Today - Sunday, April 19, 2015
Saturday, April 18, 2015
- Comcast (NASDAQ:CMCSA) and Time Warner Cable (NYSE:TWC) will meet Wednesday with the Justice Department in hopes of negotiating concessions to assuage the department's reported opposition to their $45B merger, The Wall Street Journal is reporting.
- It's the first time the companies would meet with any regulators -- and the deal is nearing its endgame with both Justice and the FCC.
- Bloomberg reported Friday that staff attorneys at Justice were leaning toward blocking the deal, though any final word would come from senior officials there.
- The Justice Department's concern is antitrust issues in the combination of two giant service providers; the FCC is evaluating the deal to see whether it is in the public interest.
- American Airlines Group (NASDAQ:AAL) won approval from the DOT to take over a Los Angeles-Mexico route from Alaska Airlines (NYSE:ALK).
- The company faced a challenge from Delta Airlines over the valuable route.
- An important note from the DOT is that the agency says it expects "substantial changes" in the market over the next year after advanced trade talks between the U.S. and Mexico.
- United Continental (NYSE:UAL), Volaris (NYSE:VLRS), and Aeromexico (OTC:GRPAF) are also active in the L.A. to Mexico market.
- The roll-out of 4G LTE high-speed wireless connections in all 2016 General Motors (NYSE:GM) models could provide the automaker with new sources of revenue and jump-start tech initiatives of rivals.
- GM sees OnStar 4G leading to e-commerce revenue from transaction splits (fast-food, hotel rooms, entertainment, advertising), services, and data usage.
- Software upgrades pushed out via broadband connections could also save GM money on repair and warranty costs.
- While execs with GM estimate OnStar will generate $350M in profit over the next three years, some analysts have aimed much higher with their projections.
- Gartner sees 10% of all revenue from the automobile industry generated from connected broadband platforms by 2020 - a formidable mark which explains the increasing presence of Apple and Google in the sector.
- Partnerships between Silicon Valley and Detroit are expected to accelerate.
- GM sits in a nice position to defend its turf against the tech heavyweights through its valuable OnStar property - while BMW (OTCPK:BAMXY), Audi (OTCQX:VLKAY), Nissan (OTCPK:NSANY), and Tesla Motors (NASDAQ:TSLA) are also a few steps away from Internet-based revenue streams.
- Other companies which might benefit to a degree from a connected car explosion: MBLY, NVDA, AMBA, SWKS,SBUX, DPZ, T - add your own in the comments.
Friday, April 17, 2015
- A spokesperson for ESPN (NYSE:DIS) has weighed in on reports that Verizon (NYSE:VZ) will offer unbundled or "skinny" packages to give customers choice about what they receive -- and ESPN says that's not allowed.
- “Media reports about Verizon’s new contemplated bundles describe packages that would not be authorized by our existing agreements," says the company's statement. "Among other issues, our contracts clearly provide that neither ESPN nor ESPN2 may be distributed in a separate sports package.”
- The move's unsurprising coming from ESPN, which charges the highest prices per subscriber by far among national cable peers, reportedly now more than $6/month. That compares with TNT at around $1.48/subscriber month.
- ESPN has made defending bundles a policy priority in Washington, and companies with powerful bundles of channels like Disney (with the various flavors of ESPN as well as the Disney Channel and Soapnet) can force channels with low or no consumer interest into bundles with the desired flagship stations to build their audience.
- The statement suggests Verizon didn't get a sign-off from Disney before talking about unbundling, though Peter Kafka reports that Verizon's Alberto Canal said the company had gotten authorization from all programmers in its new bundle.
- As reports spread that Justice Dept. attorneys were likely to recommend blocking Comcast's (CMCSA -2.1%) $45B buyout of Time Warner Cable (TWC -5.4%), the cable companies both argued there was no basis to block the deal.
- It'll mean "faster broadband speeds, access to a superior video experience, and more competition in business services resulting in billions of dollars of cost savings," according to a Comcast statement. "These benefits have been essentially unchallenged in the record."
- Meanwhile, over at the FCC, 37 groups opposed to the deal wrote Tom Wheeler, the agency's chairman, saying that even conditional application of net neutrality regulation wouldn't soften their opposition. Signatories included Dish, Consumers Union, the Writers Guild of America, West, and Free Press; "they don't make any new arguments," Comcast responds.
- Some volume came into competitive stocks and gave them a (relative) lift after the news: Charter Communications (NASDAQ:CHTR) came off lows to finish down 1.9%; Cablevision Systems (NYSE:CVC) rebounded to finish just -0.3%.
- In February, BTIG analyst Rich Greenfield laid out why he thought the deal would ultimately get rejected.
- Then shortly after the Justice Dept. news broke, Comcast noted it was bringing its top-speed 2-Gbps Gigabit Pro service to the California Bay Area. The company previously said it would launch the service in Atlanta (where Google Fiber and AT&T plan 1-Gbps service); it's setting June for the California launch, but still no word on possible pricing.
- Wal-Mart (NYSE:WMT) says it plans to eliminate the position of zone managers and reassign those ~14K workers to department manager and assistant manager positions within its stores, while adding up to 8K new department heads, as part of an overhaul of its store operations.
- WMT says the cut to the layer of in-store management is meant to reduce bureaucracy and put more power in the hands of people running the company’s 4.5K U.S. stores.
- WMT says the cost is included in the $1B investment in wages and staffing outlined in February; the costly turnaround plan under CEO Doug McMillon also includes raising wages for a half-million employees, with hourly rates going to $9/hour this month and $10/hour by next year.
- A new version of popular series Battlefield wasn't enough to boost video game sales in March, as software sales slipped 3% Y/Y to $395.4M. But software was positively solid compared to game hardware sales that slipped 21% Y/Y to $311.1M, according to NPD Group.
- In new retail games, Battlefield: Hardline (NASDAQ:EA), a cops-and-robbers version of the war-game series, led sales charts followed by another new entry, action role-player Bloodborne (NYSE:SNE) which was strong despite being a PS4 exclusive.
- The top five was rounded out by Grand Theft Auto V (NASDAQ:TTWO), Mario Party 10 (OTCPK:NTDOY), and Call of Duty: Advanced Warfare (NASDAQ:ATVI).
- Physical software sales showed sharp declines for previous-generation consoles, which points to the health of the new generation (PS4, Xbox One, Wii U), whose software sales increased 58% Y/Y.
- In hardware, Sony says PS4 again topped the charts, but everyone's doing well in the new generation: “This is the 17th month of sales for the Xbox One and PS4, whose combined cumulative hardware sales are over 50% higher than the combined 17-month cumulative sales totals for the Xbox 360 and PS3,” said NPD's Liam Callahan.
- In a market down more than 1% today, GameStop (NYSE:GME) did worse, down 3.1%.
- And in other EA news, at the ongoing "Star Wars Celebration" event going on in Anaheim, Calif., today's news included the reveal trailer for Star Wars: Battlefront wowing fans. Launching Nov. 17, the game showcases high-definition visuals but takes a somewhat risky move of dropping single-player missions entirely for cooperative and multiplayer.
- Costco (NASDAQ:COST) is hiking its quarterly dividend by 13% ($0.045/share) to $0.40/share. That's good for a 1.1% yield at current levels. The next dividend is payable on May 15 to shareholders on record as of the May 1 close.
- The bulk goods retailer is also launching a new $4B buyback that replaces its existing $4B authorization (had $2.5B remaining). The buyback expires in April 2019, and is good for repurchasing 6% of shares at current levels.
- COST +0.5% AH to $145.25.
- Just in time for critical upfronts, advertising spending on TV rose in the first quarter, Standard Media Index reports, offering some optimism for networks in a challenging season.
- Excluding last year's Winter Olympics impact, spending was up 7% for broadcast networks, and up 4% for cable networks.
- For broadcast, January and February showed nominal declines because of comparison with the year-ago Olympics, and revenues were flat in March. Meanwhile, TV ratings were down 11% in Q1.
- The news is good but tempered by the expectation that this year's upfronts (all-at-once negotiations over the upcoming TV season) will show ad commitments falling 10% for broadcast and 5% for cable.
- Key network owners: AMCX, DIS, CBS, FOX, CMCSA
- In the sort of things dreams are made of for retailers, Costco's (COST -1.7%) new deal with Visa (V -1.6%) and Citigroup (C -1.6%) will have the company paying next to nothing for transactions vs. the roughly 0.6% it pays current partner American Express (AXP -4.2%).
- "The numbers didn't add up," said AmEx CEO Ken Chenault last month when telling his shareholders why the company let the Costco relationship go. "We couldn't accept their financial terms."
- For Citigroup, it's plan is to make money by customers carrying loan balances, and for Visa it hopes to earn when customers use those cards at other retailers where fees are higher. Banks generally make about 80% of their credit card revenue from interest balances and other fees, with interchange making up the rest, according to Bernstein's Lisa Ellis.
- To put some numbers on it, Costco had about $100B in sales last year, with its customers accounting for 20% of AmEx's loans and 8% of spending.
3:28 PM| Comment!
- The exhibitor sector is on watch after reports indicate the DOJ has increased scrutiny on the exclusivity agreements struck between theater chains and movie studios.
- Smaller chains and indie theaters have complained to regulators for years about the unfairness of the clearance agreements.
- In the past, analysts have discounted the odds of harsh regulatory action with the theater release window model cracking a bit.
- Theater stocks are down roughly in-line with market averages today.
- Exhibitor stocks: CKEC, AMC, CNK, RLD, IMAX, RDI, MCS.
- Party City (PRTY +1%) still trades near its highs despite the lack of a festive mood on Wall Street today.
- The run-up in share price has pushed the price-to-sales ratio on the retail stock to over 1.0 - although for comparison purposes PRTY is still cheaper than Michaels Company and The Container Store.
- Previously: Party City IPO priced at $17 (April 16)
- Previously: Party City up 21% in opening IPO trades (April 16)
- GM's Shanghai General Motors unit will sell cars and offer financing to Chinese consumers via Alibaba's (BABA -2.7%) Tmall site; Buick, Chevy, and Cadillac cars are currently offered.
- In addition, Alibaba will use its analytics platform to serve ads to prospective GM car buyers, as well as pitch them on loans and aftermarket services. The Chinese e-commerce giant says it has partnerships with nearly 50 car brands and 10K dealerships. In March, it formed a $160M JV with Chinese automaker SAIC to develop Web-connected cars.
- Separately, Alibaba's Aliyun cloud services arm (estimated 23% local share) has added top Asian oil refiner Sinopec to its client list. Sinopec will rely on Aliyun to both provide a cloud infrastructure (IaaS) platform and provide analytics services for its petrochemical manufacturing ops. The companies are also exploring cooperation in payments, e-commerce, and other fields.
- Alibaba has sold off on a rough day for equities. Shares are less than $2 above a post-IPO low of $80.03.
- Ford (F -1.3%) confirms it will invest $2.5B in engine and transmission plants in Mexico.
- Expansion at two existing plans and the development of a third new facility will create about 3.8K new jobs.
- The automaker manufactures conventional and hybrid Ford Fiesta, Ford Fusion, and Lincoln MKZ models in the region.
- Previously: Toyota to open first Mexico passenger car plant (April 14)
- Previously: Ford expected to invest $2.5B in Mexico plants (April 14)
- The Justice Department's staff attorneys looking into Comcast's (NASDAQ:CMCSA) $45B bid to purchase Time Warner Cable (NYSE:TWC) are close to urging the deal be blocked, Bloomberg reports -- and they're also not working with Comcast to secure changes that would satisfy them.
- Already lower with the market today, TWC took a cliff dive, now -7%. Comcast shares are still down 2.8%.
- The lawyers could submit their review as soon as next week to deputy assistant AG Renata Hesse. Officials will then decide on whether to sue to stop the deal.
- Hesse is running the review since antitrust chief Bill Baer recused himself, as a previous representative of NBCUniversal in its takeover by Comcast.
- GrubHub (GRUB -1.3%) is down with the rest of the market despite an initiation at Buy from Sterne Agee, which called the company the "dominant platform focused on takeout at independent restaurants in the U.S."
- The firm's Arvind Bhatia noted that there are 350K independent restaurants in the U.S. making up a $70B takeout market that's local, highly fragmented -- and not very digital, 95% offline.
- "We are in the very early innings of this transition, but as this shift proliferates, GrubHub will benefit," Bhatia writes, "as they are the dominant player in the industry and have a network of restaurants that covers most of the major cities across the U.S."
- He set a price target of 56; GrubHub was trading last at $44.76, not far off an all-time high of $47.95.
- With shares having risen 74% in 2015 going into today (bringing them back above their $29 IPO price), Goldman has downgraded Wayfair (NYSE:W) to Neutral. Its target is at $36.
- The online furniture giant currently trades for 1.6x 2015E sales; the 2015 revenue growth consensus is at 31.8%. Q1 results arrive on May 11.
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