Loxo Oncology shares higher on data

Loxo announces positive interim data from LOXO-292 dose escalation trial

Loxo Oncology presents positive data  at ASCO meeting

Loxo Oncology (LOXO) announced interim clinical data from the LOXO-292 global Phase 1 LIBRETTO-001 dose escalation trial.

LOXO-292 is an investigational, highly potent and selective RET inhibitor.

Resonance Energy Transfer (RET),  is a mechanism describing energy transfer between two chromophores.

These data are being presented at the 2018 American Society of Clinical Oncology Annual Meeting.

The LIBRETTO-001 Phase 1 trial contains a dose escalation phase and a dose expansion phase. The dose escalation phase follows a “3+3” design.

LOXO-292 is dosed orally in 28-day cycles. As dose cohorts are cleared, additional patients can enroll in these cleared cohorts.

Intra-patient dose escalation is also permitted as dose cohorts are cleared.

The primary endpoint of the trial is the determination of the maximum tolerated dose or recommended dose for further study.

Secondary endpoints include safety, overall response rate and duration of response. The dose expansion phase is designed to further characterize the overall response rate, durability of response, and safety of LOXO-292 in predefined groups of patients with activating RET alterations.

The data presented at ASCO were based on an April 2, 2018 data cut-off date.

Eighty-two total patients had been enrolled to eight dose escalation cohorts.

Pharmacokinetic analyses during the dose escalation demonstrated dose-dependent increases in LOXO-292 exposure with increasing dose.

Starting at the 40 mg BID dose and the 80 mg BID dose, respectively, LOXO-292 delivered sustained greater thanIC90 RET fusion and greater thanIC90 RET M918T-mutant target coverage, based on cell-based potencies.

Most treatment-emergent adverse events were Grade 1 in severity. The expansion cohorts of the LIBRETTO-001 trial are now open and enrolling at the 160 mg BID dose. This dose was selected for initial expansion based on its promising activity and tolerability profile.

Additional dose exploration above 160 mg BID is ongoing and patients enrolled to the expansion cohorts may dose escalate should a higher dose be advanced.

ANALYST COMMENTS

Citi analyst Yigal Nochomovitz raised his price target for Loxo Oncology to $235 saying the company is the “star of ASCO.” The analyst now believes LOXO-292 has advanced into an advantageous competitive position in RET fusions. He expects the shares to continue to trade up and keeps a Buy rating on Loxo.

Morgan Stanley analyst Matthew Harrison said he expects Loxo Oncology shares to trade near $200 in the wake of data on LOXO-292 presented at the ASCO meeting that he said “sets a high bar for competitors.” The data positions LOXO-292 to rapidly advance to registration, said Harrison, who raised his market share estimate for LOXO-292 to 70% from 60%, increased his LOXO-292 peak sales estimate to $1B from $700M, and lowered his risk-adjustment, all of which drove his price target on Loxo shares to $215 from $170. He maintains an Overweight rating on Loxo Oncology, which is up 13% to $210.50 in pre-market trading.

JMP Securities analyst Konstantinos Aprilakis said the Phase 1 study data presented on LOXO-292 in patients with RET-altered cancers at the ASCO meeting came in “far above expectations” with respect to both efficacy and safety. Citing the overall response rate in RET fusion cancers of 77%, Aprilakis called the efficacy data “exceedingly impressive” and increased his price target on Loxo Oncology to $221 from $182 following the presentation. Aprilakis maintains his Outperform rating on Loxo shares.


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Starbucks receives $7.15 billion from Nestle

Nestle pays $7.15B to Starbucks for rights to sell packaged coffee, tea

Nestle pays $7.15B to Starbucks for rights to sell packaged coffee, Stockwinners
Nestle pays $7.15B to Starbucks for rights to sell packaged coffee,

Starbucks (SBUX) announced it will form a global coffee alliance with Nestle (NSRGY) to “accelerate and grow the global reach of Starbucks brands in Consumer Packaged Goods and Foodservice.”

It added, “With a shared commitment to ethical and sustainable sourcing of coffee, this alliance will transform, expand and elevate both the at-home and away-from-home coffee and related categories around the world.” As part of the alliance, Nestle will obtain the rights to market, sell, and distribute Starbucks, Seattle’s Best Coffee, Starbucks Reserve, Teavana, Starbucks VIA and Torrefazione Italia packaged coffee and tea in all global at-home and away-from-home channels.

Nestle will pay Starbucks $7.15B in closing consideration, and Starbucks “will retain a significant stake as licensor and supplier of roast and ground and other products going forward.”

Additionally, the Starbucks brand portfolio will be represented on Nestle’s single-serve capsule systems.

The agreement is subject to customary regulatory approval and is expected to close this summer or early fall.

The agreement excludes ready-to-drink coffee, tea and juice products. Starbucks intends to use the after-tax proceeds from the up-front payment primarily to accelerate share buybacks and now expects to return approximately $20B in cash to shareholders in the form of share buybacks and dividends through fiscal year 2020.

Additionally, the transaction is expected to be earnings per share accretive by the end of fiscal year 2021 or sooner, with no change to the company’s currently stated long-term financial targets.


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Barron’s is bullish on Ensco, bearish on Chipotle

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

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Stockwinners offers Barron’s review of stocks to buy, stocks to watch,

BULLISH   MENTIONS:

Investors should consider Ensco to benefit from oil-price surge.  Crude-oil prices are set to jump because President Donald Trump is likely to reintroduce harsh sanctions on Iran by mid-May and to benefit from the oil-price surge, investors should consider buying shares in Ensco (ESV), Simon Constable writes in this week’s edition of Barron’s. Other key oil stocks include EOG Resource (EOG), Transocean (RIG), Exxon Mobil (XOM), Halliburton (HAL), ConocoPhillips (COP) and Devon Energy (DVN), he adds.

Netflix may soon pass Disney in Market Value – Any week now, Netflix (NFLX) will surpass in market value Walt Disney (DIS) as investors cheer on the streaming service’s continued subscriber growth, Jack Hough writes in this week’s edition of Barron’s. Investors who buy Disney shares now could have a long wait before they learn whether the streaming push will result in a rebounding price/earnings ratio, but that is where a diversified business model helps, Hough says.

BEARISH  MENTIONS

Chipotle results boosted by potentially short-lived dynamics – Brian Niccol, the new CEO at Chipotle Mexican Grill, got an “enormous” endorsement on Thursday, as shares of the restaurant chain soared 24%, Avi Salzman writes in this week’s edition of Barron’s. But Salzman is still skeptical that investors should buy the rebound. The first-quarter report was boosted by several dynamics that could be short-lived, he argues, adding that even with those results, it is hard to “make a queso” for Chipotle tripling earnings.


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Mitel sold for $2 billion

Mitel to be acquired by Searchlight Capital Partners affiliates for $2B in cash

Mitel sold for $2 billion. Stockwinners
Mitel sold for $2 billion. Stockwinners

Mitel (MITL) announced that it has signed a definitive arrangement agreement to be acquired by an investor group led by affiliates of Searchlight Capital Partners in an all-cash transaction valued at approximately $2B, including Mitel’s net debt.

Under the terms of the agreement, to be completed pursuant to a plan of arrangement, upon completion Mitel shareholders will receive $11.15 per common share in cash.

This exceeds Mitel’s 52-week and last three-year-high price and represents a premium of approximately 24% to the 90-calendar-day volume-weighted average price of Mitel common shares through April 23, 2018.

Upon completion of the transaction, Mitel will become a privately held company, which is expected to provide the company with additional flexibility to accelerate its move-to-the-cloud strategy.

The Mitel Board of Directors has unanimously determined that the transaction is in the best interests of Mitel and fair to Mitel shareholders, and will recommend that Mitel shareholders approve the arrangement. The arrangement is not subject to a financing condition.

The transaction is expected to close during the second half of 2018, subject to customary closing conditions, including receipt of shareholder, regulatory and court approvals.

The arrangement agreement includes a 45-day “go-shop” period, which permits Mitel’s Board of Directors and advisors to actively solicit, evaluate and potentially enter into negotiations with parties that make alternative acquisition proposals through June 7, 2018.

There can be no assurance that this process will result in a superior offer.

Mitel does not intend to disclose developments with respect to the solicitation process unless and until the Board of Directors makes a determination requiring further disclosure. Jefferies LLC is serving as financial advisor to Mitel.

Paul, Weiss, Rifkind, Wharton & Garrison LLP and Osler, Hoskin & Harcourt LLP are serving as legal advisors to Mitel. National Bank Financial Inc. is serving as independent financial advisor to the Mitel Board of Directors and provided a fairness opinion to the Mitel Board of Directors on a fixed fee basis.


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21st Century Fox Says Thanks but Not Interested

 21st Century Fox rejected rival bid of $34.41 per share for assets

21st Century Fox Says Thanks but Not Interested, Stockwinners
21st Century Fox Says Thanks but Not Interested, Stockwinners

Disney (DIS) disclosed on Wednesday in a regulatory filing that on November 14, 2017, representatives of 21st Century Fox (FOXA) and “Party B” held discussions via conference call regarding a potential strategic transaction between the parties.

Party B, which Reuters reported last night to be Comcast (CMCSA), provided Fox a non-binding proposal to acquire the remaining company at a price of $34.41 per share payable in stock of Party B, subject to further discussions on the allocation of regulatory risk.

Disney’s filing further explained, “Representatives of Goldman Sachs and Centerview then discussed with the 21CF board the potential financial profiles of the surviving entities from potential strategic transactions with each of Party B and Disney.

In addition, representatives of Goldman Sachs discussed with the 21CF board illustrative financial implications of the potential strategic transactions as proposed by each of Disney and Party B, including illustrative future trading ranges for each of Disney and Party B on a pro forma basis, giving effect to the potential strategic transactions.

Goldman Sachs noted that the probability of Disney stock trading toward the higher ends of the range on a pro forma basis could be viewed as higher than such a likelihood for Party B.

Goldman Sachs also noted the higher likelihood for revenue synergies in a Disney transaction over and above the cost synergies assumed in the Goldman Sachs valuation analyses.

At the end of the meeting, the 21CF board directed management to cease discussions with Party B and focus on finalizing negotiations with Disney.”

On December 7, 2017, Fox’s Rupert Murdoch informed the Chairman and CEO of Party B that Fox would not enter into an exclusivity arrangement with Party B at this time and that Fox would suspend discussions while it pursued other opportunities, Disney’s filing states.


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Tesla Model 3 named Popular Mechanics’ Car of the Year

Tesla Model 3 named Popular Mechanics’ Car of the Year

Tesla Model 3 named Popular Mechanics' Car of the Year
Tesla Model 3 named Popular Mechanics’ Car of the Year

Popular Mechanics has named Tesla’s Model 3 as its Car of the Year.

Automotive editor Ezra Dyer said, “The demand makes sense. I try to reserve judgment on any car until I drive it, but the Model 3 sure looks good on paper.

Tesla (TSLA) claims zero-to-60 miles in the five-second range-unofficially, the first owners  are getting into the fours…

The autonomy is reliable and pleasantly novel, but I learn that it’s more fun to do the driving myself, sandbagging in the middle lane and then mashing the throttle to revel in that gush of acceleration.

With 271 horsepower, the Model 3 doesn’t quite rearrange your internal organs like a Model S, but it’s still ferocious… It’s thrilling, but the Model 3 isn’t perfect. I’d like a heads-up display, some way to put the speedometer in my line of sight.

And there are some places where you can see the cost-cutting, like in the rear trunk, where there’s no trim panel up top, just bare metal and cutouts for the speakers that would be there if you had ordered the premium sound system. But I think I could live with such compromises.

In fact, I know I can, because when I get home, I do something that I’ve never done with any of the other thousands of cars I’ve tested: I put down a deposit.”

TSLA closed at $257.78


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Macy’s rises on strong earnings

Macy’s rises as turnaround plan fuels better-than-expected earnings

Macy's rises as turnaround plan fuels better-than-expected earnings. Stockwinners.com
Macy’s rises as turnaround plan fuels better-than-expected earnings. Stockwinners.com

Shares of Macy’s (M) rallied after the company reported better-than-expected earnings, including a surprise increase in same-store sales, and offered 2018 guidance.

EARNINGS AND GUIDANCE

Macy’s reported fourth quarter adjusted earnings per share of $2.82, beating analysts’ estimates of $2.71, on revenue of $8.67B, essentially in line with the $8.68B consensus but up 1.8% from the year-ago period.

Comparable sales on an owned basis were up 1.3% and up 1.4% on an owned plus licensed basis. Macy’s also offered guidance for 2018, including EPS of $3.55-$3.75, excluding anticipated settlement charges related to the company’s defined benefit plans, which compares to analyst estimates of $3.66. The retailer sees comp sales on both an owned and an owned plus licensed basis flat to up 1% and expects total sales to decline 0.5% to 2%.

EXECUTIVE COMMENTARY

In a statement, Chairman and CEO Jeff Gennette said, “We are committed to returning Macy’s to comparable sales growth in 2018 and will build on the momentum we created in the fourth quarter of 2017… We head into 2018 with an improved base business, healthy inventories, a focused and engaged organization and a clear path to return Macy’s to growth.”

On the company’s quarterly earnings call, CFO Karen Houget said Macy’s expects stronger sales in the second half of 2018 than the first half and that first half owned plus licensed comp sales are expected to be “approximately flat to slightly down.”

UPDATE ON BROOKFIELD ALLIANCE

Macy’s this morning also provided an update on its agreement with Brookfield Asset Management (BAM), noting that it recently agreed to sell seven floors of its State Street store in Chicago to a private real estate fund sponsored by Brookfield.

As part of the transaction, Macy’s will receive a total of $30M as well as upside participation in the ultimate value creation associated with the conversion of the upper floors to office space. The company anticipates closing this transaction in the first half of fiscal 2018.

The company is also exploring opportunities to sell the approximately 240,000 gross square footI. Magnin portion of the main Union Square building in San Francisco.

The companies have also agreed to certain terms on nine assets, which Brookfield will redevelop once it has received approval. Macy’s said it hopes to reach a deal on the nine assets in 2019. Macy’s said it “continues to opportunistically evaluate its real estate portfolio to identify opportunities where the redevelopment value of its real estate exceeds that of non-strategic operating locations.”

PEERS

Macy’s and other mall-based retailers and department stores have been hurt by the increasing popularity of fast-fashion retailers like Zara, Forever 21 and H&M, as well as an increase in online shopping on sites such as Amazon (AMZN).

Additionally, in January, Macy’s reported that its comparable sales on an owned basis increased 1% in the months of November and December 2017 combined, which lagged rivals J.C. Penney (JCP) and Kohl’s (KSS). J.C. Penney posted same-store sales growth of 3.4% during the November-December holiday period, while Kohl’s reported that total and comparable sales were up 6.9% for the period over the last year. Kohl’s , J.C. Penney, and Nordstrom (JWN) are expected to report later this week.

PRICE ACTION

Shares of Macy’s are off earlier highs and are now up about 4% to $28.51 in Tuesday’s trading.

OTHERS TO WATCH

J.C. Penney is up 2.3%, Nordstrom is down about 2% and Kohl’s is down 1.5%.


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Barron’s in bullish on Dropbox IPO

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
Stockwinners offers Barron’s review of stocks to buy, stocks to watch

BULLISH   MENTIONS: 

Advertising companies cheaper than usual – After a tumble last year, shares of advertising companies such as Interpublic Group (IPG), Omnicom Group (OMC), Publicis Group (PUBGY), and WPP (WPP) are cheaper than usual relative to earnings, and business appears to be picking up, Jack Hough writes in this week’s edition of Barron’s. That is an opportunity for value investors, the report adds.

Quantum computing soon to be reality – Microsoft (MSFT) predicts that in five years there will be practical quantum computers, Tiernan Ray writes in this week’s edition of Barron’s. But there may be implications worth pondering, the report notes. As quantum computing grows nearer, it could ripple through technology and the race for innovative chips, software and cloud computing could be affected, Ray contends, adding that the companies that shoulder risk and reward include Intel (INTC), Nvidia (NVDA), Micron Technology (MU), Microsoft, Alphabet (GOOG; GOOGL) and Amazon (AMZN).

Dropbox IPO bodes well – In a follow-up article after Dropbox (DBX) filed a prospectus with the Securities and Exchange Commission for an initial public offering that could raise as much as $500M, Barron’s notes that the company has a private-market value of about $10B, making it one of the most valuable unicorns. A successful deal could invigorate the tech IPO market after Snap’s (SNAP) disappointing offering last year, the report adds.

May be time to consider Time Warner – Time Warner (TWX) shares look increasingly attractive as the company’s profit outlook should limit the downside if its merger deal with AT&T (T) is blocked on antitrust reasons, Andrew Bary writes in this week’s edition of Barron’s.

Many downsides when Amazon’s HQ2 comes to town – As Amazon decides on the location for its second corporate headquarters in North America, many have cautioned the 20 finalists to “be careful what you wish for,” Jon Swartz writes in this week’s edition of Barron’s. There are several downsides and prospective bidders should look no further than Silicon Valley, with workers still struggling to find affordable housing while enduring hellacious traffic and escalating costs in the area, the report noted.


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Barron’s in bullish on Citi, bearish on GE

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
Stockwinners offers Barron’s review of stocks to buy, stocks to watch

BULLISH   MENTIONS: 

Hovnanian (HOV) stock too cheap to ignore- Hovnanian Enterprises offers an interesting speculative bet, because more than a decade’s worth of problems are reflected in the price, Brett Arends writes in this week’s edition of Barron’s. A successful resolution of its legal issues, a corporate turnaround, a takeover, or a continued recovery in the U.S. real estate market are all potential catalysts, he adds.

JPMorgan, Walmart cash flow yields exceed dividend yields – The cash flow yields of JPMorgan (JPM), Johnson & Johnson (JNJ), Walmart (WMT), Pfizer (PFE), Cisco (CSCO), AbbVie (ABBV), PepsiCo (PEP), 3M (MMM), Bristol-Myers (BMY), United Technologies (UTX), Texas Instruments (TXN) and Abbott Laboratories (ABT) exceed their dividend yields, a good signal for dividend coverage and growth, Lawrence Strauss writes in this week’s edition of Barron’s.

Alphabet, Citi well positioned for later stages of market rally – It is time for investors to think about how and when bull markets end, Jack Hough writes in this week’s edition of Barron’s. Groups to favor now include financials, which benefit from rising interest rates, and industrials, he notes, adding that technology still looks attractive. Alphabet (GOOG; GOOGL), Lam Research (LRCX), Citigroup (C), and Cummins (CMI) are all well positioned for the later stages of a long market rally, Hough contends.

Bears, bulls battle over Under Armour – In a follow-up story, Barron’s says that Under Armour (UA) reported fourth quarter revenue that beat Wall Street’s estimate, but is difficult to tell whether the revenue upside represents a turning point for the business. Bulls and bears both found something to support their arguments, as revenue increased but gross margin declined while inventories swelled and store count rose 22%, the report notes.

BEARISH  MENTION:

General Electric stock could drop another 10% – General Electric (GE) lost $6B in 2017 after a series of charges and impairments, cut its dividend by 50%, and its accounting is under investigation by the Securities and Exchange Commission, but lately it has been attracting fresh attention from value-oriented investors, Andrew Bary writes in this week’s edition of Barron’s. Nonetheless, the stock is not a bargain and could drop another 10% or more, he contends


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KapStone sold for $4.9 billion

WestRock to acquire KapStone for $35.00 per share

WestRock to acquire KapStone for $35.00 per share. Stockwinners.com
WestRock to acquire KapStone for $35.00 per share

WestRock (WRK) and KapStone Paper and Packaging (KS) announced the signing of a definitive agreement, pursuant to which WestRock will acquire all of the outstanding shares of KapStone for $35.00 per share and will assume approximately $1.36B in net debt, for a total enterprise value of approximately $4.9B.

Based on KapStone’s annualized EBITDA performance in the second half of its fiscal 2017, WestRock estimates the EV/EBITDA multiples to be under 10 times before and 7 times after the full run rate of expected cost synergies and performance improvements.

Upon closing, the acquisition is expected to be immediately accretive to WestRock’s adjusted earnings and cash flow, inclusive of purchase accounting adjustments.

KapStone stockholders will have the option to receive $35.00 per share in cash, or to elect to receive 0.4981 WestRock shares per KapStone share, with elections of stock consideration capped at 25% of the outstanding KapStone shares but no limit on the number of KapStone shares that can receive cash consideration.

KapStone’s chairman, Roger Stone, and president and chief executive officer, Matt Kaplan, have entered into voting agreements, pursuant to which they have agreed to vote their shares in support of the transaction, subject to certain limitations.

WestRock will finance the cash consideration through the issuance of new debt under a fully committed financing package. WestRock expects to refinance existing KapStone debt assumed as part of the transaction upon closing.

WestRock’s expected leverage ratio at the closing of the transaction will be greater than 3.00x, and WestRock expects to return to its stated leverage ratio target of 2.25x to 2.50x by the end of fiscal 2019.

The transaction is not conditional on financing. The transaction is subject to a number of customary closing conditions, including a vote by KapStone’s stockholders, and is expected to close during the quarter ending September 30, 2018.

Upon completion of the transaction, KapStone will be integrated into WestRock’s Corrugated Packaging segment.


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Apple announces new U.S. investments

Apple announces new U.S. investments, sees $38B of repatriation taxes

Stockwinners offers winning Stock Research since 1998
Apple has too much cash

Apple (AAPL) announced a new set of investments “to build on its commitment to support the American economy and its workforce,” concentrated in three areas: direct employment by Apple, spending and investment with Apple’s domestic suppliers and manufacturers, and fueling the app economy.

Apple said in a statement that it is already responsible for creating and supporting over 2M jobs across the United States.

It expects “to generate even more jobs as a result of the initiatives being announced today.”

Combining new investments and Apple’s current pace of spending with domestic suppliers and manufacturers, an estimated $55B for 2018, Apple’s direct contribution to the U.S. economy will be more than $350B over the next five years, not including Apple’s ongoing tax payments, the tax revenues generated from employees’ wages and the sale of Apple products.

Planned capital expenditures in the U.S., investments in American manufacturing over five years and a record tax payment upon repatriation of overseas profits will account for approximately $75B of Apple’s direct contribution, the iPhone maker said.

Apple anticipates repatriation tax payments of approximately $38B as required by recent changes to the tax law.

The company expects to invest over $30B in capital expenditures in the U.S. over the next five years and create over 20,000 new jobs through hiring at existing campuses and opening a new one. Apple already employs 84,000 people in all 50 states.

The company plans to establish an Apple campus in a new location, which will initially house technical support for customers. The location of this new facility will be announced later in the year.

Today, Apple is breaking ground on a new facility in downtown Reno, which will support its existing Nevada facilities.

AAPL is up $2.79 to $179.05.


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Barron’s is bullish on Pfizer, Amgen and FAANG stocks

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
Stockwinners offers Barron’s review of stocks to buy, stocks to watch

BULLISH    MENTIONS:

FAANG stocks still have room to run – The FAANGs – Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX) and Google’s parent Alphabet (GOOG; GOOGL) – “took it on the chin” from critics and investors this past week but despite any woes, it is not time to dump them just yet, Ben Levisohn writes in this week’s edition of Barron’s. While concerns could limit gains in the short term, other factors suggest they have more room to run, he adds.

 Franklin may be ‘a bargain’ given potential return of cash – With the new tax law, Franklin Resources is likely to repatriate a significant amount of that cash and may distribute a chunk of it to shareholders, Andrew Bary writes in this week’s edition of Barron’s. Cash represents some 42% of Franklin’s current share price of $44, and its real estate could be worth another $2-$3 a share, he adds.

 Pfizer, Amgen among ‘good bets’ in pharma/biotech – Pfizer (PFE), Amgen (AMGN), AbbVie (ABBV), Elli Lilly (LLY), Bristol-Myers Squibb (BMY) and Johnson & Johnson (JNJ) have strong prospects, promising product pipelines, and good dividends that should keep growing, Lawrence Strauss writes in this week’s edition of Barron’s.

Under hostile takeover, Qualcomm tries offense – Qualcomm (QCOM), which is under a hostile takeover by Broadcom (AVGO), announced new radio frequency business, signaling a greater will to fight back and even go to the offense, Tiernan Ray writes in this week’s edition of Barron’s. Qualcomm’s new business could put pressure on Broadcom and, at the very least, may suggest the latter will have to raise its bid if it hopes to succeed, he adds.

Vivendi music holdings could be worth over $40B – The music business is headed for a growth spurt, as more listeners sign up subscription services such as Spotify, Jack Hough writes in this weekend’s edition of Barron’s. That is good news for rights owners like Vivendi, he adds. With a hand in music, TV and video games, Vivendi (VIVHY) is valued at $37B, but its music holdings alone could be worth more than $40B, thanks to streaming, the report notes.

BEARISH  MENTIONS

Still a long road ahead for self-driving vehicles – Dozens of companies presented driverless technology at the annual Consumer Electronics Show, Jon Swartz writes in this week’s edition of Barron’s. But while optimism about the growth of the market comes as consumers appear to become more comfortable with self-driving “robo-taxis,” the technology has not quite arrived, he notes, adding that autonomous cars are pricey and with drivers ready to take the wheel as a safety buffer. Among the players of the crowded road to the self-driving future are Alphabet (GOOG; GOOGL), Tesla (TSLA), BMW (BMWYY), Ford (F), Toyota Motor (TM), General Motors (GM), and Volkswagen (VLKAY), the report notes.


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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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Scana Corporation sold for $14.6 billion

Dominion, Scana announce all-stock merger valuing Scana at $55.35 a share

 Scana Corporation sold for $7.9 billion. Stockwinners.com
Scana Corporation sold for $7.9 billion.

Dominion Energy (D) and Scana Corporation (SCG) announced an agreement for the companies to combine in a stock-for-stock merger in which Scana shareholders would receive 0.6690 shares of Dominion Energy common stock for each share of Scana common stock, the equivalent of $55.35 per share, or about $7.9B based on Dominion Energy’s volume-weighted average stock price of the last 30 trading days ended Jan. 2.

Including assumption of debt, the value of the transaction is approximately $14.6B.

The agreement also calls for significant benefits to Scana’s South Carolina Electric & Gas Company subsidiary electric customers to offset previous and future costs related to the withdrawn V.C. Summer Units 2 and 3 project.

After the closing of the merger and subject to regulatory approvals, this includes: A $1.3B cash payment within 90 days upon completion of the merger to all customers, worth $1,000 for the average residential electric customer.

Payments would vary based on the amount of electricity used in the 12 months prior to the merger closing; An estimated additional 5% rate reduction from current levels, equal to more than $7 a month for a typical SCE&G residential customer, resulting from a $575M refund of amounts previously collected from customers and savings of lower federal corporate taxes under recently enacted federal tax reform; A more than $1.7B write-off of existing V.C. Summer 2 and 3 capital and regulatory assets, which would never be collected from customers.

This allows for the elimination of all related customer costs over 20 years instead of over the previously proposed 50-60 years; Completion of the $180M purchase of natural-gas fired power station at no cost to customers to fulfill generation needs.

Scana would operate as a wholly owned subsidiary of Dominion Energy.

It would maintain its significant community presence, local management structure and the headquarters of its SCE&G utility in South Carolina.

The transaction would be accretive to Dominion Energy’s earnings upon closing, which is expected in 2018 upon receipt of regulatory and shareholder approvals.

The merger also would increase Dominion Energy’s compounded annual earnings-per-share target growth rate through 2020 to 8% or higher.

The merger is contingent upon approval of Scana’s shareholders, clearance from the U.S. Federal Trade Commission/the U.S. Department of Justice under the Hart-Scott-Rodino Act, and authorization of the Nuclear Regulatory Commission and Federal Energy Regulatory Commission.

Scana and Dominion Energy also will file for review and approval from the public service commissions of South Carolina, North Carolina, and Georgia.


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Cannabis in California

Names to watch ahead of California marijuana legalization

Names to watch ahead of California marijuana legalization. Stockwinners.com
Names to watch ahead of California marijuana legalization

As recreational use of marijuana is set to become legal in California on the first day of the year, the space seems to be getting more and more attention, with a new marijuana ETF starting to trade this week and Constellation Brands (STZ) taking a stake in a Canadian medical marijuana producer earlier this year.

CANNABIS IN CALIFORNIA

For people residing in California, the New Year means they will able to buy recreational marijuana as it is set to become legal in the state starting January 1, a date that dispensaries and consumers have had in their sights on since Proposition 64 made it the official opening of the adult-use market in California.

In keeping with state rules, retailers will be able to sell or deliver cannabis between 6am and 10pm.

NAMES TO WATCH

Among the publicly traded names in the space is Innovative Industrial Properties (IIPR), a REIT that owns dispensary properties.

Last year, NYSE became the first major exchange to list a cannabis company with its acceptance of Innovative Industrial Properties’ initial public offering.

Constellation Brands seems to also be interested in the blossoming cannabis industry as the company bought a minority stake in a Canadian medicinal marijuana producer.

In October, Constellation announced it paid C$245M for a 9.9% interest in Canopy Growth, a Canadian provider of medicinal cannabis products.

Constellation, which is looking to develop cannabis products that don’t contain alcohol, does not expect to sell products in the U.S. before marijuana is nationally legalized but may begin to sell products in Canada, where such products are expected to be legalized by 2019.

Earlier this week, ETF Managers Group announced that MJX, the ETFMG Alternative Harvest ETF, was live and available for trading on the NYSE Arca.

This fund is one of the first of its kind available to U.S. investors and is designed to replicate the Prime Alternative Harvest Index, which tracks companies likely to benefit from the increasing global acceptance of various uses of the cannabis plant.

This includes treatments from innovative medicinal breakthroughs involving the plant’s unique properties.

PRICE ACTION

In Wednesday’s trading, shares of Constellation Brands are fractionally down to $224.95, while Innovative Industrial Properties is up nearly 5% to $27.24.


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