Canary in the mine, Homebuilders

Homebuilders continue tumble as Credit Suisse downgrades several in space

Visit Stockwinners for stock research
Homebuilder shares tumble; Stockwinners

Many believe that housing market is the engine of the economy. If that is the case, we should expect a slow down in the economy. Housing prices have always been one of the first indicators of a slowdown or a coming out of a recession for the economy. We should brace ourselves for lower home prices!

Shares of homebuilders continued their decline after an analyst at Credit Suisse downgraded several companies in the space, saying that she expects more tempered demand and rising affordability concerns to weigh on homebuilding sentiment and broader group valuation, offsetting any near-term earnings beats.

A different analyst at the firm downgraded home improvement retailers Home Depot (HD) and Lowe’s (LOW) this morning, due to his concern that their recent results and stock prices have disconnected from housing.

HOMEBUILDERS DOWNGRADED

Credit Suisse analyst Susan Maklari told investors in a research note this morning that although she believes housing and macro fundamentals remain “intact,” including high consumer confidence and sustained low unemployment, unit gains are likely to moderate.

She sees any near-term earnings beats to be offset by even more tempered demand and rising affordability concerns. She sees average order growth for 2019 of 8%, compared to 11% in 2018 and 12% in 2017, and sees “relative” outperformance from builders who are able to capture above-trend gains due to product mix, like D.R. Horton (DHI), and geographic positioning, like PulteGroup (PHM). Maklari downgraded Lennar (LEN) and Meritage Homes (MTH) to Neutral from Outperform and lowered her respective price targets for the shares to $45 from $55 and to $36 from $50.

The analyst sees more limited upside to Lennar looking ahead as its strategic initiatives, as well as geographic exposure, are reflected in its current valuation.

While Meritage has benefited from efforts to drive improvements in operations in its East region as well as the rollout of its entry level targeted homes, Maklari believes much of the initial gains have been captured and she expects limited upside to the current valuation as comparisons become more difficult.

The analyst also downgraded KB Home (KBH) to Underperform from Neutral and lowered her price target to $18 from $27, saying that over the last several months her channel checks and Realtor Survey have pointed to slowing demand in higher cost MSAs, including California, which accounted for about 50% of the company’s 2017 revenues.

HOME DEPOT, LOWE’S ALSO DOWNGRADED

Another analyst at Credit Suisse, Seth Sigman, this morning downgraded Home Depot and Lowe’s, both to Neutral from Outperform, citing his concern that their recent results and stock prices have disconnected from housing. In a research note of his own, Sigman said his key concern is that home prices will continue to moderate, at least temporarily, as higher rates weigh on affordability.

Overall, Sigman still sees EPS growing, but sees less upside over the next 12 months relative to current estimates.

The analyst continues to view Home Depot as best-in-class in retail, but struggles to find multiple upside from its current premium level as housing sentiment shifts and some uncertainty arises. While he continues to expect meaningful improvement in sales and operating profit at Lowe’s under new CEO Marvin Ellison, Sigman thinks consensus estimates are baking that in. The analyst cut his price target on Home Depot to $204 from $222 and on Lowe’s to $111 from $115.

PRICE ACTION

Shares of Lennar dropped 3%, while Meritage Homes dropped 6.6% and KB Home declined 4.4%. Other homebuilders were dragged lower, including D.R. Horton, PulteGroup and Toll Brothers (TOL), which are all down over 3%.

Additionally, Home Depot and Lowe’s both declined over 4%. Further, XHB, the homebuilding ETF, is down nearly 3% today and about 10% month-to-date.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

This 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.

Musk’s tweet sends Tesla shares lower

Tesla slides after Elon Musk mocks SEC on Twitter

https://stockwinners.com/blog/
Musk’s tweet sends Tesla shares lower

Shares of Tesla (TSLA) dropped in Friday’s trading after Elon Musk, the company’s CEO, mocked the Securities and Exchange Commission in a tweet, calling the agency the “Shortseller Enrichment Commission.”

Last weekend Musk reached an agreement with the SEC to settle fraud charges, and that charge is currently pending approval from a federal judge.

MUSK MOCKS SEC

On Thursday, Musk tweeted, in apparent reference to the SEC, “Just want to [sic] that the Shortseller Enrichment Commission is doing incredible work. And the name change is so on point!”

Musk’s tweet came just hours after Musk and the SEC were told by U.S. District Court Judge Alison Nathan, who must approve the deal, to explain why the settlement is “fair and reasonable” by October 11, Bloomberg reported.

Separately, Musk took aim at BlackRock (BLK) and other large fund managers for fueling short sellers.

Musk alleged in a tweet that BlackRock and other firms pocket “excessive profit from short lending while pretending to charge low rates for ‘passive’ index tracking.”

SEC SETTLEMENT

This past weekend, the SEC announced that Musk agreed to settle the securities fraud charge brought against him last week.

The settlement requires that Musk will step down as Tesla’s chairman and will be ineligible to be re-elected chairman for three years.

Additionally, Tesla will appoint two new independent directors to its board and both the CEO and company will each pay $20M penalties to settle allegations that Musk misled investors in August by tweeting that he was considering taking Tesla private and had secured funding for the effort.

According to the SEC’s complaint, Musk’s misleading tweets caused Tesla’s stock price to jump by over 6% on August 7, and led to “significant market disruption.”

Additionally, the SEC is requiring that Musk get approval from the company’s lawyer before tweeting anymore company news, which reports had said could clamp down on Musk’s “headline-grabbing, unpredictable approach to promoting Tesla’s brand.”

Recode’s Teddy Schleifer reported via Twitter after the “Shortseller Enrichment Commission” tweet that the SEC agreement on Musk’s tweets “does not take effect for 90 days from the settlement date, per source. So he still has ~80 days to tweet whatever he wants.”

The SEC declined to comment on Musk’s tweet, Schleifer said.

Additionally, Fox Business Network’s Charlie Gasparino also tweeted, saying that the “@SEC_Enforcement continues to investigate @Tesla over possible misstatements on production/profitability targets-sources focus is on stated targets for Model 3/co profitability.

SEC sources say case is tougher case than @elonmusk ‘funding secured’ tweet.”

PRICE ACTION

In Friday morning trading, shares of Tesla are down 4.2% to $270.17.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

This 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.

Toyota enters self-driving car services

Toyota, SoftBank agree to form JV for self-driving car services

Toyota enters self-driving car services, Stockwinners
Toyota enters self-driving car services, Stockwinners

Shares of Toyota (TM) are in focus on Thursday after the company announced plans to team up with SoftBank (SFTBF) to develop self-driving car services.

The news follows an announcement from General Motors (GM) on Wednesday that Honda (HMC) will invest $2.75B and take a 5.7% stake in its Cruise self-driving vehicle unit, in which SoftBank is also an investor.

TOYOTA, SOFTBANK TO FORM JV

Toyota announced in a statement that it and SoftBank will form a joint venture called MONET, short for mobility network, to develop businesses that will use driverless-car technology to offer new services, such as mobile convenience stores and delivery vehicles in which food is prepared en route.

MONET will provide coordination between Toyota’s Mobility Services Platform, Toyota’s information infrastructure for connected vehicles, and SoftBank’s Internet of Things Platform, which was built to create new value from the collection and analysis of data acquired from smartphones and sensor devices, the companies said.

MONET will roll out an autonomous driving service using e-Palette, Toyota’s dedicated battery electric vehicle for mobility services, by the second half of the 2020s, Toyota and SoftBank added.

The venture will have initial capital of Y2B, and SoftBank will own just over half of the business, which will initially focus on Japan and eventually go global, according to a Reuters report.

Junichi Miyakawa, chief technology officer at SoftBank who will be CEO of the new company, commented that “SoftBank alone and automakers alone can’t do everything… We want to work to help people with limited access to transportation.”

WHAT’S NOTABLE

Earlier this year, Toyota set up a new company dedicated to the research and development of self-driving vehicles, with plans to invest $2.8 billion to develop a commercially viable autonomous car.

RECENT PARTNERSHIPS IN AUTONOMOUS VEHICLES

On Wednesday, Cruise and GM announced that they partnered with Honda to work towards large-scale deployment of autonomous vehicle technology.

Honda will work jointly with Cruise and General Motors to fund and develop a purpose-built autonomous vehicle for Cruise that can serve a wide variety of use cases and be manufactured at high volume for global deployment.

Honda will contribute approximately $2B over 12 years to these initiatives, which, together with a $750M equity investment in Cruise, brings its total commitment to the project to $2.75B.

SoftBank’s Vision Fund committed $2.3B to Cruise earlier this year.

Additionally, Renault (RNSDF)-Nissan (NSANY) and Daimler (DDAIF) are considering expanding their collaboration to battery and autonomous vehicle technology as well as mobility services, Reuters reported on Wednesday, citing comments made by the CEOs of both companies.

“The industry being in transformation in the area of connectivity, autonomous cars and connected services, there are plenty of areas of cooperation for our entities,” Renault Nissan CEO Carlos Ghosn said.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

This 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.

J.C. Penney names new CEO, Shares rise

J.C. Penney spikes after naming former Joann Stores chief as new CEO

Retail selloff continues with J.C. Penney report. See Stockwinners.com for details.
J.C. Penney names new CEO, Shares rise

Shares of J.C. Penney (JCP) surged in Wednesday’s pre-market trading after the company named Jill Soltau as its new chief executive officer.

The CEO role has been vacant since the resignation of Marvin Ellison earlier this year to become the CEO of Lowe’s (LOW).

J.C. PENNEY GETS ITS CEO

On Tuesday after the market close, J.C. Penney said that Jill Soltau, the former president and CEO of fabric and crafts retailer Joann Stores, will become its next CEO.

Her appointment is effective on October 15.

In a statement, J.C. Penney director and chairman of the search committee Paul Brown said “Jill stood out from the start among an incredibly strong slate of candidates,” adding that “As we looked for the right person to lead this iconic company, we wanted someone with rich apparel and merchandising experience and found Jill to be an ideal fit.”

Former CEO Marvin Ellison left the company in May to become CEO of Lowe’s, and the CEO role at J.C. Penney has been vacant ever since.

Additionally, last week, J.C. Penney announced the resignation of CFO Jeffrey Davis to pursue another opportunity. His departure was effective October 1.

As J.C. Penney looks for Davis’ replacement, the company said Jerry Murray, senior VP of finance, will serve as interim CFO.

The retailer said it will consider both internal and external candidates to replace Davis, who has been CFO since July 24, 2017.

This summer, Chief Customer Officer Joe McFarland quit after less than a year to become executive vice president, stores, at Lowe’s.

Following Ellison’s departure, J.C. Penney created an “Office of the CEO,” comprised of Davis, McFarland, Chief Information Officer and Chief Digital Officer Therace Risch and EVP of Supply Chain Mike Robbins. Just two of those executives are still working at J.C. Penney.

WHAT’S NOTABLE

Mall-based retailers, including J.C. Penney, have been hurt by the increasing popularity of fast-fashion retailers like Zara, Forever 21 and H&M, as well as an increasing shift by shoppers to purchase online on sites like Amazon (AMZN).

J.C. Penney has struggled more than some of its peers, including Nordstrom (JWN) and Macy’s (M), and in August, cut its outlook for fiscal 2018 as it continued to deal with too much inventory.

ANALYST COMMENTARY

In a research note to investors, Piper Jaffray analyst Erinn Murphy said Soltau has “direct insights” on J.C. Penney’s core consumer given the overlap of the consumer base in her prior roles as Joann Stores CEO, but remains sidelined on shares due to her longer-term view on department store retailing and her belief that J.C. Penney is still in the process of “right-sizing” its inventory.

Murphy has a Neutral rating and $1.50 price target on the shares.

PRICE ACTION

In pre-market trading, shares of J.C. Penney are up nearly 13% to $1.76.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

This 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.

GE fires CEO, Shares rise

GE shares jump after CEO Flannery ousted amid Power unit challenges

GE introduces new company AiRXOS, Stockwinners
GE fires CEO, Shares rise

Shares of GE (GE) are rising in pre-market trading after the shrinking conglomerate announced that H. Lawrence Culp, Jr. has been named Chairman and CEO, replacing John Flannery, effective immediately.

POWER WRITE-OFF

The company stated that while its businesses other than Power are “generally performing consistently with previous guidance,” the company will fall short of previously indicated guidance for free cash flow and EPS for 2018 due to weaker performance in the GE Power business.

GE expects to take a non-cash goodwill impairment charge related to the GE Power business that will likely be as much as the approximately $23B current goodwill balance for the business, GE added.

GE previously forecast FY18 EPS at the low end of its $1.00-$1.07 range. The current EPS consensus is 95c.

RECENT ANALYST CONCERNS

In a recent note to investors, RBC Capital analyst Deane Dray lowered his price target on GE shares to $13 from $15, stating that the company had yet to reach a point where bad news does not make the stock decline and arguing that the bottom had not yet been reached.

Last month, JPMorgan analyst Stephen Tusa lowered his price target for General Electric to $10 from $11 and kept an Underweight rating on the shares.

The analyst’s channel checks, which were confirmed by GE Power’s CEO, GE investor relations, suggested GE had experienced a failure in a first stage blade on an H-frame in one of its two initial marquee installations in the U.S., Colorado Bend. Further, Tusa said the problem was material enough for Exelon (EXC) to have shut the plant down, along with the “award winning” Wolf Hollow plant for precautionary measures.

There should no longer be any doubt that GE Power has company-specific issues, Tusa contended at the time, stating that his new price target assumed weaker results at GE Power and some franchise value impact.

PRICE ACTION

In Monday’s pre-market trading, GE shares are up $1.53, or 13.5%, to $12.82.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

This 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.

Sonic sold for $2.3 billion

Sonic to be acquired by Inspire Brands for $43.50 per share in $2.3B deal

https://stockwinners.com/blog
Sonic sold for $2.3 billion, Stockwinners

Sonic (SONC) and Inspire Brands announced that they have entered into a definitive merger agreement under which Inspire will acquire Sonic for $43.50 per share in cash in a transaction valued at approximately $2.3B including the assumption of Sonic’s net debt.

Inspire is a multi-brand restaurant company whose portfolio includes more than 4,700 Arby’s, Buffalo Wild Wings, and Rusty Taco locations worldwide.

Following the completion of the transaction, Sonic will be a privately-held subsidiary of Inspire and will continue to be operated as an independent brand.

The agreement, which has been unanimously approved by Sonic’s board, represents a premium of approximately 19% per share to Sonic’s closing stock price on September 24, 2018 and a premium of approximately 21% to Sonic’s 30-day volume-weighted average price.

The transaction is subject to the approval of Sonic shareholders and the satisfaction of customary closing conditions, including applicable regulatory approvals, and will close by the end of the year.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

This 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.

Barrick Gold acquires Randgold

Barrick acquires Randgold in all-stock deal, sees ‘industry-leading’ company

Barrick Gold acquires Randgold, Stockwinners
Barrick Gold acquires Randgold, Stockwinners

Barrick Gold (ABX) announced that it has reached agreement on the terms of a recommended share-for-share merger of Barrick and Randgold Resources Limited (GOLD).

The merger is subject to approval by both sets of shareholders, regulatory approvals and other customary closing conditions.

It is intended that the merger will be implemented by means of a court-sanctioned scheme of arrangement of Randgold Resources and the Randgold shareholders under Article 125 of the companies Law 1991, with the entire issued and to be issued share capital of Randgold being acquired by Barrick.

Under the terms of the merger, each Randgold shareholder will receive 6.1280 new Barrick shares for each Randgold share.

Following completion of the merger, Barrick shareholders will own approximately 66.6% and Randgold shareholders will own approximately 33.4% of the new Barrick Group on a fully-diluted basis.

The company said, “The Merger will create an industry-leading gold company with the greatest concentration of Tier One Gold Assets in the industry, led by a proven management team of owners. Superior operating metrics, including the highest Adjusted EBITDA margin and the lowest total cash cost position among Senior Gold Peers, will support sustainable investment in growth and shareholder returns.”

The merger is expected to close by Q1 2019.

Following completion of the merger: John Thornton, Executive Chairman of Barrick, will become Executive Chairman of the New Barrick Group; Mark Bristow, Chief Executive Officer of Randgold, will become President and Chief Executive Officer of the new Barrick Group; Graham Shuttleworth, Finance Director and Chief Financial Officer of Randgold, will become Senior Executive Vice President and Chief Financial Officer of the new Barrick Group; Kevin Thomson, Senior Executive Vice President, Strategic Matters of Barrick, will become Senior Executive Vice President, Strategic Matters of the new Barrick Group; Two-thirds of the directors of the board of the new Barrick Group will be nominated by Barrick, and one-third will be nominated by Randgold.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

This 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.

Pandora sold for $3.5 billion

Sirius XM to acquire Pandora in all-stock deal valued at about $3.5B

Pandora sold for $3.5 billion, Stockwinners
Pandora sold for $3.5 billion, Stockwinners

Sirius XM Holdings (SIRI) and Pandora Media (P) announced a definitive agreement under which SiriusXM will acquire Pandora in an all-stock transaction valued at approximately $3.5B.

The combination creates the world’s largest audio entertainment company, with more than $7B in expected pro-forma revenue in 2018 and strong, long-term growth opportunities.

Pursuant to the agreement, the owners of the outstanding shares in Pandora that SiriusXM does not currently own will receive a fixed exchange ratio of 1.44 newly issued SiriusXM shares for each share of Pandora they hold.

Based on the 30-day volume-weighted average price of $7.04 per share of SiriusXM common stock, the implied price of Pandora common stock is $10.14 per share, representing a premium of 13.8% over a 30-day volume-weighted average price.

The transaction is expected to be tax-free to Pandora stockholders. SiriusXM currently owns convertible preferred stock in Pandora that represents a stake of approximately 15% on an as-converted basis.

The merger agreement provides for a “go-shop” provision under which Pandora and its Board of Directors may actively solicit, receive, evaluate and potentially enter negotiations with parties that offer alternative proposals following the execution date of the definitive agreement.

There can be no assurance this process will result in a superior proposal. Pandora does not intend to disclose developments about this process unless and until its Board of Directors has made a decision with respect to any potential superior proposal.

The transaction has been unanimously approved by both the independent directors of Pandora and by the board of directors of SiriusXM.

The transaction is expected to close in the first quarter of 2019.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

This 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.

Online retailers fall on Amazon concerns

Online retailers slide as Amazon reportedly testing recommendation service

Https://stockwinners.com/
Online retailers fall on Amazon concerns

 

Shares of several retailers and online personal shopping services are slipping in afternoon trading after CNBC reported that Amazon (AMZN) is testing a new on-site recommendation service known as Scout.


WHAT’S NEW:

 

CNBC reported that Amazon is testing a new service called Scout, a shopping site for consumers who don’t know specifically what they want to buy but are willing to take some automated recommendations.

 

Scout asks shoppers to like or dislike a product and responds by showing other products based on user responses, according to CNBC.

 

Scout is currently available for home furniture, kitchen and dining products, women’s shoes, home decor, patio furniture, lighting and bedding, with more categories coming soon.
“This is a new way to shop, allowing customers to browse millions of items and quickly refine the selection based solely on visual attributes,” an Amazon spokesperson said in an emailed statement. “
Amazon uses imagery from across its robust selection to extract thousands of visual attributes for showing customers a variety of items so they can select their preferences as they go.”

WHAT’S NOTABLE

The CNBC report noted that Amazon is utilizing machine learning technology to address one of the major criticisms of its service, namely that it’s a great place to buy things but not a great place to browse.
While Amazon is easily the biggest U.S. e-commerce company, e-retailers such as Stitch Fix (SFIX) and Walmart’s (WMT) Bonobos provide a more personalized experience and have given social media services such as Instagram (FB) and Pinterest more room to use their large collections of data in turning their networks into fledgling commerce sites, CNBC said.

PRICE ACTION

Following the news, Wayfair (W) slipped 4.3%, Williams-Sonoma (WSM) fell 1.9%, Stitch Fix dropped nearly 9%, and Steven Madden (SHOO) slid 1.3%. Meanwhile, Amazon (AMZN) shares are 1.5% lower in Wednesday afternoon trading.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

This 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.


General Mills North America sales decline

General Mills plunges after reporting North America sales decline

General Mills North America sales decline, Stockwinners
General Mills North America sales decline, Stockwinners

Shares of General Mills (GIS) sunk in late morning trading after the company reported quarterly results, including net sales for its North America Retail segment that fell 2% from the year-ago period.

QUARTERLY RESULTS AND GUIDANCE

General Mills reported first quarter adjusted earnings per share of 71c, beating analysts’ consensus estimates of 63c, while sales of $4.1B were essentially in line with the consensus forecast.

However, the company said net sales in North America, its biggest region, fell 2% to $2.39B, with net sales down 4% in U.S. Snacks and down 2% each in U.S. Meals & Baking and U.S. Yogurt.

General Mills said its pet-food division reported sales of $343.4M, up 14% on a pro forma basis. General Mills acquired Blue Buffalo earlier this year for $8B, and said its net interest expense was $134M in the quarter, primarily driven by financing related to the acquisition.

Looking ahead, General Mills reaffirmed fiscal 2019 targets, including adjusted EPS flat to down 3% from the base $3.11 earned in fiscal 2018, organic net sales flat to up 1%, net sales up 9%-10% including the impact of the Blue Buffalo deal and constant currency adjusted operating profit up 6%-9% from the base of $2.6B reported in FY18.

EXECUTIVE COMMENTARY

In a statement, Chairman and Chief Executive Officer Jeff Harmening commented that FY19 is “off to a good start” and said the Blue Buffalo transition is “progressing well.”

General Mills expects double-digit top and bottom-line growth for the Blue Buffalo business this year, excluding acquisition-related charges. On its quarterly earnings conference call, CFO Donal Mulligan said he expects price/mix to improve as the year unfolds, and that operating margins will be down “somewhat” for the year.

He also thinks there will be “a little bit more pressure” on gross margin from where the company originally expected.

For the year, General Mills expects input cost inflation will be 5% of cost of goods, one point above FY18 levels.

OTHERS TO WATCH

Peers trading lower on Tuesday include Kraft Heinz (KHC), Campbell Soup (CPB) and J.M. Smucker (SJM).


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

This 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.

Cannabis stocks rise amid interest by Coca-Cola

Cannabis stocks rise amid interest by Coca-Cola, opportunities for Shopify

Cannabis stocks rise amid interest by Coca-Cola, Stockwinners
Cannabis stocks rise amid interest by Coca-Cola, Stockwinners

Shares of cannabis stocks are in focus following a report that Coca-Cola (KO) is in talks with Aurora Cannabis (ACBFF) as it eyes the cannabis industry and an analyst note from Keybanc which said Shopify (SHOP) has cannabis potential.

COCA-COLA EYES CANNABIS

Coca-Cola is monitoring the nascent cannabis drinks industry and is in talks with Canadian marijuana producer Aurora Cannabis to develop the drinks, Bloomberg reported Monday.

“We are closely watching the growth of non-psychoactive CBD as an ingredient in functional wellness beverages around the world,” Coca-Cola spokesman Kent Landers said. “The space is evolving quickly. No decisions have been made at this time” Landers added.

The move comes as beverage makers are looking towards cannabis as soda consumption and traditional business slows.

Constellation Brands (STZ, STZ.B) previously announced it will spend $3.8B to increase its stake in Canadian marijuana producer Canopy Growth (CGC) and Molson Coors Brewing (TAP) is starting a joint venture with Quebec’s Hydropothecary to develop cannabis drinks.

In addition, Diageo (DEO) has been holding talks with at least three Canadian cannabis producers regarding a potential deal and Heineken’s (HEINY) Lagunitas label has launched a brand focused on non-alcoholic drinks infused with THC.

SHOPIFY MAY BENEFIT FROM CANNABIS SALES

KeyBanc analyst Monika Garb told investors in a research note on Monday that she is a buyer of Shopify, as the company has “ample” growth opportunities ahead.

She sees potential upside to her above-consensus estimates and expects that recreational sales of cannabis in Canada could be a general merchandise volume and revenue driver further benefiting Shopify’s business momentum.

The analyst said the company has been selected by several Canadian provinces to run their e-commerce sites and in-store point of sale solutions and has also signed deals with private cannabis producers and distributors, including Canopy Growth and Aurora.

Additionally, Garb says Shopify is the best positioned to benefit from growth in emerging brands, citing brands like Rebecca Minkoff and Kyle Cosmetics that already use Shopify. Garb maintained an Overweight rating and $182 price target on shares.

CANNABIS STOCKS

Publicly-traded companies in the space include Cronos Group (CRON), Canopy Growth, Tilray (TLRY), Cannabis Science (CBIS), Innovative Industrial Properties (IIPR) and Aurora Cannabis.

PRICE ACTION:

Aurora Cannabis gained over 16% in Monday’s trading, while Tilray gained 7.3%.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

This 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.

Incyte reports positive data

Incyte announces Phase 2b trial of ruxolitinib cream met primary endpoint

Incyte says REACH1 trial met primary endpoint, Stockwinners
Incyte reports positive data, Stockwinners

Incyte Corporation (INCY) announced positive results from its randomized, dose-ranging, vehicle- and active-controlled Phase 2b study evaluating ruxolitinib cream in patients with atopic dermatitis who are candidates for topical therapy.

The study, part of the True-AD clinical trial program, met its primary endpoint, demonstrating that ruxolitinib cream 1.5% administered twice daily significantly improved Eczema Area and Severity Index scores – a measurement of the extent and severity of AD – from baseline versus vehicle control at Week 4.

Additionally, treatment with ruxolitinib cream 1.5% BID resulted in a rapid and sustained reduction in itch versus vehicle, a key secondary endpoint.

These results were shared in an oral presentation today at the 27th European Academy of Dermatology and Venerology Congress in Paris, France.

Key study results included: Significantly improved EASI score in the ruxolitinib cream 1.5% BID arm versus vehicle at Week 4, the primary endpoint, and improvement in EASI score versus the active control, triamcinolone 0.1% cream, at Week 4, a secondary endpoint.

Significantly improved EASI scores in the ruxolitinib cream 1.5% BID arm versus vehicle at Weeks 2 and 8. Significantly greater changes in EASI score in the once daily ruxolitinib cream 1.5% and 0.5% arms versus vehicle at Week 4.

Significantly more Investigator’s Global Assessment responders – a measure of disease severity – in the ruxolitinib cream 1.5% BID arm versus vehicle at Week 4, and greater IGA response rates across other ruxolitinib arms versus vehicle.

Rapid and sustained reductions in itch numerical rating scale score observed as early as within two days from the initiation of therapy, and a more pronounced reduction in itch with ruxolitinib cream 1.5% BID and QD than with triamcinolone cream 0.1% BID.

Ruxolitinib cream was well-tolerated at all dosage strengths and was not associated with clinically-significant application site reactions.

All treatment-related adverse events were Grade 1 or Grade 2 in severity. Ruxolitinib cream is the first JAK1/JAK2 inhibitor to exhibit positive results as a topical monotherapy in the AD patient population.

Over-activity of the JAK signaling pathway has been shown to drive inflammation involved in the pathogenesis of AD.

These data support the planned initiation of a global, pivotal Phase 3 program, for which preparations are already underway.

INCY closed at $66.51.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

This 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.

Ocean Rig sold for $2.7B

Transocean to acquire Ocean Rig for $2.7B including debt

 

Ocean Rig sold for $2.7B, Stockwinners
Ocean Rig sold for $2.7B, Stockwinners

Transocean (RIG) and Ocean Rig UDW Inc. (ORIG) announced that they have entered into a definitive merger agreement under which Transocean will acquire Ocean Rig in a cash and stock transaction valued at approximately $2.7B, inclusive of Ocean Rig’s net debt..

The transaction consideration is comprised of 1.6128 newly issued shares of Transocean plus $12.75 in cash for each share of Ocean Rig’s common stock, for a total implied value of $32.28 per Ocean Rig share, based on the closing price on August 31, 2018.

This represents a 20.4% premium to Ocean Rig’s ten-day volume weighted average share price.

The transaction has been unanimously approved by the board of directors of each company.

Transocean intends to fund the cash portion of the transaction consideration through a combination of cash on hand and fully committed financing provided by Citi.

The merger is not subject to any financing condition. Upon completion of the merger, Transocean’s and Ocean Rig’s shareholders will own approximately 79% and approximately 21%, respectively, of the combined company.

No changes to Transocean’s board of directors, executive management team, or corporate structure are anticipated as a result of the acquisition.

The Company will remain headquartered in Steinhausen, Switzerland, with significant operating presence in Houston, Texas, Aberdeen, Scotland and Stavanger, Norway.

The transaction, which is expected to be completed during the first quarter of 2019, is subject to the approval of both Transocean and Ocean Rig shareholders and the satisfaction of customary closing conditions, including applicable regulatory approvals.

The merger is not subject to any financing condition.

Also, consistent with the Company’s strategy of recycling less competitive rigs, Transocean will retire two of its floaters, the ultra-deepwater drillship C.R. Luigs and the midwater floater Songa Delta.

The rigs will be classified as held for sale and will be recycled in an environmentally responsible manner. Both floaters are currently stacked.

Transocean anticipates re-ranking the combined fleet, which may result in additional rigs being recycled.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

This 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.

Coca-Cola to acquire Costa for $5.1B

Coca-Cola to acquire Costa in deal valued at $5.1B

Coca-Cola to acquire Costa for $5.1B, Stockwinners
Coca-Cola to acquire Costa for $5.1B, Stockwinners

Coca-Cola (KO) announced that it has reached a definitive agreement to acquire Costa Limited.

The acquisition of Costa from parent company Whitbread PLC is valued at $5.1B and will give Coca-Cola a strong coffee platform across parts of Europe, Asia Pacific, the Middle East and Africa, with the opportunity for additional expansion.

Costa operations include a leading brand, nearly 4,000 retail outlets with highly trained baristas, a coffee vending operation, for-home coffee formats and Costa’s state-of-the-art roastery.

For Coca-Cola, the expected acquisition adds a scalable coffee platform with critical know-how and expertise in a fast-growing, on-trend category. Costa has a solid presence with Costa Express, which offers barista-quality coffee in a variety of on-the-go locations, including gas stations, movie theaters and travel hubs.

Costa, in various formats, has the potential for further expansion with customers across the Coca-Cola system. The acquisition will expand the existing Coca-Cola coffee lineup by adding another leading brand and platform. The portfolio already includes the market-leading Georgia brand in Japan, plus coffee products in many other countries.

The purchase price is approximately $5.1B.

Upon the closing, Coca-Cola will acquire all issued and outstanding shares of Costa Limited, a wholly owned subsidiary of Whitbread. This subsidiary contains all of the existing operating businesses of Costa.

Whitbread will be seeking shareholder approval for the transaction, which is expected to take place by mid-October.

The deal is subject to customary closing conditions, including antitrust approvals in the European Union and China.

It is expected to close in the first half of 2019. Coca-Cola expects the transaction to be slightly accretive in the first full year, not taking into account any impact from purchase accounting.

For FY18, Costa generated revenue and EBITDA of roughly $1.7B in revenue and $312M in EBITDA.

Because Coca-Cola expects the transaction to close in the first half of 2019, there is no change to 2018 guidance.

The company’s long-term targets also remain unchanged.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

This 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.

K2M Group sold for $1.4B

Stryker to acquire K2M Group for $27.50 per share

K2M Group sold for $1.4B , Stockwinners
K2M Group sold for $1.4B , Stockwinners

Stryker (SYK) announced a definitive merger agreement to acquire all of the issued and outstanding shares of common stock of K2M Group (KTWO) for $27.50 per share, or a total equity value of approximately $1.4B.

The combined business will have a competitive portfolio across Stryker’s Spine product categories and leverage a more powerful commercial engine.

With the addition of K2M’s proven product portfolio, consistent track record of execution and robust pipeline, Stryker Spine’s business will be well-positioned to sustain innovation and provide its customers and employees with proven products.

Upon closing of the transaction, it is expected that Eric Major will serve as President of Stryker’s Spine division and lead the combined business in its continued growth and innovation.

Bradley Paddock, the current President of Stryker’s Spine division, will assist with transitioning his responsibilities to Major while also supporting the integration efforts.

The acquisition of K2M is expected to close late in the fourth quarter of this year and is expected to have an immaterial dilutive impact to Stryker’s net EPS and adjusted net EPS in 2018.

There is no change to Stryker’s previously announced expected adjusted net EPS for the full year, which is a range of $7.22-$7.27.

For 2019, and beyond, Stryker reaffirms its previously stated long-term financial goals for sales, operating margins and adjusted net EPS.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

This 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.