Seeking Alpha
  • Today - Saturday, September 20, 2014

  • 4:48 PM
    • Though plenty of ink has been spilled over Facebook's (NASDAQ:FB) competitive threats over the last year, eMarketer estimates the average U.S. Facebook user now spends 39 minutes/day on its site and apps - up from 38 in 2013 and 35 in 2012. The figures exclude Instagram, whose user base has a large U.S. component, and also WhatsApp.
    • In spite of the usage growth, Facebook's share of U.S. social media time has fallen to 33.3% from a 2011 peak of 40%. Likewise, its share of U.S. digital time spent has slipped to 6% from 6.5%. On the other hand, with digital continuing to grab media share, Facebook's share of total media time spent has grown to 2.8% from 2.2%.
    • Meanwhile, with Facebook's ad sales having soared over the last two years thanks to an all-out monetization push (especially on mobile), eMarketer estimates the company now has a 9.7% share of U.S. digital ad spend, 370 bps above its digital time share. By contrast, all other social networks claim just a 3.9% share of U.S. digital ad spend, in spite of having an 11.9% share of time spent.
    • Likewise, Pandora (NYSE:P) is estimated to have only a 1.4% digital ad spend share vs. a 7.1% share of time spent. With the company spending aggressively to grow its ad salesforce, that gap could narrow in the coming years.
    • As is the case for many of its peers, the U.S. remains crucial to Facebook's top and bottom lines: North America still accounted for 44% of Q2 revenue, even though it was responsible for only 15% of MAUs.
    • Previous: Pew's U.S. Facebook survey data
  • 3:05 PM
    • Computer experts inside Home Depot (NYSE:HD) had warned for years that they might be easy prey for hackers, the NY Times says.
    • Former members of HD's cybersecurity team say the company was slow to respond to early threats and only belatedly took action, that it relied on outdated software to protect its network and scanned systems irregularly, and that some members of its security team left after managers dismissed their concerns.
    | Comment!
  • 9:30 AM
    • Nailed badly this summer over worries about its long-term care unit, Genworth (NYSE:GNW) - whose share price about doubled in 2013 - is offering investors another buying opportunity, writes Jonathan Laing in Barron's. Q2 results this year showed a drop in operating profit from LTC to $6M from $46M a year earlier, and surging claim losses has the company reviewing the adequacy of its reserves.
    • The results of the review - and whether the company will need to take a reserve charge - are expected at this quarter's end. A further sting: It was less than a year ago management had done a "deep dive" into LTC reserves and given the "all clear" to analysts.
    • Even a massive and unlikely reserve charge of $1B would only cut Genworth's book value per share just a couple of dollars from the current $31.37 (vs. Friday's closing stock price of $13.19), says Laing. The actual charge, he says, is likely to be closer to an easily covered $200M. He expects the gap to book value to begin closing in the coming years.
    • The company isn't sitting still in LTC either, says Laing, noting premium increases nearly nationwide and the tightening of policy terms - basically eliminating lifetime benefits in favor of maximum benefit periods of 3-5 years. The big issue, of course, are those legacy policies (sold from 1974-2001) where lapse rates have been 1% or less vs. the 5-5% expected, and investment returns of 5.5% are less than 6.75% expected. Genworth will do good to break even on these, but their number should shrink to 123K over the next decade from 331K today based on mortality statistics.
    | 1 Comment
  • 9:00 AM
    • "Starting next year," writes Jack Hough in Barron's, "BofA (NYSE:BAC) investors will get a glimpse of two things they haven't seen in years: a fairly clean income statement and a decent dividend." Litigation costs are set to nail the bank again this quarter, but then will begin to quickly clear away, leaving investors to focus on the bank's operations. Earnings per share - an estimated $0.75 this year - could hit $2 in 2017, and the annual dividend ($0.20 now) could rise to $0.55.
    • CEO Brian Moynihan notes core pretax profit in four of BofA's five units was $8.5B in Q2, up from $6.8B two years ago. Business #5 is mortgages, and that provided a $4.5B loss thanks to now rapidly fading legacy issues. Litigation costs make most of the headlines, but there's also non-litigation expenses like modifying some loans and foreclosing on others. These costs dropped to $1.4B last quarter from $2.3B a year earlier, and are expected to fall to $500M in 2015.
    • Upgrading BofA to a Buy earlier this month, Goldman - looking past litigation and other one-time items - says the bank has had the largest reduction in earnings volatility of any of its peers in recent years and the stablest trading revenues since 2013. The beacon is Wells Fargo - earnings stability and a higher dividend has that stock trading at a premium 1.7x book value. BofA is at 0.8x, and as its steadier earnings begin to become clearer, that valuation discount should narrow.
    • Bank of America is also underowned, says Goldman, noting its weighting in mutual funds relative to its weighting in the S&P 500 is the second lowest among 25 large financials (the lowest is Berkshire Hathaway).
  • 8:25 AM
    • Deutsche Bank analysts say they came away encouraged after hosting a series of one-on-one meetings with top energy companies; despite recent negative sentiment on the group, it paints an optimistic outlook for oil service companies, which see continued strength in the overall spending outlook from customers, even with the move down in commodity prices.
    • Among the firm's top Buy-rated stocks in the group is Schlumberger (NYSE:SLB), down 12.5% since July 1; despite a slowdown from Libya, Iraq and Russia, the DB team likes the outlook for Latin America, with a recent contract win in Brazil in wireline and better pricing in its drilling contract, and eyeing start-up work in Mexico.
    • DB also likes Hercules Offshore (NASDAQ:HERO), which has cratered 63% YTD; the company expects slow going in the Gulf of Mexico until the end of this year’s hurricane season, but opportunities look much brighter in 2015.
    • Rounding out the firm's favorites: BHI, BAS, EXH, FET, PES.
  • Friday, September 19, 2014

  • 7:26 PM
    • Seven months after launching the first desktop GPUs based on its 28nm Maxwell architecture (the low-cost GTX 750 and 750 Ti), Nvidia (NASDAQ:NVDA) has rolled out a pair of high-end Maxwell parts: The GTX 980 and 970.
    • The 980 retails for $549, and the 970 $329. For reference, AMD's high-end Radeon R9 290X (launched last fall) retails for $500. The dual-GPU R9 295 X2 goes for $1,000, and Nvidia's dual-GPU Titan Z (based on the older Kepler architecture) goes for an eye-popping $3,000.
    • "The GTX 980 is faster, less power hungry, and quieter than the Radeon R9 290X," says AnandTech in a very positive review. Its benchmarks often show the 980 holding a 15%+ performance edge over the 290X, and a 10%-15% edge in load power consumption. The site also praises the 980's build quality (deemed "impeccable"), and new features such as VXGI.
    • ExtremeTech offers similar comments for the 980, and thinks the 970's pricing will take a toll on AMD. "It’s nearly a match for the R9 290X, but with an ASP that’s nearly $200 less."
    • AnandTech suspects AMD price cuts are likely. "AMD can’t match NVIDIA on performance, but they can sure drive down prices." The chipmaker is believed to be prepping the R9 390X, a new high-end GPU that relies on liquid cooling.
  • 6:55 PM
    • Hundreds of car owners suing GM over an ignition switch flaw got a boost today when a New York judge ordered the auto maker to turn over internal documents about its handling of the defect to plaintiffs' attorneys.
    • The discovery order applies only to auto accidents that occurred after GM emerged from bankruptcy court protection in July 2009; GM had asked the judge to delay discovery while it waited for a ruling from a bankruptcy judge over whether some claims were blocked by the terms of its July 2009 sale order, which the company said barred suits over pre-bankruptcy incidents.
    • At issue is whether GM purposely chose not to disclose the ignition switch flaw that employees first flagged in 2005, which could be used to void the bankruptcy shield.
  • 6:30 PM
    • Iliad (OTC:ILIAF) has set a mid-October deadline to either make a new T-Mobile USA (NYSE:TMUS) offer or walk away, Reuters reports. The French carrier is said to be talking with U.S. banks to help finance a higher bid.
    • Reuters adds Iliad "faces resistance" from Deutsche Telekom (OTCQX:DTEGY), which would keep a minority T-Mobile stake under Iliad's proposed deal terms and is skeptical of the company's prospects in a market it currently has no presence in.
    • Bloomberg reported earlier today Iliad was struggling to line up 3rd-party investors, and that DT's board was divided on whether it should "sell its only growing asset." Sources (within Iliad?) tell Reuters Iliad's management has "finished road shows to meet U.S. investors and is waiting to hear back from potential investors."
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  • 6:25 PM
    • Patterson-UTI Energy (NASDAQ:PTEN) today announced the purchase of a fleet of pressure pumping assets from an unnamed privately held company in a move praised by analysts.
    • The acquisition includes 143,250 horsepower of fracking equipment and provides PTEN with two additional bases of operations and employees to support customer activity in the Eagle Ford and Haynesville shale plays.
    • The seller is believed to be Clearlake Capital's Platinum Energy, with an estimated $143M price.
    | Comment!
  • 6:15 PM
    • With a market cap of $233.9B as of today's close, Alibaba (NYSE:BABA) is the 4th-most valuable tech company on the planet, behind only Apple, Google, and Microsoft. Nonetheless, many on the Street have argued shares are fairly valued or undervalued.
    • Cantor, which started coverage with a Buy and $90 target earlier this week: "We believe that a differentiated pricing model, strong brand, and unmatched scale give Alibaba an unfair competitive advantage relative to peers ... While the stock's not cheap, we believe the company's outsized growth and margin profiles, if sustained, should support higher valuation over time."
    • Wedbush, whose $80 target has already been surpassed, thinks "Chinese e-commerce appears to have room to grow at 30%+ for several years." CRT Capital's $95 target implies a multiple of 26x 2016E EPS, something it considers justified given a 35%+ revenue CAGR is forecast for 2014-2017.
    • On SA, Triton Research observes Alibaba's 2013 marketplace revenue as a % of GMV (3.1%) was a tiny fraction of eBay's (19.3%), leaving plenty of room for growth even if eBay-like monetization isn't feasible in China.
    • Value Record is more cautious, viewing Alibaba's VIE legal structure as a risk and questioning how successful its international expansion plans will be - Baidu and many other Chinese Web names have had a rough time trying to replicate their domestic success.
    • Yahoo (YHOO -2.7%) closed lower, albeit off the day's lows. With shorts having trouble borrowing Alibaba shares, some may have settled for shorting Yahoo instead.
    • Josh Brown thinks Yahoo's pending IPO windfall and large remaining Alibaba stake once more make it a prime target for an activist. "There is absolutely no way, in my opinion, they're going to allow this management team, this board of directors to take $6 billion, do a buyback and then have another free $6 billion in cash to experiment."
  • 6:00 PM
    • S&P -0.15%.
    • 10-yr +0.23%.
    • Euro -0.71% vs. dollar.
    • Crude -0.3% to $91.70.
    • Gold -0.87% to $1,216.20.
    | Comment!
  • 5:54 PM
    • Investors apparently were underwhelmed by the $2.2B offer for Total's (NYSE:TOT) adhesive company from specialty chemicals company Arkema, even though TOT was offered ~1.5% of its market value for a business which contributes barely 0.5% of its EBITDA.
    • The offer underlines the value of consumer-facing brands lurking in the majors’ downstream chemicals divisions, and a Bloomberg analysis suggests TOT could take a cue from Sinopec's sale of a stake in its fuel retailing business; a TOT spinoff of its gas station business could bring in ~$12B.
    • While TOT has set a goal to raise crude and natural gas output substantially and to boost cash flow, analysts expect the company to cut its production and cash flow guidance at its Sept. 22 investor day.
    | 1 Comment
  • 5:37 PM
    • Top gainers, as of 5:15 p.m.: CDZI +5.0%. DAKP +4.5%. DRL +3.3%. DRC +3.2%. INO +2.7%.
    • Top losers, as of 5:15 p.m.: FSM -6.7%. SSE -3.4%. FCEL -3.2%. WFD -2.4%. ILF -2.2%.
  • 5:32 PM
    • SmartEyeglass, Sony's (NYSE:SNE) first stab at creating a pair of smartphone-connected display glasses, have a design that "makes Google Glass look chic," says Engadget.
    • The site declares SmartEyeglass looks like "a bulky pair of 3D glasses that have been modified to include a 3-megapixel camera, accelerometer, gyroscope, compass, brightness sensor, a microphone and a pretty large battery pack." At the same time, it points out the device can "deliver hologram-like visuals through its lenses," and that its use of a monochrome display improves battery life.
    • Unlike Google Glass, apps are hosted on smartphones rather than the device itself. An SDK has been released; Sony promises a full commercial launch by the end of March. Glass (also awaiting a full launch) currently has a decent head-start in developer support.
    • SmartEyeglass is distinct from Sony's gaming-focused Morpheus VR headset, which will face off against the Oculus Rift. A Sony exec claims 85% of Morpheus' development work is now finished, but won't provide an ETA. He does state Sony won't release Morpheus until enough software is available.
  • 5:21 PM
    • The latest speculation over Dresser-Rand (NYSE:DRC) now includes GE, which Financial Times reports is holding talks with DRC management about a possible takeover and is deciding whether to launch a bid.
    • If it does, it could be the second time GE has faced off against Siemens (OTCPK:SIEGY) over a multibillion-dollar deal in the past six months after competing over the takeover of the energy businesses of Alstom in June.
    • Siemens reportedly is in talks with DRC about a ~$80/share offer, and Swiss industrial pump maker Sulzer (OTC:SULZF) has said it is in talks with the U.S. oilfield equipment manufacturer about a possible merger.
    | Comment!
  • 5:00 PM
    • S&P -0.15%.
    • 10-yr +0.23%.
    • Euro -0.72% vs. dollar.
    • Crude -0.3% to $91.70.
    • Gold -0.87% to $1,216.20.
    | Comment!
  • 4:54 PM
    • Though Oracle's (ORCL -4%) cloud-related sales saw healthy growth in FQ1, its core database business saw negative license growth, notes Deutsche's Karl Keirstead, downgrading shares to Hold. "Coupled with Larry Ellison’s decision to give up the CEO role, our confidence in the core database business is getting tested and we’d prefer to step to the sidelines while Oracle shares are still near their 10-year high."
    • While Oracle blames the database weakness on tough comps and sales execution - the latter is a common excuse among enterprise software firms - Keirstead also sees other factors at work: A mature relational database market; Microsoft's share gains; and a secular shift to new data types (e.g. Hadoop/NoSQL) and cloud apps (often running on non-Oracle databases). He estimates Oracle's FQ2 guidance implies a 3%-4% Y/Y drop in license revenue.
    • D.A. Davidson (Neutral) also isn't thrilled with Oracle's numbers. "ORCL's financial results have now either missed or come in at the low end of management's guidance range in 7 of the last 9 quarters." Ditto Sterne Agee: "Given the current moderate size of the cloud business, the transition will span several years and create both revenue and EPS estimate volatility."
    • On the other hand, Sterne (like many others) isn't concerned about Oracle's CEO change, calling it "more of a change in titles than in functions." On the CC (transcript), new co-CEOs Safra Catz and Mark Hurd insisted there will be no major operational changes.
    • Wedbush, however, sees negative long-term implications. "Mr. Ellison's desire to delegate more responsibility (and credit) to Safra Catz and Mark Hurd is understandable ... but it underlines our view that Oracle's days as an organic grower are rapidly coming to an end."
    • Prior Oracle coverage
    | Comment!
  • 4:51 PM
    • Exxon Mobil (NYSE:XOM) has put its Torrance, Calif., refinery up for sale, Reuters reports, making it the latest big oil company to consider exiting the state amid tougher environmental standards.
    • The 155K bbl/day refinery, in the south part of Los Angeles, is XOM's only refinery in California and the second smallest of its half-dozen U.S. plants.
    • XOM may have some trouble making a sale, however, because of the state's environmental regulations and since several refiners including Chevron (NYSE:CVX), ConocoPhillips (NYSE:COP), Tesoro (NYSE:TSO) and Valero (NYSE:VLO) already operate two or more refineries there, limiting their ability to buy others.
  • 4:35 PM
    • The ADT Corporation (NYSE:ADT) declares $0.20/share quarterly dividend, in line with previous.
    • Forward yield 2.16%
    • Payable Nov. 19; for shareholders of record Oct. 29; ex-div Oct. 27.
    | Comment!
  • 4:30 PM
    • Kite Realty Group Trust (NYSE:KRG) declares $0.26/share quarterly dividend, in line with previous.
    • Forward yield 4.11%
    • Payable Oct. 13; for shareholders of record Oct. 6; ex-div Oct. 2.
    | Comment!
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