Zayo Group sold for $35 per share

Zayo Group to be acquired by Digital Colony, EQT in deal valued at $14.3B

Zayo Group Holdings (ZAYO) announced that it has signed a definitive merger agreement to be acquired by affiliates of Digital Colony Partners and the EQT Infrastructure IV fund.

Zayo sold for $14.3 billion, Stockwinners

The transaction would result in Zayo transitioning from a public company to a private company.

Zayo Group Holdings, Inc. provides bandwidth infrastructure solutions for the communications industry in the United States, Canada, and Europe.

Under the new ownership, the Zayo team would continue to execute the Company’s strategy and remain headquartered in Boulder, Colorado.

Under the terms of the agreement, which was unanimously approved by Zayo’s Board of Directors, shareholders will receive $35.00 in cash per share of Zayo’s common stock in a transaction valued at $14.3 billion, including the assumption of $5.9 billion of Zayo’s net debt obligations.

The offer price represents a 32% premium to the volume-weighted price average of the last six months of $26.44. Dan Caruso, Zayo’s Chairman and CEO, said, “Digital Colony and EQT share our vision that Zayo’s Fiber Fuels Global Innovation.

Both are experienced global investors in the communications infrastructure space, and they appreciate our extraordinary fiber infrastructure assets, our highly talented team and our strong customer base. I am confident this partnership with EQT and Digital Colony will empower Zayo to accelerate its growth and strengthen its industry leadership.”

“Following a comprehensive review of strategic alternatives, the Zayo Board of Directors concluded that the sale of Zayo to Digital Colony and EQT Infrastructure is in the best interest of Zayo and all its stakeholders,” said Yancey Spruill, Zayo’s Lead Independent Director. “

The transaction delivers immediate and substantial value to shareholders and will strengthen Zayo’s financial flexibility, enabling the company to increase investments and better position itself for long-term growth and profitability.”

The closing of the deal is subject to customary conditions, including regulatory clearance and Zayo shareholder approvals.

The transaction is expected to close in the first half of calendar 2020.

Goldman Sachs and J.P. Morgan are serving as financial advisors to Zayo Group in connection with the transaction and Skadden Arps is serving as legal counsel.

Morgan Stanley and Deutsche Bank are acting as financial advisors to Digital Colony and EQT Infrastructure, and Simpson Thacher is serving as legal advisor.

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Red Hat sold for $34 billion

 IBM to acquire Red Hat for $190 per share

Red Hat sold for $34 billion, Stockwinners
Red Hat sold for $34 billion, Stockwinners

IBM (IBM) and Red Hat (RHT) announced that the companies have reached a definitive agreement under which IBM will acquire all of the issued and outstanding common shares of Red Hat for $190 per share in cash, representing a total enterprise value of approximately $34B.

With this acquisition, IBM will remain committed to Red Hat’s open governance, open source contributions, participation in the open source community and development model, and fostering its widespread developer ecosystem.

In addition, IBM and Red Hat will remain committed to the continued freedom of open source, via such efforts as Patent Promise, GPL Cooperation Commitment, the Open Invention Network and the LOT Network. IBM and Red Hat also will continue to build and enhance Red Hat partnerships, including those with major cloud providers, such as Amazon Web Services (AMZN), Microsoft (MSFT) Azure, Google (GOOG; GOOGL) Cloud, Alibaba (BABA) and more, in addition to the IBM Cloud.

At the same time, Red Hat will benefit from IBM’s hybrid cloud and enterprise IT scale in helping expand their open source technology portfolio to businesses globally.

Upon closing of the acquisition, Red Hat will join IBM’s Hybrid Cloud team as a distinct unit, preserving the independence and neutrality of Red Hat’s open source development heritage and commitment, current product portfolio and go-to-market strategy, and unique development culture.

Red Hat will continue to be led by Jim Whitehurst and Red Hat’s current management team.

Jim #Whitehurst also will join IBM’s senior management team and report to Ginni #Rometty.

IBM intends to maintain Red Hat’s headquarters, facilities, brands and practices.

The acquisition will accelerate IBM’s revenue growth, gross margin and free cash flow within 12 months of closing.

It also will support a solid and growing dividend. The company will continue with a disciplined financial policy and is committed to maintaining strong investment grade credit ratings.

The company will target a leverage profile consistent with a mid to high single A credit rating. The company intends to suspend its share repurchase program in 2020 and 2021.

The company intends to close the transaction through a combination of cash and debt. The acquisition has been approved by the boards of directors of both IBM and Red Hat.

It is subject to Red Hat shareholder approval. It also is subject to regulatory approvals and other customary closing conditions. It is expected to close in the latter half of 2019.


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Android spyware Skygofree called very dangerous

Kapersky Lab says finds Android spying app called ‘Skygofree’

Android spying app called 'Skygofree' is widely distributed. Stockwinners.com
Android spying app called ‘Skygofree’ is widely distributed 

According to Kapersky Lab, “At the beginning of October 2017, we discovered new Android spyware with several features previously unseen in the wild.

In the course of further research, we found a number of related samples that point to a long-term development process. We believe the initial versions of this malware were created at least three years ago – at the end of 2014.

Since then, the implant’s functionality has been improving and remarkable new features implemented, such as the ability to record audio surroundings via the microphone when an infected device is in a specified location; the stealing of WhatsApp messages via Accessibility Services; and the ability to connect an infected device to Wi-Fi networks controlled by cybercriminals.

We observed many web landing pages that mimic the sites of mobile operators and which are used to spread the Android implants. These domains have been registered by the attackers since 2015.

According to our telemetry, that was the year the distribution campaign was at its most active.

The activities continue: the most recently observed domain was registered on October 31, 2017.

Based on our KSN statistics, there are several infected individuals, exclusively in Italy.

Moreover, as we dived deeper into the investigation, we discovered several spyware tools for Windows that form an implant for exfiltrating sensitive data on a targeted machine.

The version we found was built at the beginning of 2017, and at the moment we are not sure whether this implant has been used in the wild.

We named the malware Skygofree, because we found the word in one of the domains.”

According to researchers, the Skygofree Android implant is ” one of the most powerful spyware tools that we have ever seen for this platform.

As a result of the long-term development process, there are multiple, exceptional capabilities: usage of multiple exploits for gaining root privileges, a complex payload structure, never-before-seen surveillance features such as recording surrounding audio in specified locations.

Given the many artifacts we discovered in the malware code, as well as infrastructure analysis, we are pretty confident that the developer of the Skygofree implants is an Italian IT company that works on surveillance solutions, just like HackingTeam.”

GOOG closed at $1121.76.


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Square reports today

What to watch in Square earnings report

Square reports today. See Stockwinners.com for additional analysis

Square (SQ) is scheduled to report results of its third fiscal quarter after the market close on November 8, with a conference call scheduled for 5:00 pm EDT.

What to watch for

1. OUTLOOK

During the company’s last earnings call, Square said it sees third quarter adjusted earnings per share of 4c-5c and revenue of $562M-$568M. Square also raised its 2017 adjusted earnings per share outlook to 21c-23c from 16c-20c, and its 2017 net income outlook to (21c)-(19c) from (24c)-(20c).

Additionally, the company sees 2017 revenue between $2.14B-$2.16B.

2. BANKING BUSINESS

Back on September 7, The Wall Street Journal reported that Jack Dorsey’s Square was looking to get into the banking business and was planning to submit an application to form a wholly owned bank based in Utah. The unit, which will be called Square Financial Services, would offer loans and deposit accounts to small businesses and be capitalized with $56M in cash, the publication noted.

3. UPSIDE, RISING VALUATION

On October 11, Oppenheimer analyst Jed Kelly initiated Square with an Outperform and $35 price target saying he sees continued upside from execution on core initiates to expand into multiple revenue channels.

The analyst told investors he believes Square’s cohesive user experience is enabling the company to create a differentiated product that is in the early stages of utilizing its vast payment data to build an ecosystem for small businesses that can obtain products such as loans, marketing services, inventory management and ecommerce solutions.

Later in the month, Deutsche Bank analyst Bryan Keane raised his price target for Square to $37 saying he expects “robust” revenue growth when the company reports quarterly results.

Continued business momentum and rising sector valuations drive the new price target, the analyst noted, reiterating a Buy rating on Square.

Square reports today. See Stockwinners.com for details

His peer at Nomura Instinet also raised his price target on the name to $45 from $33. Analyst Dan Dolev argues that the third quarter report will “prove to be a defining moment” with the shares up 147% year-to-date. The analyst’s study showed that the consensus “chronically underestimates” Square’s profitability. He expects a “stellar” second half of the year with adjusted EBITDA potentially reaching $145M-$150M.

4. VALUATION TOO HIGH

Meanwhile, earlier this month, Stifel analyst Scott Devitt downgraded Square to Hold from Buy ahead of the company’s third quarter earnings. While he expects a strong quarter, the analyst noted the stock is up 168% year-to-date.

5. NEW PRODUCTS

On October 31, Square unveiled its newest hardware offering, Square Register, a versatile, fully integrated point-of-sale, built in-house to work seamlessly with any business.

Square Register is priced to offer larger sellers a fully integrated point-of-sale solution at $999, or with a convenient financing option of $49 per month for 24 months. Sellers can accept all forms of card-present payments with a new, simple transaction rate of 2.5% + 10c per transaction.

SQ last traded at $36.59. It has a 52-weeks trading range of $11.43 – $37.75.


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Barron’s is bullish on JD.com, Softbank

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

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M&A may be easiest way for Google to catch-up in the Cloud – Alphabet’s (GOOG; GOOGL) Google has been chasing competitors Amazon (AMZN) and Microsoft (MSFT) in cloud computing, Tiernan Ray writes in this week’s edition of Barron’s. The easiest way to close in may be through M&A, the publication notes, with rumors saying Alphabet could contemplate a deal as large as buying Workday (WDAY) or Salesforce (CRM).

JD.com could rise 25% or more – With the China Single’s Day – the biggest shopping day of the year – less than a month away, investors looking for growth stocks in the country may want to look to JD.com (JD), its number two online retailer after Alibaba (BABA), Jack Hough writes in this week’s edition of Barron’s. JD.com stock could gain 30% or more in the next year, he adds.

Post-Peltz, P&G must to do more than cut costs – Last week, Procter & Gamble (PG) announced that its eleven standing board members won re-election, while activist Nelson Peltz had not won a seat, Vito Racanelli writes in this week’s edition of Barron’s. Nonetheless, Peltz has yet to concede, saying the vote remains too close to call, with an independent inspector expected to certify the results, the publication adds. Management’s victory means that its CEO David Taylor is on “a short leash,” facing the task of doing more than just cutting costs, Racanelli contends.

Softbank shares can still go higher – SoftBank (SFTBF) is reportedly ready to announce a $10B deal to buy up to 17% of Uber, as it negotiates a merge of its Sprint (S) unit with rival T-Mobile (TMUS) to challenge Verizon (VZ) and AT&T (T), Assif Shameen writes in this week’s edition of Barron’s. SoftBank stock is up 27% year to date and 140% from the lows of February 2016, but its shares can go still higher, the publication adds.

Time to rethink how to play Wal-Mart. – Wal-Mart (WMT) has had a good run, so it is time to rethink how to play the stock, Steven Sears writes in this week’s edition of Barron’s. The sell-side analyst community may spend the next few months getting bullish on Wal-Mart’s digital future, while realizing that more than 4,000 retail stores offer competitive advantages, Sears noted, adding that the November earnings report should provide additional evidence for “analysts to update earnings models, raise price targets, and hike investment ratings.”


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Target and Google join forces

Target to expand nationally on Google Express

target

Target Corporation (TGT) announced it is deepening its partnership with Google (GOOG, GOOGL) to make online shopping even easier.

The partnership includes Target’s nationwide expansion on Google Express, including voice- activated shopping, as well as the addition of Target REDcard as a payment option in 2018.

Target and Google also will partner to explore and develop future digital experiences focused on Target’s signature style categories.

The expansion of Google Express follows Target’s successful trial of the home delivery shopping service in California and New York City.

By expanding Google Express nationally, more guests will be able to shop Target’s assortment, including exclusive brands that are only available at Target. And since items are shipped from a nearby Target store, guests will receive their orders in just two days.

Google’s announcement that shopping will soon be available via the Google Assistant on eligible Android phones and iPhones, joining Google Home and Android TV, will allow Target guests to make their “Target Run” from a phone solely using voice commands, a first for the company.

Target will further deepen its partnership with Google in 2018, as Target plans to make the Target REDcard debit or credit card available as an option for Google Express shoppers.

That means guests shopping Target through Google Express will enjoy the convenience of #REDcard benefits, including 5% off most purchases and free shipping. Beginning in 2018, guests will have the option to pick up their orders in a Target store, where orders are ready in just two hours.

Guests also will be able to choose to link their Target.com accounts with Google for a more personalized shopping experience.

TGT last traded at $59.90. GOOG last traded at $992.26.


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Barron’s is bullish on Cullen/Frost and Caterpillar

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

Stockwinners offers Barron's review of Stockwinners offers stocks to buy, stocks to watch, upgrades, downgrades, earnings, Stocks to Buy On Margin

BULLISH  MENTIONS

Affiliated Managers bull case ‘working out well,’ – In a follow up story, Barron’s says that Affiliated Managers (AMG) stock has jumped about 25% over the past 12 months but the opportunity is not over.

Betting on Cullen/Frost (CFR) stock could produce a 25% gain – Frost Bank has survived the Great Depression, the oil-patch bust of the 1980s, and the housing bubble of the 2000s, but investors seem to be betting it will have a tough time handling Texas latest challenges, namely weak energy prices and the effects of Hurricane Harvey, Lawrence Strauss writes in this week’s edition of Barron’s. However, he believes anyone making that wager is likely to lose in the long run, with the shares of its parent Cullen/Frost Bankers looking like a bargain for patient investors who could have a 25% gain.

Caterpillar, Analog Device among few stocks rising on earnings surprises – Until recently, companies that beat quarterly earnings estimates could routinely expect shares to rise, but not anymore, Jack Hough writes in this week’s edition of Barron’s. Although there is a shortage of true upside surprises, Hough says there are still some, with Align Technology (ALGN), Analog Services (ADI), Caterpillar (CAT), E-Trade Financial (ETFC) and Red Hat (RHT) among those who beat earnings and revenue estimates and enjoyed quick share price gains as a result, which should bode well for future performance.

 

BEARISH  MENTIONS

Equifax breach unsettles online investors – Equifax (EFX) breach unsettles online investors, with brokers stressing the need for getting rid of Social Security IDs and for close monitoring of accounts for unusual activity, Theresa Carey writes in this week’s edition of Barron’s.

Almost no one expecting FedEx results to be good– FedEx  (FDX) is set to report first-quarter earnings on Tuesday, and almost no one is expecting them to be good, Ben Levisohn writes in this week’s edition of Barron’s. Levisohn argues, however, that just because FedEx is “an express shipper doesn’t mean we need to rush to judgment,” and says sitting back and waiting to see how TNT plays out looks like the best strategy.

Goldman Sachs might be underdog – Goldman Sachs (GS) is rarely thought of as an underdog, but it might be right now, Ben Levisohn writes in this week’s edition of Barron’s. Goldman’s decline is a result of its own missteps, Levisohn notes, adding that if it can correct its problems, its stock may be able to close the performance gap with its peers.


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Barron’s is Bullish on Leucadia, Sarepta and Flex, Bearish on Fiberoptic Makers, Retail

Barron’s, the weekly publication owned by the Wall Street Journal, in its latest issue is bullish on several names. They include:

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Flex could rise 25% in a year – Flex (FLEX) is using robotics, machine learning, three-dimensional printing, and other next-generation technologies to transform itself into an everything factory, able to turn out not just consumer electronics but also medical equipment, sneakers, and car components, Jack Hough writes in this week’s edition of Barron’s. While the company’s business mix is changing, it still has ample exposure to PCs and smartphones, as well as companies like Apple (AAPL) and Lenovo (LNVGY), the report noted, adding that it expects Flex’s stock to rise another 25% or more over the coming year.

Leucadia shareholders to ‘finally’ see reward – Five years after Leucadia National (LUK) announced its merger with Jefferies Group, the combined company, and its shares, seem poised to prosper, Leslie Norton writes in this week’s edition of Barron’s. Despite an initial burst from $21 to $31 in the year following the deal, the shares succumbed shortly thereafter to the drop-in oil prices and oil-related junk bonds, which hurt Jefferies’ commodities and bond units, the publication noted, adding that both businesses have since revived, with some investors believing its shares could be worth $30 or more.

Aviation, defense stocks have ‘juicy yields – Some aerospace and defense stocks sport “nice yields,” not to mention impressive total returns in recent years, and “good opportunities” exist in companies that overlap like Boeing (BA), Lawrence Strauss writes in this week’s edition of Barron’s. Alongside Boeing, the report highlighted the yields of Lockheed Martin (LMT), United Technologies (UTX), Raytheon (RTN), L3 Technologies (LLL), General Dynamics (GD), Northrop Grumman (NOC) and Rockwell Collins (COL).

Upbeat sales news, guidance boost lift Sarepta shares – Sarepta’s (SPRT) shares surged last week after the company reported stronger than expected U.S. sales of its drug for Duchenne muscular dystrophy, or DMD, in the second quarter, while raising sales guidance for the year, Andrew Bary writes in this week’s edition of Barron’s. There could be more upside in the shares because of the significant sales potential for its DMD drug, Exondys 51, the report noted, adding that Sarepta looks like one of the “most promising smaller biotech companies.”

BEARISH NAMES

Amazon, others could be threat to fiberoptic markers – Amazon.com (AMZN), Alphabet (GOOGL;GOOG), Microsoft (MSFT), Apple (AAPL), and Facebook (FB) have all become the biggest and most important buyers of tech gear, with their influence changing the way fiberoptic components are being manufactured and distributed, Tiernan Ray writes in this week’s edition of Barron’s. The pace is so intense, and supplies have gotten so tight, that Amazon is bypassing traditional vendors and manufacturing the parts itself, the report note, adding that this could threaten companies like Applied Optoelectrics (AAOI), Lumentum (LITE) and Oclaro (OCLR) if other big techs follow. See Stockwinners’ blog about fiberoptic names.

Nothing is ‘Amazon-proof’  – Amazon’s (AMZN) deal with Sears (SHLD) to sell Kenmore appliances caused shares of Home Depot (HD), Lowe’s (LOW) and Best Buy (BBY) to tumble, Ben Levisohn writes in this week’s edition of Barron’s. Brick-and-mortar retailers like Macy’s (M) and Kohl’s (KSS) were the first victims of the rise of online shopping, while this year retailers once thought immune to the impact like O’Reilly Automotive (ORLY) and Advance Auto Parts (AAP) followed suit, the report noted, adding that when Amazon agreed to buy Whole Foods Market (WFM), it also caused shares of Kroger (KR) and Costco (COST) to sell off. “Nothing is Amazon-proof,” Levisohn argued.

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Yandex Jumps on Uber Tie Up

Yandex and Uber to combine businesses in Russia and neighboring countries

Yandex and Uber Join Forces. See Stockwinners Market Radar to read more.

Yandex (YNDX) and Uber are combining their ridesharing businesses in Russia, Kazakhstan, Azerbaijan, Armenia, Belarus and Georgia into a new company.

Uber will also contribute its UberEATS business in the region to NewCo.

In addition, Uber has agreed to invest $225M and Yandex has agreed to invest $100M into NewCo, valuing it at $3.725B on a post-money basis.

After these investments, and subject to certain adjustments at closing, NewCo will be owned approximately 59.3% by Yandex, 36.6% by Uber, and 4.1% by employees of the company, on a fully diluted basis.

Tigran Khudaverdyan, currently the CEO of Yandex.Taxi, will become the CEO of the combined business.

After the closing of the transaction, consumers will be able to use both Yandex and Uber apps while the driver-side apps will be integrated. The transaction is expected to close in Q4.

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Weight Watchers Higher on Insider Buy

Weight Watchers said in a regulatory filing that its general counsel purchased 7,110 shares in the company

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Weight Watchers (WTW) shares are getting a boost following a filing by the company’s general counsel showing he purchased shares in the weight loss company.

SHARE PURCHASE

Weight Watchers said in a regulatory filing on Thursday afternoon that general counsel Michael Colosi purchased 7,110 shares in the company.

RECENT COMPANY NEWS

In May, the Oprah Winfrey-backed diet company posted a surprise profit for the first quarter and reported revenue that also beat analysts’ expectations.

The company also said it ended the quarter with 3.6M subscribers, up 16% from a year ago. The gains prompted the company to raise its earnings per share view for fiscal year 2017.

Weight Watchers has been on a turnaround track since Winfrey took a stake in the company and agreed to become a company spokesperson in October 2015.

In addition to “the Oprah Effect,” CFO Nick Hotchkin said the company is retaining customers through technology investments and an improved weight loss program.

New CEO

Weight Watchers announced in late April that Mindy Grossman, CEO of HSN, Inc (HSNI), would join the company as president and CEO in July. The company had been seeking a replacement for Jim Chambers, who resigned in September 2016.

Weight Watchers recently announced results from a two-year study published in The Lancet which found that adults with obesity referred to Weight Watchers for one year lost significantly more weight and were able to keep it off for longer “compared to those who either received brief advice and self-help materials, or were referred to a 12-week Weight Watchers program.” Those on both the 12- and 52-week Weight Watchers program also had greater blood sugar control and greater reductions in body fat than those on the brief intervention program.

PRICE ACTION:

Weight Watchers closed on Thursday up 6.3% at $28.80, just off the 52-week high of $28.95 hit during the session.

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Barron’s is bullish on Chevron, Apple

Apple’s (AAPL) smart speaker is a “turning point” for personal technology

Comerica (CMA), SVB Financial (SIVB) and Zions Bancorp (ZION) are among banks that “should continue to benefit” from near-term rate hikes

Barron's Logo on stockwinners

Barron’s, the weekly publication owned by the Wall Street Journal, in its latest issue is bullish on several names. They include:

The unveil of Apple’s (AAPL) smart speaker is a “turning point” for personal technology and possibly for the company itself, Barron’s contends in a ‘Technology Trader’ column. The product and its array of “enticing” audio tech shows that Apple continues to innovate, the publication says, while cautioning that some observers see Apple’s arguably lackluster Siri digital assistant as a “giant hole” in the product as compared to competing offerings from Amazon (AMZN) and Alphabet (GOOG).

Shares of ATM-maker Diebold (DBD) could return 25%-40% over the next two years, Barron’s contends in a feature article. The company should lift EPS to at least $3 through 2020 as it realizes cost cuts and synergies from its acquisition of Wincor Nixdorf, the publication says. Additionally, while cash is sometimes called a declining medium amid the proliferation of online payment platforms, Diebold CEO Andy Mattes tells Barron’s that such pessimism is countered by the 5%-6% annual growth rate of paper notes in circulation.

Lam Research (LRCX) could gain 20% in a year, Barron’s contends in a feature article. The publication argues that as memory chip usage in cars, home appliances, and other machines increases — and China ramps its catch-up efforts in the space — investors should buy the industry’s “arms dealers;” that is, the companies that manufacture etching and lithography equipment. Barron’s names both Lam Research and Applied Materials (AMAT), but favors Lam Research.

Banks

Comerica (CMA), SVB Financial (SIVB) and Zions Bancorp (ZION) are among banks that “should continue to benefit” from near-term rate hikes, Barron’s contends in a feature article. The publication explains that most banks haven’t paid depositors more despite the start of rate hikes in late 2015, a trend which is expected to continue with the likely hike in June, which means higher profits for the banks. Small and mid-market names with significant depositor bases, good balance sheets, and many commercial customers will gain the most from the trend, Barron’s says, leading it to recommend the above-mentioned banks.

Energy Stocks

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Certain North American energy names “look attractive,” including Chevron (CVX), EOG Resources (EOG), Canadian Natural Resources (CNQ) and Noble Energy (NBL), Barron’s contends in a feature article. The sector “could be near a bottom” after dipping on the recent surprise gain in crude inventories, the publication adds.

Regeneron (REGN) appears expensive against short-term profit expectations, but the stock still looks good for growth investors given the company’s “long-term ability to generate more attempts at hit drugs than do peers,” Barron’s contends in a ‘Follow Up’ column.

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DuPont Fabros Sold for $7.6 Billion

DuPont Fabros shareholders will receive of 0.545 Digital Realty shares

The combination of the two companies is expected to create annual savings of $18M

 

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Digital Realty  and DuPont Fabros announced they have entered into a definitive agreement under which DuPont Fabros will merge with Digital Realty in an all-stock transaction.

The consummation of the transaction is subject to customary closing conditions, including approval by the shareholders of Digital Realty and DuPont Fabros.

DuPont Fabros Technology, Inc. (DFT) , a real estate investment trust (REIT), engages in the ownership, acquisition, development, operation, management, and lease of large-scale data center facilities in the United States.

Digital Realty Trust, Inc.(DLR), a real estate investment trust ( #REIT ),  engages in the ownership, acquisition, development, redevelopment, and management of technology-related real estate.

Under the terms of the agreement, DuPont Fabros shareholders will receive a fixed exchange ratio of 0.545 Digital Realty shares per DuPont Fabros share, for a transaction valued at approximately $7.6B in enterprise value.

The two companies’ operating models are highly complementary, and the combined organization is expected to provide the most comprehensive product offering in the data center sector. Given the enhanced size and scale, the combined company is also expected to have the most efficient cost structure and the highest EBITDA margin of any U.S.-based publicly-traded data center REIT.

The combination of the two companies is expected to create an opportunity to realize up to $18M of annualized overhead savings, resulting from both companies’ complementary business operations.

Upon closing, the transaction is expected to be immediately accretive to financial metrics, and is expected to further improve balance sheet strength.

The fixed exchange ratio represents a total enterprise value of approximately $7.6B, including $1.6B of assumed debt and excluding transaction costs.

Digital Realty has obtained a fully committed bridge loan facility from BofA Merrill Lynch and Citigroup which will be available, if needed, to finance the transaction. The debt assumed in the transaction is expected to be permanently refinanced with a combination of investment grade corporate bonds and other financings.

The transaction has been unanimously approved by the boards of directors of both Digital Realty and DuPont Fabros. The transaction is expected to close in the second half of 2017 and is subject to the approval of DuPont Fabros and Digital Realty shareholders and other customary closing conditions.

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Browsers Ad Blocking Moves Stocks

The ad-blocking feature, which could be switched on by default within Chrome, would filter out certain online ad types deemed to provide bad experiences for users as they move around the web

Large social media websites, including Facebook and Twitter, should benefit from new efforts by Apple and Google to prevent advertisers and publishers from tracking Internet users’ activities

 

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#Alphabet Inc.’s #Google is introducing an ad-blocking feature in the mobile and desktop versions of its popular Chrome web browser. The ad-blocking feature, which could be switched on by default within Chrome, would filter out certain online ad types deemed to provide bad experiences for users as they move around the web. Apple’s #Safari has announced a similar move.

Large social media websites, including Facebook (FB) and Twitter (TWTR), should benefit from new efforts by Apple (AAPL) and Google (GOOG, GOOGL) to prevent advertisers and publishers from tracking Internet users’ activities on their browsers, according to #MorganStanley. Amazon (AMZN) and digital game makers could also be boosted by the changes being made by Apple and Google, according to the firm’s analyst.

Conversely, the firm believes that retailers, small e-commerce companies, and online travel agencies could be hurt by the changes. The news is “not positive” for Criteo (CRTO), which tracks and analyzes users’ browsing behavior, Morgan Stanley added.

Other analysts, however, were more quicker to defend Criteo, with #JPMorgan, #Cowen, and Jefferies saying the stock’s decline yesterday in the wake of Apple’s announcement was overdone.

WINNERS:

The anti-tracking initiatives will make online platforms less attractive to advertisers in the shorter term, contended Morgan Stanley analyst Brian Nowak. Over the longer term, however, the changes will make user data more valuable, boosting Facebook, Twitter and #Snap (SNAP), the analyst stated. Additionally, more advertisers could turn to #Amazon in an effort to connect with its user base, while digital game makers #Zynga (ZNGA) and #Activision (ATVI) could benefit from similar trends, according to Nowak.

POTENTIAL LOSERS:

Based on the browser changes, small e-commerce companies such as eBay (EBAY) and Etsy (ETSY) could find it harder to compete against Amazon, while online travel companies may have to pay more to acquire customers, Nowak stated. The two major online travel companies are Priceline (PCLN) and Expedia (EXPE).

CRITEO OUTLOOK:

The changes announced by Apple and Google are “not positive” for #Criteo, Nowak warned. “It will be important to monitor” the company’s efforts to work around the changes and to increase its focus on advertising within apps, he wrote.

More upbeat on Criteo was #Jefferies analyst Brian Fitzgerald. Apple’s browser probably only accounts for less than 1.5% of Criteo’s revenue, and that percentage is “rapidly shrinking,” he stated. Noting that desktop ads only accounted for 37% of Criteo’s revenue in the last quarter of 2016, down from 53% in December 2015, the analyst says that Criteo “is already quickly mix-shifting away from desktop browsers and away from Safari specifically.” He recommended buying Criteo’s stock on weakness. Similarly, JPMorgan analyst Doug Anmuth does not expect Criteo’s results to be affected much by the changes being made by Apple and Google. He thinks that the decline in Criteo’s stock yesterday was overdone and kept an Overweight rating on the name.

Finally, Cowen analyst Thomas Champion says that Criteo’s exposure to Apple’s browser “seems limited,” so he believes that the risk to Criteo’s revenue should be “mitigated.”

Champion thinks that the decline in Criteo’s stock yesterday appeared to be overdone, and he reiterated an Outperform rating on the name.

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Tegna may be a takeover target

Consolidation in Media Companies is underway

Tegna recently spun off Cars.com, CareerBuilder might be next

 

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Tegna (TGNA) may be a takeover target of Nexstar (NXST), Dealreporter says.

#Tegna, formerly known as Gannett, engages in media and digital businesses in the United States.

The company operates in two segments, Media and Digital. It operates 46 television stations that produce local programming, such as news, sports, and entertainment. The company also operates Cars.com, an online destination for automotive consumers that offers information about car shopping, selling, and servicing; CareerBuilder, which provides human capital solutions. The company has a market capitalization of $5.1 billion.

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#Nexstar Media Group $NXST operates as a television broadcasting and digital media company in the United States. It focuses on the acquisition, development, and operation of television stations and interactive community Websites in medium-sized markets. The company offers free over-the-air programming to television viewing audiences. It also provides sales, programming, and other services through various local service agreements to 30 power television stations owned and/or operated by independent third parties. The company has a market capitalization of $2.7 billion.

Media companies in recent months have been looking for mergers to improve their earnings and competition from various internet based media compete for advertisers dollars. YouTube (GOOG) has recently offered a service similar to cable companies for $35 per month. YouTube will take a cut from advertising dollars that are sold on its network.

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Morgan Stanley Turns Bearish on Tesla

model3Morgan Stanley’s Adam Jonas who was a bull on Tesla downgraded the name, worried by #Apple, #Alphabet competition – $TSLA was downgraded to Equal Weight by the analyst, citing signs that the company will face stiffer competition from tech heavyweights like  Apple $AAPL and Alphabet $GOOG, $GOOGL .

Additionally, Wall Street appears to be overestimating the number of Model 3 vehicles that the company can sell in the near to medium term, Jonas warned.

COMPETITION: There are indications that “large tech firms” are preparing to compete in the electric vehicle market, said Jonas, who noted that Alphabet is looking to increase the size of its autonomous vehicle fleet by 600%, while Apple recently obtained an autonomous driving permit from California. Ultimately, “much larger and more well capitalized competitors” will become involved in Telsa’s core market, Jonas believes.

MODEL 3’s IRRATIONAL EXUBERANCE: In the last four months, the market’s expectations for sales of Tesla’s upcoming Model 3 vehicle have increased significantly, Jonas stated. The analyst thinks that the market expects Model 3 deliveries to far exceed his estimates of 2,000 and 90,0000 in 2017 and 2018, respectively.

OTHER FACTORS: China will probably not be a large market for Tesla, since #Beijing may limit the number of foreign made, high-tech electric vehicles that can be sold in the country, Jonas wrote. Meanwhile, Tesla’s newer businesses – solar, electric storage and electric trucks – probably won’t be worth more than a cumulative 15% of its current market cap, #Jonas believes.

PRICE TARGET: Jonas kept a $305 price target on Tesla shares.

PRICE ACTION: In morning trading, Tesla fell 2.4% to $317 per share. Over the last three months, the stock has advanced about 13.5%.

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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.