Author Archives: Scalper1

Netflix, Amazon, Akamai Benefiting From Cable Cord-Cutters

Interest in cable TV cord-cutting and cord-shaving is on the rise, according to a new survey by Robert W. Baird & Co. In its semiannual video trends survey, 51% of respondents said they are considering canceling or reducing their pay TV service. That’s up from 47% in Q3 2015 and 46% a year ago, Baird analyst William Power said in a research note Wednesday. “Consistent with our past surveys, price remains far and away the No.1 dissatisfaction with traditional cable service, followed by streaming alternatives and paying for more channels than you need, all of which feed the OTT (over-the-top TV) opportunity,” Power said. Netflix ( NFLX ) remains the clear leader in the Internet streaming-video market, but Amazon.com is gaining fast, Power said. Almost half of Netflix subscribers said they view Netflix as a substitute to traditional TV, though 82% of Netflix subscribers still subscribe to cable or satellite. Survey respondents picked “Orange Is the New Black” as the most-watched Netflix original show, followed by “House of Cards,” “Making a Murderer,” “Daredevil” and “Narcos.” Baird surveyed 1,300 U.S. Internet users, which skewed the results toward younger consumers. Roughly 15% of those surveyed were cord-cutters or cord-nevers who didn’t subscribe to traditional pay TV services. “Due in part to the online nature of our survey and its bias toward a younger demographic, Netflix penetration of 75% of respondents is much higher than Netflix’s actual U.S. household penetration of close to 50%, and we expect Amazon ’s ( AMZN ) penetration of 52% of our sample is also significantly higher than actual,” Power said. Netflix penetration in the first quarter was unchanged from the Q3 2015 survey. But the Amazon Prime subscriber rate of 52% was up from 45% six months ago, Baird said. Akamai Technologies ( AKAM ), a leading enabler of streaming services, “should be well positioned to benefit from increased streaming,” Power said. Power rates Netflix stock neutral and Akamai stock outperform. He does not have a rating on Amazon. Akamai stock rose 2.1% Wednesday and Netflix stock rose 1.5%, while Amazon shares fell a fraction.

Meat Industry Produces Some Juicy Offerings To Growth Investors

The meat products industry is one place where investors can find not only plenty of protein but some capital gains, too. IBD ranks  it No. 5 out of 197 industry groups, based on past six-month performance. It might be easy to dismiss the group’s recent strength as a defensive play in a choppy market, but some of the stocks in the group hitting new highs are demonstrating sharp increases in earnings based on fundamental factors in the industry. Hormel Foods ( HRL ) is one such stock.  It has been moving in a tight range since reporting earnings Feb. 16 that were 23% above a year earlier. That report represented a second straight quarter of earnings acceleration. The stock is in its fourth week of building a flat base, although it’s made a big move over the last several years. The company is benefiting from margin expansion driven by low prices of pork, which is its core business and its biggest business segment. It sells bacon, pepperoni and fresh pork into retail and food-service channels. Hormel also owns Skippy peanut butter, Spam lunch meats and Jennie-O turkey. The company broadened its offerings with the 2015 acquisition of Applegate Farms, the No. 1 brand in the natural foods organic space. It has a Composite Rating of 98, making it the No. 2 company in the nine-member industry group. The No. 1 company, with a 99 Composite Rating, is Cal-Maine Foods ( CALM ), the nation’s largest egg producer, which focuses on the southeastern part of the U.S. The Jackson, Miss.-based company sold more than 1 million dozen shell eggs last year, representing about a quarter of total domestic egg consumption. It has 33.7 million layers and 8.4 million pullets (young females) and breeders (males and females used to produce fertile eggs). Last fall, McDonald’s ( MCD ) announced that it was moving toward using more eggs from cage-free chickens. Then it began selling breakfast sandwiches all day. Cal-Maine doesn’t list McDonald’s among its top 10 customers. Walmart ( WMT ) is the biggest customer, representing 26% of sales. However, Cal-Maine is a major seller of eggs produced from cage-free chickens, and McDonald’s is likely to help egg prices stay buoyant. Cal-Maine’s stock appears to be starting on the right side of a late-stage base, although the stock still trades below its 50-day moving average. Tyson Foods ( TSN ) is another strong player in the group, with a 97 Composite Rating. Every week, it produces 35 million chickens, 128,000 head of beef and 401,000 head of pork for a total of 68 million pounds of meat. The company works with more than 11,000 family farms. Tyson has worked hard to separate itself from peers by adding value to its products through strong brands such as Jimmy Dean sausage and Hillshire Farm lunch meat. It’s working on other products, such as marinated and breaded poultry. Tyson gapped out of a flat base with a 54.52 buy point and has advanced more than 20%, giving investors a good spot to take profits. The catalyst for the breakout was an earnings report that beat estimates easily and was 49% above the year-earlier number.

Comcast, Charter, Altice Cable Swaps Eyed After Deal Approvals

Charter Communications ( CHTR ) is moving closer to gaining federal regulators’ approval for acquiring Time Warner Cable ( TWC ) — a deal that could set the stage for assets swaps among cable TV firms, including  Comcast ( CMCSA ), analysts say. The Federal Communications Commission reportedly is set to greenlight the Charter-TWC merger, with conditions, though the deal is still being studied by California’s state regulators. Charter stock rose to just shy of a record high on the report. Regulators thwarted Comcast’s proposed purchase of TWC in early 2015. Europe-based Altice Group , however, expects to gain approval for its purchase of Cablevision Systems ( CVC ) in May, the company said. Altice earlier acquired Suddenlink Communications. If both the Charter-TWC and Altice-Cablevision deals sail through, cable TV firms are likely to explore asset swaps of cable systems in different markets, says a Barclays research report. “Post the completion of pending cable deals, there is some likelihood of potential asset swaps between the remaining distributors to align footprints more closely and extract more in synergies,” said Barclays. “While the regulatory push-back is fair to consider in this instance, we note that the FCC has concluded in the past that pro-competitive effects of clustering of cable systems tend to outweigh the negatives.” Even if the FCC approves the Charter-TWC merger, California’s OK might not come until late May, analysts say. Charter also plans to buy privately held Bright House Networks. Netflix ‘s ( NFLX ) support has smoothed the path for Charter’s deals, analysts say. Both TWC and Cablevision offer services in the New York City area, a big market. RBC Capital says the FCC might still be opposed to any sizable acquisitions by Comcast, the nation’s No. 1 cable TV firm. Comcast also owns NBCUniversal. “Comcast would be unlikely to be allowed to acquire a major cable firm or programmer, but could acquire long-distance assets, a wireless operator, or could engage in clustering and swaps with other cable operators,” RBC analyst Jonathan Atkin wrote in a recent research report. Charter stock rose 6% in the stock market today , to 198.16. Charter peaked at 199 last March. Time Warner Cable stock rose 3.3% Wednesday.