Today - Wednesday, December 11, 2013
1:05 PMChinaCache trades up: Wedge thinks 4G will catalyze profitability
- ChinaCache (CCIH +1.1%) shares trade up after Wedge Partners sees China Mobile's 4G launch catalyzing profitability at the CDN services provider in Q3 2014.
- Analyst Jun Zhang notes that CCIH "has become a top pick of multinational companies such as Apple, General Motors, Microsoft, etc. ... 70% of China Mobile's mobile CDN services were provided by ChinaCache."
- And gross margins, which have been pressured by intense price competition in the fight for market share between ChinaCache and China Netcenter through 2012, may reach stable ground as the 2 have reached a "fairly stable" duopoly structure that incentivizes developments in new technology rather than price competition.
- Wedge sees a minimum upside of 50% in shares, given that "ChinaCache should have at least 1.5 times sales valuation before it turns profitable." CCIH's much larger peer, Akamai, trades at 5.3x TTM Sales, although it has much better margins.
1:04 PMBond outflows surpass all-time record
- Investors have pulled $70.7B from bond mutual funds YTD, according to TrimTabs - that's more than the $62.5B pulled amid the serial Fed rate hikes and bond market rout of 1994.
- Since June alone, investors have pulled $164.5M out of bond funds, and three of the four largest monthly outflows ever have occurred this year.
- Broad fixed-income ETFs: AGG, BOND, BND, BSV, BIV, BLV, SCHZ, LAG, SAGG, ILTB, ISTB, GBF, GVI, MINC, FWDB, GIY
1:03 PMMicrosoft reportedly thinking of offering Windows Phone/RT for free
- Fresh off writing about a Nokia Android phone project, The Verge reports Microsoft (MSFT -1.6%) is thinking of eliminating licensing fees for Windows Phone and RT, and focusing on monetizing the platforms via ads and services subscriptions.
- In practice, such a move would make it cheaper to license Windows Phone than Android (GOOG), given Microsoft collects significant Android royalties from top OEMs.
- Though Windows Phone has achieved a double-digit smartphone unit share in certain European and emerging markets, IDC estimates the OS only had a 3.6% global share in Q3, thanks in large part to small U.S. and Chinese shares. With regards to the latter, it's worth noting Microsoft doesn't collect royalties on a large portion of Chinese Android shipments, particularly those form white-label OEMs.
- RT, meanwhile, has fallen flat since its 2012 launch. PC OEMs have largely abandoned the ARM-based (ARMH) OS, which may be merged with Windows Phone down the line, to focus on building Windows 8 and Android tablets.
1:02 PMHispanic networks make some noise
- The latest batch of TV viewing data for the week ending on December 1 reveals an interesting trend.
- Four of the eight highest rated shows on Rentrak's Stickiness Index are from Hispanic networks.
- Broadcasters Univision and Telemundo (CMCSA) both had two shows on the list.
- Related: Univision mulls over IPO.
1:00 PMOn the hour
- Dow -0.53%.
- 10-yr -0.07%.
- Euro +0.32% vs. dollar.
- Crude -0.77% to $97.75.
- Gold -0.31% to $1257.2.
12:52 PMTesoro -1.8% despite positive comments after analyst day
- Tesoro (TSO -1.8%) apparently didn't offer enough good news at yesterday's analyst day, as shares tumble despite the general perception from the meeting as "incrementally positive."
- The key messages in the meeting surrounded progress of the synergy capture from the Carson acquisition, continued margin improvement through feedstock and product optimization and driving additional logistics growth.
- TSO sees rail unloading capacity along the U.S. west coast for North Dakota crude oil growing to nearly 1M bbl/day through 2015; TSO's $100M rail-to-barge project in Washington is the largest of the offloading projects announced so far.
- Imperial Capital raises its TSO price target TSO to $63 from $57, and Howard Weil lifts its target to $66 from $62.
- Other refiners are lower too: VLO -1.3%, PSX -0.7%, MPC -1.8%, WNR -2.6%, HFC -1.6%, ALJ -1%, NTI -0.2%, DK -1.9%, CLMT -2.7%.
12:40 PMWBI Investments to enter ETF business
- WBI Investments is set to become a new player in ETFs, prepping a lineup of dividend bond and equity ETFs:
- WBI AbsoluteCore Shares Global SMID Growth ETF
- WBI AbsoluteCore Shares Global SMID Value ETF
- WBI AbsoluteCore Shares Global SMID Yield ETF
- WBI AbsoluteCore Shares Global SMID Select ETF
- WBI AbsoluteCore Shares Global Large Growth ETF
- WBI AbsoluteCore Shares Global Large Value ETF
- WBI AbsoluteCore Shares Global Large Yield ETF
- WBI AbsoluteCore Shares Global Large Select ETF
- WBI AbsoluteCore Shares Tactical Bond ETF
- WBI AbsoluteCore Shares Tactical High Income ETF
12:36 PMIshares' actively-managed short-term bond fund gets nearer to launch| Comment!
12:35 PMAmazonFresh launches in San Francisco
- As rumored, the AmazonFresh (AMZN -0.7%) same-day/grocery delivery service is launching in San Francisco. The $299/year service, which launched in L.A. in June and has been in Amazon's hometown of Seattle for some time, promises same-day or early morning delivery for 500K+ items for $35+ orders.
- With high population density and per capita income levels, and a very tech-savvy customer base, S.F. is a logical expansion market for AmazonFresh, which has been dubbed a "Trojan horse" meant to underpin Amazon's same-day delivery efforts. An NYC launch might happen in 2014.
- Google and eBay have already launched same-day services in S.F. Unlike Amazon, both companies are relying on partnerships with retail chains.
12:31 PMU.S. Steel defended at Morgan Stanley, but shares -1.7%
- U.S. Steel (X -1.7%) has edged lower since Morgan Stanley went against the grain with its upgrade a month ago, so the firm is out defending its optimistic view.
- On skepticism over X's cost cutting program, the firm believes management was right when it decided to not set a concrete cost savings target; as a result, the firm thinks each individual cost savings announcement over the coming year will be its own incremental positive catalyst, and the dispersion of announcements will make life more difficult and less predictable for short sellers.
- The firm also says the impact of lower iron ore prices will be more than offset by improvements to earnings power from Project Carnegie cost savings, fixed cost absorption, and enhanced pricing power as operating rates rise.
12:25 PMGannett ticks up on UBS Conference revenue, EPS commentary
- Gannett (GCI +1.2%) shares tick up after management provides a strategic update at the UBS Global Media and Communications Conference: "Based on the trends thus far in the quarter ... we are comfortable with the higher end of [a $0.63-$0.67 estimate] range," CFO Victoria Harker said.
- The company also provided an update on Q4 broadcasting revenue expectations, forecasting a 20% Y/Y decline after excluding an additional week in Q4 2012. The Q4 comparison was "challenged by a record level of political spending in the fourth quarter last year." Stripping out political spend, broadcasting revenue is expected to be 17% higher Y/Y.
- As was previously announced, Gannett will expand a pilot program that integrated USA Today into print and e-editions of 4 local newspapers and was "embraced enthusiastically by subscribers" to 35 markets in early 2014.
12:20 PMIcahn Enterprises tumbles for a 2nd day
- "If Carl Icahn is selling, do you want to be buying," asks Andrew Bary in Barron's. "Probably not." Icahn Enterprises (IEP -13.6%) extends yesterday's big post-secondary offering decline as Bary reminds the stock trades at a hefty premium to NAV of about $75 per unit.
- While it might be worth some premium to invest alongside Carl Icahn, says Bary, 80% is probably far too much (it's less since the article was published!).
- By contrast, you can invest with the Tisch family in Loews (L -1.3%) at a discount to NAV, and Berkshire Hathaway (BRK.A, BRK.B) trades at just 1.3x book.
- "Icahn can do the math and he seems to think the company's units are at least fully priced given the equity offering, which will add to his war chest as he pursues his distinctive brand of activist investing."
12:16 PMSocGen cuts Nokia to Hold, upgrades Ericsson to Buy
- Eleven months after upgrading Nokia (NOK -1.8%) to Buy, SocGen has cut shares to Hold.
- Nokia, which is up 78% since SocGen issued its upgrade, is selling off following the downgrade. The ratings cut is overshadowing a bullish coverage launch from Citi (made as part of a broader sector launch).
- In tandem with downgrading Nokia, SocGen has upgraded mobile infrastructure rival Ericsson (ERIC +0.8%) to Buy. Ericsson's YTD gains are far smaller than Nokia's.
12:11 PMPDC Energy -6.7% after unveiling $647M capex budget for 2014
- PDC Energy (PDCE -6.7%) slides after announcing a 2014 capital budget of $647M, targeting organic growth within its inventory of liquid-rich projects in the core Wattenberg Field and Utica Shale.
- Production for 2014 is seen averaging 9.5M-10M boe/day, up 34% Y/Y, with 60% in crude oil and natural gas liquids; guidance includes a reduction in dry gas volumes due to the anticipated closing of the sale of its shallow Upper Devonian assets and the suspension of drilling in its Marcellus Shale assets.
12:08 PMLimited impact for MCO names from budget deal: Deutsche
- "Any hopes of a roll-back of the 2% Medicare sequestration cuts were dashed as more details of the plan were revealed over the course of the evening," Deutsche's Scott Fidel notes, referencing the new U.S. budget agreement.
- "In fact," Fidel continues, "under the budget deal the 2% Medicare payment cuts will actually be extended by two years through 2023."
- Nevertheless, Deutsche doesn't think anyone was expecting much in the way of a roll-back anyway, and as such, the bank sees limited impact for MCO names.
- AET, CI, HNT, HUM, UNH, WLP
12:08 PMBlackRock: Stay nimble
- "2014 is the year to squeeze more juice out of risk assets. But investors should be ready to discard the fruit when it starts running dry," says BlackRock's Ewen Cameron Watt in the firm's 2014 Investment Outlook. "Beware of traffic jams: easy to get into, hard to get out of."
- Behind the view is the idea central banks (U.S., U.K, Canada, China, to name a few) are poised to begin tightening monetary policy.
- BlackRock doesn't believe stocks are yet in a bubble, but its "risk indicator" - measuring enterprise value against earnings adjusted for volatility - is nearly as high as just before the dotcom bust. "The ratio of the two is the key. High valuations combined with low volatility can make for a lethal mix. This market gauge sounded the alarm well before the Great Financial Crisis."
- Broad large-cap ETFs: PRF, VUG, VTV, SDOG, VV, SCHX, MGK, DEF, SCHG, SCHV, PWV, FLAG, MGV, DOD, JKD, FEX, EQL, IWY, EZY, JKE, PWB, IWX, FTC, JKF, EEH, SPXH, TRSK, SFK, FWDD, PXLC, ALTL, PXLV, GVT, RWG, FNDX, PXLG, IELG
12:06 PMNQ Mobile slumps; SA contributor criticizes financials, conflicts of interest
- While relying heavily on baseball analogies, SA contributor Robert Zangrill takes aim at NQ Mobile's (NQ -7.1%) financial metrics, as well as various conflicts of interests he sees in the company's business dealings.
- Zangrill notes NQ has grown its revenue/employee by 817% over the last five years, and estimates the company is "on pace to generate about 20% more in revenue per computer than any other software company did in 2012."
- These eye-popping figures lead Zangrill to believe NQ is either "lying about its revenue, or ... has discovered the greatest business model ever - one that requires no capital investment, no assumption of risk, not even the headache of having to deal with additional employees."
- Much like Muddy Waters, Zangrill also thinks NQ is "round tripping" revenue via deals with affiliated parties. Among other things, he points out NQ relies on a payment processor owned by its former marketing chief, and has multiple directors with ties to a major Asian billing software provider.
- Shares are currently down ~50% from where they traded before Muddy Waters' allegations arrived in late October.