Author Archives: Scalper1

SunEdison Stock Torched On Creditor-Negotiation Rumors

SunEdison ( SUNE ) stock was torched Tuesday on reports that it’s in talks with creditors over $725 million in second-lien loans, two weeks after the Vivint Solar ( VSLR ) acquisition went up in smoke. In afternoon trading on the stock market today , SunEdison stock crashed 19% and was trading below 2 on the firm’s second biggest single-day plunge this month. Meanwhile, Vivint Solar stock buoyed 3% early after securing $200 million in funding for rooftop project, but dropped sharply to just a fractional gain in the afternoon. SunEdison is engaged in debtor-in-possession negotiations , according to sources noted in a Debtwire report cited by Reuters. SunEdison and yield company TerraForm Power ( TERP ) have twice delayed filing their 10-K annual reports amid a SunEd liquidity investigation. SunEdison representatives declined to comment to IBD on “market rumors and speculation.” Current and former executives alleged in late 2015 that SunEdison misrepresented its liquidity stance. No material mistakes have been found in the audit thus far, SunEd said last week. But the audit is holding up both 10-K filings. Delaying its 10-K put TerraForm Power out of Nasdaq compliance . It formally has until May 16 to submit the form or file a plan to regain compliance, although the SunEd yieldco could get until Sept. 12 to become compliant or face delisting. And, at least four law firms are investigating whether TerraForm Power violated securities laws related to the  fraud and insider trading sections of the Securities and Exchange Act of 1934. TerraForm Power stock sank about 6% in afternoon trading Tuesday alongside its parent. Vivint Solar credited its $200 million term facility closure to its freedom “from the constraints of the terminated SunEdison merger agreement.” “We have demonstrated our ability to rapidly access the capital markets for flexible, term-debt financing to support our continued growth,” executive vice president Thomas Plagemann said in a statement. The $200 million will be available in two tranches — $75 million at 5.5% interest and $125 million at 8% interest. Credit Suisse analyst Patrick Jobin earlier called the loan’s terms “onerous.” But Vivint Solar says the financing is structured to allow it to utilize cash flow generated by the operating portfolio — under specific circumstances — to fund additional business initiatives. Image provided by Shutterstock .

Apple’s Cheap iPhone SE Raises Profit Margin Concerns

Apple ‘s ( AAPL ) decision to price its new 4-inch smartphone, the iPhone SE, starting at $399 could attract value-conscious consumers, especially in emerging markets, but it also could hurt the company’s profit margins. The iPhone SE was announced Monday at Apple’s spring product launch event at company headquarters in Cupertino, Calif. Apple also announced a 9.7-inch iPad Pro tablet; software updates for its mobile devices and the Apple TV; a price cut to the Apple Watch; and new Apple Watch bands. The iPhone SE is an update to the 2.5-year-old iPhone 5S. It features upgraded internal components such as an A9 processor, 12-megapixel camera, and NFC technology to enable Apple Pay. The “iPhone SE’s price was notably lower than we expected ($399 vs. $499), and we worry about (average selling price) and margin implications,” Bernstein analyst Toni Sacconaghi said in a research report. The lower-than-expected price may be a response to increasing sales of used iPhones and a conscious attempt to grow the installed base of iPhone users in hopes of pushing them to a services model over time, he says. The gross profit margin of the iPhone SE is probably about 30% to 35%, compared with about 45% for the iPhone 6 and 6S, Sacconaghi says. “Apple executives noted in yesterday’s remarks that the ‘vast majority’ of its iPhones are resold,” Sacconaghi said. “The bad news for Apple is that it captures no revenues from used iPhone sales. Accordingly, the low price of the SE may be an attempt for Apple to begin to provide an alternative to used iPhones for price conscious consumers and to capture those revenues directly.” Apple’s Use Of Same Components Helps Profits Nomura analyst Jeffrey Kvaal also expresses concern about the pricing of the iPhone SE and its impact on ASPs and margins. On the plus side, Apple’s use of the same components as higher-end iPhones could allow Apple to keep costs down and margins up, he says in a report. The iPhone SE is priced $50 below iPhone 5S models, which should help Apple attract new iPhone users in emerging markets while keeping gross margins stable, Morgan Stanley analyst Katy Huberty says in a report. The iPhone SE pricing likely won’t hurt gross margins because the handset shares manufacturing tools with the iPhone 5 and 5S, which have a similar design, and shares components with the iPhone 6S, she says. BMO Capital Markets analyst Tim Long says the attractively priced iPhone SE should help Apple capture more of the market that was going to smartphones using Alphabet ’s ( GOOGL ) Google Android operating system. “We continue to believe Apple’s growth over the next several years will be driven by the conversion of a small percentage of the 2 billion-plus mass market Android users,” Long said in a report. The iPhone SE “does a good job addressing a slice of that segment.” Sacconaghi rates Apple stock outperform, with a price target of 135. Kvaal has a buy rating on Apple with a price target of 135. Huberty rates Apple as overweight with a price target of 135. Long has an outperform rating on Apple with a price target of 130. Apple stock was up nearly 1% in afternoon trading on the stock market today , near 107. Apple Watch Price Cut Could Signal Version 2 Ahead On Monday, Apple cut the starting price for the Apple Watch by $50 to $299. Wall Street analysts say that move could signal that a second-generation smartphone is on the way from Apple. Bernstein’s Sacconaghi says the price cut could mean that the next version of the Apple Watch could arrive around midyear. “We note that Watch originally launched on April 24, 2015, and is approaching the one-year mark (on which Apple typically refreshes its products) — meaning Watch is due for an upgrade in the coming months,” Sacconaghi said. BMO’s Long says the Apple Watch 2 is likely to be announced this fall along with the iPhone 7. “We expect a refreshed model to be announced at the September event, which may well be a sweet spot, putting the release more than a year following the product’s initial introduction to avoid alienating early adopters,” he said. Nomura’s Kvaal says the Apple Watch price cut is more about trying to stimulate demand for the smartwatch in general. “Apple’s decision to lower the price from $349 to $299 without a new product launch suggests Apple is still searching for the right price/value ratio,” Kvaal said.

Apple Upping Its Game On Trade-Ins? Should AT&T, Verizon Worry?

Apple ( AAPL ) could be getting more aggressive with its iPhone upgrade plans, which so far apparently haven’t dented sales at wireless phone companies such as AT&T ( T ) and Verizon Communications ( VZ ). Apple on Monday rolled out the 4-inch-screen iPhone SE, priced starting at $399 for the 16 gigabyte model. Apple “also upped their game on trade-ins to drive sales through their upgrade program,” said Walter Piecyk, an analyst at BTIG Research, in a research note. Apple introduced its own financing plan for iPhone purchases in September, when rolling out the 6S series. Analysts were unsure if Apple’s own monthly installment payment plans posed a worry for AT&T, Verizon, T-Mobile US ( TMUS ) and Sprint ( S ). Apple in late January had nothing to say about demand for its iPhone upgrade program on its fiscal Q1 earnings conference call. One view was that Apple’s financing plan would create more customer loyalty for Apple, at the expense of its carrier partners. Wrote Piecyk: “A new entry level iPhone SE would cost $17 per month under the plan, but Apple will drop that monthly charge to $10 per month if an iPhone 5S in working order is traded in. That implies an iPhone 5S trade-in value of $168 compared to the $100 to $120 that Gazelle is paying for an iPhone 5S today.” Gazelle is a popular trade-in website. Many of the used iPhones acquired by wireless distributors Brightstar, Gazelle and others are resold in emerging markets, particularly mainland China. If Apple is getting more aggressive, it may be laying the groundwork for the iPhone 7’s debut later this year. Wireless firms have been phasing out service contracts, which involved retail subsidies. AT&T and Verizon have shifted to monthly installment payment plans. T-Mobile and Sprint also have equipment installment plans (EIP). Both T-Mobile and Sprint also have leasing deals, which cost less monthly, while AT&T and Verizon have steered away from leasing offers.