An uptick in the housing market, market-share gains at the expense of struggling Sears, and substantial supply-chain improvements could be the catalysts for a near-25% rise in Home Depot (HD) over the next year, writes Avi Salzman in a Barron's cover story.
The stock price is up just 6% Y/Y, sharply lagging both the S&P 500 and Lowe's (LOW). Its 17.4x P/E ratio slightly trails that of Lowe's despite more impressive earnings. As Lowe's has relied on promotions and new stores in the years following the housing bust, Home Depot - under the leadership of Frank Blake who came to the CEO spot just ahead of crash - has moved to cut costs, close underperforming units, and improve customer service, and since mid-2009 has consistently posted same-store sales gains higher than Lowe's. In 2013, comp-store sales grew 6.8% at HD, the best print since 1999.
Home Depot has the best management team in the business, says Credit Suisse's Gary Balter, and ROE has shot up to 35.5% - roughly twice that of competitors - from 22.2% when Blake took over and began reorganizing the supply chain.
Barrick Gold (ABX) and Newmont Mining (NEM) - the world's two largest gold producers - had hoped to have a merger deal announced as soon as Tuesday, reports the WSJ, but talks have broken down. The talks come after a particularly tough year for the gold miners has them shifting focus from empire-building to cutting costs, and analysts note the two have neighboring operations in Nevada, as well as operations in proximity to each other in Peru and Australia.
The merger would have created a combined company with a market cap of more than $30B.
The State Department - which has had the project under review for nearly six years - says it needs more time to prepare its recommendation to Pres. Obama because of ongoing litigation in Nebraska that is unlikely to be resolved before next year; the department was set to close a review process with eight other federal agencies on May 7.
Pipeline supporters are criticizing the delay as a political ploy, but the move looks likely to keep environmental activist money flowing into the election races; billionaire Tom Steyer, who has pledged to spend $100M to support candidates who back strong policies to fight climate change, is praising the delay as "good news."
Pro-Russian protesters, many of whom are armed, have refused to vacate administrative buildings they have occupied in eastern Ukraine despite an agreement between the government, Russia, the U.S. and EU to "de-escalate" the crisis.
Under the deal, the buildings were to be vacated and armed militias disbanded.
Despite the continued standoff, Russia's Micex index is +2.2% in response to the agreement. The USD-RUB is +0.1% at $35.568.
GM (GM) hasn't tested cars with faulty ignition switches to see if knee bumps from drivers can accidentally turn the engine off, Reuters reports. The issue is significant because company engineers complained as early as 2004 that such a knock could turn the engine off.
GM didn't assess its cars for the problem despite carrying out over 80 tests in order to persuade a judge that the vehicles are safe to drive as long the key ring doesn't have more than one key on it.
The judge seems to have concurred, as he ruled that GM doesn't have to instruct owners of cars falling under the ignition-switch recall to park their vehicles until they are fixed.
Procter & Gamble's (PG) Gillette is set to launch a new high-end razor called the ProGlide FlexBall, which incorporates a swiveling ball-hinge that enables the blade to pivot, the WSJ reports. The FlexBall is Gillette's first major upgrade since 2010.
P&G intends to start shipping the product in June and hopes to generate $188M in sales in the first year.
The company will set suggested prices of up to $12.59 for the razor and one cartridge, which could be a bit of risk given the emergence of low-cost competitors such as Dollar Shave Club.
P&G's grooming business is one of its most important, bringing in $8B in revenue in the last fiscal year, although that was down 3.7%.
Globalfoundries has agreed to license Samsung's (SSNLF) most advanced chipmaking technology, 14-nanometer FinFET, in a co-operation deal that analyst Jim McGregor says poses "a huge competitive threat" to Taiwan Semiconductor Manufacturing Co. (TSM), which controls around half of the $38.9B chip-foundry sector.
The collaboration could also make it more difficult for Intel (INTC) to gain a strong position in the foundry business, McGregor says.
The tie-up "provides an alternative to those companies that are looking to use leading-edge production." That could affect chip designers such as Qualcomm (QCOM).
Virtu Financial (VIRT) has suspended its IPO plans amid market volatility and controversy about high-speed trading (HFT) firms after Michael Lewis accused them of rigging the market in a new book, the WSJ reports.
Virtu's move also comes as regulatory scrutiny on HFT increases, with the SEC, FBI, and the state of New York investigating the sector. Virtu has received a letter from the latter's Attorney General's office asking for information about its trading operations
Virtu had intended to raise over $200M in its IPO at a market cap of about $3B and hoped its shares would debut by mid-April.
Eight million people have bought health insurance under Obamacare, President Obama said yesterday, easily surpassing earlier projections by the Congressional Budget Office for 6-7M signups by the end of March.
The high number of enrollments was achieved despite the technical problems that the online exchanges suffered, particularly when the Affordable Care Act was launched last year.
Around 35% of those who purchased coverage were people under 35, who are thought to be less likely need to treatment and so can help balance the cost of claims for those who need care.
However, Obama didn't provide details about the number of enrollees who already had insurance before Obamacare was introduced.
China's new-housing inflation weakened to an eight-month low in March, with the average price of new homes in 70 major cities moderating to +7.7% on year from +8.7% in February.
On month, housing inflation slipped to 0.2% from 0.3%.
Home prices rose on a year-on-year basis in 69 of 70 cities, as in February.
The softening in prices reflects the government's attempts to cool the housing sector, although it also adds to concerns about the slowdown in the wider economy.
"There are definitely risks in the property market of China's smaller cities," says Standard Chartered's Lan Shen. "The property market will be a big factor that presses the country's economic growth this year."
Russia, Ukraine, the U.S. and the EU have agreed to "de-escalate" the crisis in eastern Ukraine following talks in Geneva.
Under the deal, non-government militias have to be dissolved and occupied government buildings vacated, while Ukraine will give amnesty to the protesters and it will start a public consultation to devolve constitutional powers to the provinces.
The agreement also promised "additional support" for Ukraine's battered economy.
However, the deal left various issues unaddressed such as who would disarm the militias. It also doesn't require Russia to scale back its massive buildup of troops on its border with Ukraine.
While U.S. physical retail video game sales have been slumping for some time (as shown by NPD's data), SuperData estimates U.S. digital gaming revenue rose 9% Y/Y in March to $936M.
Revenue for subscription titles such as Activision (ATVI +1.2%) cash cow World of Warcraft fell Y/Y, but download and free-to-play revenue rose. Electronic Arts' (EA -0.1%) much-hyped Titanfall delivered the most digital revenue among "boxed" titles.
SuperData estimates conversion rates (i.e. the ratio of paying users to total users) for social gaming platforms rose to 2.3% from 1.9% six months earlier. But Zynga (ZNGA +4.4%), which had a Q4 conversion rate of 1.7% and only averages $0.13 per DAU (less than its closest rivals), continues to trail.
In spite of widespread concerns about slumping Candy Crush Saga (KING -1.3%) usage, SuperData thinks the game is holding up reasonably well for now. It estimates spending rose 1.2% M/M (3 extra days helped), with mobile MAUs rising 0.3% and social (read: Facebook) MAUs falling 2.1%.
"We're obviously in the throes of what feels like a correction for the small-cap and growth-equity companies," says Revolution Ventures managing partner David Golden.
Following a Q1 that saw the highest level of U.S. VC investment since 2001 ($10.7B, up from $9.1B in Q4 and $7.5B a year earlier ), as well as a handful of late-stage deals featuring eye-popping valuations (Airbnb, Dropbox), a rapid selloff in high-beta tech stocks is yielding a sense of caution.
Accel Partners' Jim Breyer (an early Facebook investor): "Not a board meeting goes by when at least half the meeting isn't spent on financial strategy." Venrock's Nick Beim: "We all feel like we're at the top of the cycle, and everyone's skating on new ice ... Just how thin the ice is not yet clear."
GSV Capital's (GSVC) Michael Moe, whose firm often takes positions in late-stage startups, likes what he sees. "I think prices will get more favorable for buyers because it will be more difficult to do megadeals at megavaluations." The Firsthand Tech Value Fund (SVVC) might also get more favorable terms.
Today's tech IPOs - Weibo and Leju - each delivered solid gains, but only did so after pricing their offerings at the low end of their respective ranges.