that ALXN1210 should raise the bar from a convenience standpoint.

The analyst added that he sees “little reason to fret” at this point over the competitive threat to Alexion from RA101495, and reiterated an Overweight rating and $170 price target on Alexion’s shares.

RA PRICE TARGET UPPED

Meanwhile, his peer at BMO Capital raised his price target for RA Pharmaceuticals to $34 from $31, while reiterating an Outperform rating, after its RA101495 demonstrated clinical benefit in all three cohorts in the ongoing Phase 2 trial.

Analyst M. Ian Somaiya told investors in a research note of his own that he believes the phase 3 design is rational and likely to succeed.

Commenting on the potential impact on Alexion, the analyst noted that positive ‘1495 data supports his view that ALXN1210 Phase 3 results need to maintain if not raise the high efficacy and safety bar set by Soliris.

Data from Phase 1/2 trials in the first half of 2018 of Roche (RHHBY)/Chugai’s C5 antibody, with a similar profile to ALXN1210, represents the biggest competitive threat to Alexion, he contended.

PRICE ACTION

In Monday afternoon trading, shares of Ra Pharmaceuticals have dropped almost 40% to $8.80, while Alexion’s stock has gained about 3% to $112.37.


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First Potomac Sold for $1.4 Billion

First Potomac shareholders will receive $11.15 in cash per share

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First Potomac Realty Trust (FPO) announced that it has entered into a definitive merger agreement with Government Properties Income Trust (GOV) under which GOV will acquire all of the outstanding shares of First Potomac.

The transaction, which is valued at $1.4B, including the assumption of debt, is expected to close prior to year end 2017.

Under the terms of the agreement, First Potomac shareholders will receive $11.15 in cash per share at the close of the transaction. This represents a premium of approximately 9.3% to First Potomac’s 30-trading day Volume Weighted Average Price ended April 24, the last trading day before media speculation regarding a potential sale of First Potomac.

The transaction is subject to customary closing conditions, including approval by First Potomac shareholders at a special meeting. The Board of Trustees of First Potomac has unanimously approved the merger agreement and has recommended approval of the merger by First Potomac’s shareholders.

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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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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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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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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.