Author Archives: Scalper1

Low-Cost iPhone SE Could Dent Apple’s Profit Margins

Apple ‘s ( AAPL ) new iPhone SE probably has a gross profit margin of about 35% for the entry-level model, which is well below the mid-40% margins enjoyed by the rest of the iPhone family, RBC Capital Markets said in a research report Thursday. But the new phone, which starts at $399, will still give a lift to revenue and profit, RBC analyst Amit Daryanani said in the report. The iPhone SE could provide $6.8 billion in revenue and 23 cents in earnings per share this calendar year, assuming Apple sells an incremental 15 million units, Daryanani said. He reiterated his outperform rating on Apple stock, with a price target of 130. Apple was down a fraction, below 109, in morning trading on the stock market today . Based on teardown reports, the 16-gigabyte model iPhone SE has a bill of materials cost of about $260, Daryanani said. The 4-inch iPhone uses many of the same components found in the larger-screen, higher-priced iPhone 6 and 6S series phones. The iPhone SE likely benefited from cheaper components that were the result of Apple suppliers left with excess inventory after the iPhone 6S underperformed, he said. Chipmakers Qualcomm ( QCOM ) and Qorvo ( QRVO ) topped content in the iPhone SE, but Skyworks Solutions ( SWKS ) and Texas Instruments ( TXN ) gained new chips in the refreshed 4-inch smartphone, a Chipworks teardown found . The iPhone SE went on sale Thursday. It was a low-key product launch for Apple, with few stores seeing lines forming outside, Piper Jaffray analyst Gene Munster said in a report Thursday. Also, a check of 100 Apple stores in the U.S. found 90% availability for the iPhone SE, he said. “We view both the lack of lines and the high level of product availability as in line with expectations, reinforcing our view that the SE will be largely incremental to the model in replacing the low-end iPhone 5S,” Munster said. RELATED: Middle-Aged Apple Might Get A Sports Car, New Girlfriend .

Citi Cuts Amazon, NFLX, Google Price Targets On Stock Compensation

Citigroup slashed its price target on LinkedIn and also lowered its targets on shares of  Amazon.com ( AMZN ), Alphabet ( GOOGL ), Facebook ( FB ) and Netflix ( NFLX ) in a report that takes a close look at the earnings dilution from stock compensation grants. Tech companies, and some others, typically report both non-GAAP (generally accepted accounted principles) earnings — which exclude stock grants to employees, among other items — and earnings under GAAP, which include everything. Financial analysts typically provide non-GAAP estimates for quarterly results, and those numbers frequently get more play in quarterly earnings stories in the business press. “We are adjusting our models and price targets to better reflect the impact of stock-based compensation (SBC),” said Citigroup analyst Mark May in the research report. “Some may say this is a bear market issue, but we believe it is a necessary change that is long overdue.” Citigroup cut its price target on LinkedIn ( LNKD ) to 130 from 194. It lowered Amazon’s price target to 760 from 780, Google-owner Alphabet’s target to 900 from 924, Netflix to 116 from 121, and Facebook to 133 from 134. Citigroup maintained buy ratings on Amazon, Facebook and Google. It has neutral ratings on LinkedIn and Netflix. In morning trading on the stock market today , LinkedIn stock was near 115, Amazon near 597, Alphabet near 763, Netflix near 104, and Facebook near 115. All were up a fraction except Netflix, which was up 2%. The report also looks at the stock-based compensation of eBay ( EBAY ), Twitter ( TWTR ) and Yahoo ( YHOO ). “While most (investors) view Twitter as having the highest stock-based compensation ratio, LinkedIn’s grants as a percentage of revenue are higher than Twitter, and LinkedIn saw this ratio increase last year,” said the report. “While most view Amazon as having high stock-based compensation, it actually ranks near Netflix as among the lowest. Facebook ranks high, but grants declined last year, and its revenue growth, profitability and stock price performance provide important offsets. “The impact of stock-based compensation provides additional reason to remain cautious on LinkedIn and Twitter. “Unlike some people, we do not think stock-based compensation should be treated as a cash expense, mostly because it is in fact not a cash item. Instead, we account for it consistent with what it is — an ongoing source of dilution to equity holders.” According to Citigroup, on a percentage of revenue basis, the company with the highest stock compensation grants in 2015 was LinkedIn, followed by Twitter, Yahoo, Facebook, Google, eBay, Amazon and Netflix, respectively.

BlackBerry Q4 Revenue Falls Far Short Of Estimates As Stock Tumbles

Deep in a turnaround effort that aims to slow its sinking revenue growth and return it to profitability, BlackBerry ( BBRY ) turned in mixed results Friday morning that sent its stock crashing. The provider of smartphones and security software reported revenue of $464 million for its fiscal Q4 ended Feb. 29, down 30% from the year-earlier quarter and missing the consensus estimate of $563.2 million. But it reported a per-share loss minus items of 3 centers where analysts polled by Thomson Reuters expected a 10-cent loss. BlackBerry stock was down more than 7%, near 7.50, in early trading in the stock market today . BlackBerry stock is down 19% in 2016 so far. The company, however, said that its software and services revenue rose 106% to $153 million, exceeding its estimates. “Overall, BlackBerry’s Q4 performance was solid as we made progress on the key elements of our strategy, which are to grow software faster than the mobility software market, achieve device profitability and generate positive free cash flow,” CEO John Chen said in the company’s earnings release. “Our strategy is on track and our growth engines are in place to continue to generate above-market growth in software and achieve our profitability objectives.” The smartphone maker that once dominated the field prior to the Apple ( AAPL ) iPhone, followed by Android from Alphabet ( GOOGL ), is pivoting to other areas. BlackBerry has made several acquisitions in the last two years, among them its $425 million purchase of Good Technology. The deal widely expanded BlackBerry’s security software platform to other smartphones and operating systems.