Today - Wednesday, December 11, 2013
1:55 PMNetflix outperforms following Citi PT hike
- Citi's Mark May, who started coverage on Netflix (NFLX +0.9%) with a Neutral in July, has raised his PT to $390 from $355, albeit while maintaining his original rating.
- May declares Netflix "the largest and most innovative company in the Internet TV sector," and is lifting his broadband penetration and Netflix subscriber forecasts for the streaming giant's international markets.
- He now expects Netflix's international sub base to post a 39% CAGR from 2013-2016, up from a prior 31%, and is modeling 15% growth for later years. May also continues to expect a $1/month U.S. price hike in 2016.
- Shares are trading higher on a down day for the Nasdaq. They're up 296% YTD.
1:40 PMPhotronics climbs on bottom-line beat in FQ4, management remarks on 2014
- Photronics (PLAB +12.2%) shares climb after a bottom-line beat in FQ4.
- The market may also be happy about positive comments by management looking forward. CFO Sean Smith said on the conference call that although the company is not issuing specific guidance, it "expect[s] to see substantial growth" in Q2 and Q3 of 2014.
- When asked about the quarter's strength in the mainstream ops and its sustainability, Smith observed that it is "a bright spot for us year-over-year," with a slight revenue increase in a market where units are "clearly decreasing. So we're picking up market share there. And our objective is to continue to do that."
1:28 PMJA Solar announces management shakeup, shares drop
- JA Solar (JASO -3.9%) COO Jian Xie is set to "assume broader leadership" within the company, and become its president. CTO Yong Liu will take over Xie's current job. (PR)
- In addition, CFO Min Cao is being reassigned to the role of chief strategy officer. Replacing him is Herman Zhao, who was JA's CFO from 2006-2008 and has since been the CFO of two other companies.
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.
1:03 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.
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.
12:06 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.
11:17 AMSpotify launches new mobile service, adds 20 markets; Pandora drops
- Spotify has launched its rumored free/ad-supported mobile library streaming service. As expected, the service (unlike Spotify's ad-supported PC offering) doesn't provide unfettered access to Spotify's giant music library. Rather, it allows users to stream tracks from a particular artist or featured playlist in shuffle mode.
- Pandora (P -3.9%), whose Web/mobile radio platform has headed off threats from Spotify, Apple, and others, is selling off.
- Spotify has also announced it's launching its services in 20 new Latin American and Central/Eastern European markets. For now, Pandora is only available in the U.S., Australia, and New Zealand.
11:08 AMARC Group climbs after Brean provides first coverage: a Buy and $25 PT
- Shares of ARC Group Worldwide (ARCW +12.7%) climb after Brean Capital provides the first analyst coverage on the name, initiating the stock at Buy with a PT of $25.
- Analyst Ananda Baruah adds another voice to a heated debate of whether ARCW should garner a 3D play valuation, calling the stock "an attractive asset and an intriguing addition to our advanced technology sector coverage along with Buy-rated 3D Systems and Buy-rated Stratasys."
- Baruah sees 10%+ revenue and 15%-20% EPS growth in store for the company, with operating margin expansion opportunities.
- Upside includes potential for multiple expansion due to the secular attractiveness of ARCW's core Metal Injection Molding market and a "further embrace" by the company of 3D printing, automation, and robotics.
10:58 AMMicron, SanDisk slip; Hynix plant to reportedly be operational next month
- MKM reports the Wuxi, China SK Hynix (HXSCL) DRAM plant that was badly damaged in a September fire will be operational by mid-January, well ahead of the mid-2014 timeframe forecast by others.
- Micron (MU -2.1%) is slipping, as is SanDisk (SNDK -1.5%), which benefits when NAND flash capacity gets reallocated to deal with DRAM shortages.
- Micron and SanDisk rallied on Monday amid a flurry of positive DRAM sales, pricing, and supply-related news.
- Samsung (SSNLF, SSNGY), the world's largest DRAM manufacturer (37.1% Q3 share per DRAMeXchange), fell 1.4% overnight in Seoul. Hynix rose 0.8%.
10:48 AMRosetta Stone acquires B2B language software maker Tell Me More for $28M
- Rosetta Stone (RST +0.9%) acquires Europe-focused, B2B language-learning software company Tell Me More for €20.75M ($28M).
- 95% of Tell Me More's €18.5 million ($25 million) business is focused on corporate and higher education verticals, with a significant presence in Europe as well as in China.
- The company has more than 3K customers worldwide and offers solutions covering 9 languages.
- Rosetta stone expects to achieve significant cost synergies by streamlining the 2 companies' sales forces under the Rosetta Stone brand and taking advantage of Rosetta's scale.
- Management expects the acquisition to contribute bookings of $25M-$27M in 2014. The impact to EBITDA is seen at $3M-$4M after excluding $3M-$4M in integration costs. Beyond 2014, the company sees "modest top-line growth" and EBITDA margins of 25% or greater.
10:29 AMCrossroads Systems climbs on SA Pro bull articles
- Shares of Crossroads Systems (CRDS +15%) climb after SA Pro's Valuable Insights lays out the bull case (embargoed until 10am ET tomorrow) for why the stock carries a "massively asymmetric risk-reward profile."
- The potential of near-term profitability with new management at the helm, a valuable IP position (a case also laid out by SA Pro contributor Markman Advisors), and the growth of a high-margin product could spell large upside for the company, which sports a $31.4M market cap.
10:20 AMAutohome the latest Chinese Web IPO to fly higher
- After pricing its 7.82M-share IPO at $17, above a range of $14-$16, Autohome (ATHM) opened at $30.16 and is currently at $29.97, up 76.3%. The Chinese automotive site owner currently has a market cap of $3.12B, or over 20x its likely 2013 sales (given recent growth rates).
- Over the first nine months of 2013, Autohome had revenue of $101M (+49% Y/Y), and net income of $55M. The company had over 7.7M registered users as of Sep. 30, and over 2.4M automobile listings.
- Other recent successful Chinese Web IPOs: Qunar, 58.com, 500.com
- F-1, IPO preview
10:09 AME-House falls on $180M proposed convertible note offering
- E-House (China) Holdings (EJ -4.3%) shares fall after the company proposes to offer $180M in convertible senior notes due 2018 ($20M overallotment).
- The company intends to use $20M to repurchase shares and $50M to pay the premium of a zero-strike call option to a counterparty (the instrument will serve as a hedge for investors in the notes). Remaining funds will be used for general corporate purposes.
9:56 AMA roundup of tech ratings changes
- Ruckus (RKUS +2.9%) has been started at Buy by Craig-Hallum. Stephens started coverage at Overweight yesterday afternoon, Goldman upgraded shares to Buy on Dec. 2, and Stifel launched coverage at Buy on Nov. 27.
- Demand Media (DMD +9.3%) has been upgraded to Market Perform by JMP.
- Radware (RDWR +2.5%) has been upgraded to Outperform by Wells Fargo.
- E2open (EOPN +2.2%) has been started at Buy by Janney.
9:49 AMThe uneasy relationship between Amazon and discount-tracking sites
- A niche industry of Amazon (AMZN -0.4%) deal-watching sites has popped up to give consumers yet another crack at squeezing the e-commerce giant for deals.
- Sites such as Camelcamelcamel.com, Keepa.com, and Thetracktor.com will alert users via e-mail when items hit a certain price and have more detailed data than larger well-known coupon sites like DealNews and Slickdeals.
- How does Amazon react to the margins-squeezers? The company provides sales data directly to the sites and pays a referral fee for purchases made from them.
- Execs with the retail upstarts realize the uneasy relationship with Amazon might not go on forever, but they have a neat back-up plan: Track Wal-Mart's (WMT +0.2%) deals and prices.
9:40 AMXbox One sales top 2M; Microsoft may go ahead with Android project
- Eight days after Sony (SNE) announced it had sold 2.1M+ PlayStation 4 units since its Nov. 15 launch, Microsoft (MSFT) says it has sold 2M+ Xbox One units since its Nov. 22 launch.
- A spokesman says the One, whose $499 price tag had worried some observers, is selling at a faster clip than the Xbox 360 did following its launch, and is sold out at most retail locations.
- Nomura had previously suggested 3M-4M 2013 One sales were likely; Microsoft's latest figure suggests it's on its way to hitting that range. The firm had also cautioned the Xbox unit could lose over $1B in 2013 after accounting for all expenses.
- CPU/GPU supplier AMD has been estimated to receive $110 per One shipment.
- Separately, AllThingsD has followed up on The Verge's report about a Nokia low-end/custom Android phone by stating "there is a sense" within Nokia that Microsoft "may be willing to pursue the project."
- A Nokia source states the phone's software "has a look more similar to Windows Phone than to the 'squircle' icons used on the Asha," and would deliver Microsoft services (Bing, Skype, etc.). The latter may be a necessity, given Google won't allow its own services to be provided with a "forked" version of Android.