Author Archives: Scalper1

Sprint Seen ‘Pulling Away’ From Prepaid As AT&T, T-Mobile Battle

Sprint ( S ) has “pulled away” from the prepaid segment of the wireless market, as AT&T and T-Mobile US ( TMUS ) slug it out in the segment, says Cowen & Co. AT&T ( T ) has gained share in the prepaid market with its “Cricket” brand, while T-Mobile continues to be successful with its “MetroPCS” brand, says Cowen in a research report, which rates T-Mobile stock outperform. Both AT&T and T-Mobile have stepped up their prepaid marketing . Prepaid subscribers traditionally bought calling minutes as needed and don’t have service contracts. But the marketing lines have blurred between the prepaid and postpaid segments as wireless firms phase out service contracts. Many prepaid plans renew automatically every month. Prepaid customers typically buy less-pricey phones upfront, and spend less on data services. “The balance of power (in prepaid) is shifting. In 2015, prepaid accounted for 29% of total (industry) net adds vs. just 12% in 2014, driven by strong growth at both Cricket (AT&T) and MetroPCS (T-Mobile),” Cowen analyst Colby Synesael said in the report. “Sprint has meaningfully pulled away from the market and has shifted its focus toward the postpaid (phone) market, and just recently began de-emphasizing its Virgin (prepaid) brand,” Synesael added. According to some industry reports , though, Sprint recently overhauled some of its prepaid plans. T-Mobile and AT&T both added 469,000 prepaid subscribers in Q4, while Verizon Communications ( VZ ) shed 157,000 and Sprint lost 491,000. Some of Sprint’s prepaid subscribers upgraded to postpaid plans. T-Mobile acquired prepaid specialist MetroPCS in 2013 and has kept the brand alive. AT&T acquired Leap Wireless and its Cricket brand for $1.2 billion in 2014. Since then, AT&T has stepped up Cricket advertising while opening more retail stores. “The makeup of the prepaid market is shifting from a segmented low-end, pay-as-you-go service to higher-end monthly plans driven by solid device lineups that are riding on quality nationwide LTE networks,” said Synesael. Image provided by Shutterstock .

Dual ETF Momentum March Update

Scott’s Investments provides a free “Dual ETF Momentum” spreadsheet which was originally created in February 2013. The strategy was inspired by a paper written by Gary Antonacci and available on Optimal Momentum. Antonacci’s book, Dual Momentum Investing: An Innovative Strategy for Higher Returns with Lower Risk , also details Dual Momentum as a total portfolio strategy. My Dual ETF Momentum spreadsheet is available here and the objective is to track four pairs of ETFs and provide an “Invested” signal for the ETF in each pair with the highest relative momentum. Invested signals also require positive absolute momentum, hence the term “Dual Momentum”. Relative momentum is gauged by the 12 month total returns of each ETF. The 12 month total returns of each ETF is also compared to a short-term Treasury ETF (a “cash” filter) in the form of the iShares Barclays 1-3 Treasury Bond ETF (NYSEARCA: SHY ). In order to have an “Invested” signal the ETF with the highest relative strength must also have 12-month total returns greater than the 12-month total returns of SHY. This is the absolute momentum filter which is detailed in depth by Antonacci, and has historically helped increase risk-adjusted returns. An “average” return signal for each ETF is also available on the spreadsheet. The concept is the same as the 12-month relative momentum. However, the “average” return signal uses the average of the past 3, 6, and 12 (“3/6/12″) month total returns for each ETF. The “invested” signal is based on the ETF with the highest relative momentum for the past 3, 6 and 12 months. The ETF with the highest average relative strength must also have an average 3/6/12 total returns greater than the 3/6/12 total returns of the cash ETF. Portfolio123 was used to test a similar strategy using the same portfolios and combined momentum score (“3/6/12″). The test results were posted in the 2013 Year in Review and the January 2015 Update . Below are the four portfolios along with current signals: Return Data Provided by Finviz Click to enlarge As an added bonus, the spreadsheet also has four additional sheets using a dual momentum strategy with broker specific commission-free ETFs for TD Ameritrade, Charles Schwab, Fidelity, and Vanguard. It is important to note that each broker may have additional trade restrictions and the terms of their commission-free ETFs could change in the future. Disclosures: None

Sunrun Offers ‘Draconian’ 2016 View, Won’t Gouge SolarCity Market

Sacked Nevada operations smashed Sunrun ‘s ( RUN ) chances of scooping up some SolarCity ( SCTY ) market share, a Credit Suisse analyst said Friday after Sunrun’s late-Thursday 2016 solar-deployment guidance lagged expectations by half. For 2016, Sunrun sees 40% growth in solar installations vs. Credit Suisse views for 78%, analyst Patrick Jobin wrote in a research report. It’s a rather “draconian scenario, considering the (Investment Tax Credit) has been de facto extended through 2023 and most net-metering decisions are in favor of rooftop solar.” Sunrun stock was torched, down 14% in early afternoon trading on the stock market today to just above 6, on the installer’s mixed Q4 earnings results. IBD’s 22-company Energy-Solar industry group felt some heat, trading flat Friday afternoon despite an up day for the market overall. SolarCity stock was down 1.2%. Late Thursday, Sunrun reported $99.6 million and a 15-cent loss per share for Q4. Sales rose 66%, and losses shrunk vs. the year-earlier quarter. Sales missed estimates, but the bottom line beat the consensus view of seven analysts polled by Thomson Reuters. For 2015, Sunrun reported $304.6 million sales, up 53%, and a per-share loss of 96 cents, narrowing from a $1.54 per-share loss in 2014. Both measures topped Wall Street’s model for $302.8 million and $2.39 a share in losses. In Q4, Sunrun deployed 68 megawatts and booked 80 MW, up 83% and 117%, respectively, vs. the year-earlier quarter. Sunrun wrapped up 2015 with 203 MW deployed and 274 MW booked, up a respective 76% and 85%. But Nevada affected both metrics, Sunrun noted. Sunrun’s Q4 deployed metric missed Jobin’s expectations for 80 MW. Current-quarter and 2016 guidance for 56 MW and 285 MW were also disappointing, Jobin wrote. Nevada Gouges Sunrun, Too Sunrun and SolarCity stocks are down a respective 52% and 55% from their closing prices of Dec. 21, the day rumors began swirling of a potential extension to the ITC. Without an extension of that key solar subsidy, analysts expected a cliff for 2017 installations following its expiration Dec. 31, 2016. Congress extended the ITC, boosting solar shares, but then a decision a few days later in Nevada gouged solar stocks. Nevada regulators opted to cut payments to solar customers for excess energy fed back into the grid. Net-metering policies are typically seen as anti-utility because they force the companies to buy the energy on a one-to-one basis. In December, both Sunrun and SolarCity opted to exit Nevada, which has been a top solar state. In February, Nevada regulators voted against grandfathering existing solar customers under the old net-metering scheme, prompting Sunrun to sue. Wall Street “under-appreciated how quickly Nevada had (grown) when we attempted to assess risks to volumes,” Jobin wrote. A recent GTM Research report says Nevada was among six states to surpass 1 gigawatt in cumulative installations. But the Nevada Public Utilities Commission decision to cut net-metering payments will move Nevada from No. 5 in installations to No. 31 in 2016, GTM predicted. In 2015, Sunrun deployed 203 MW, slightly below its guidance for 205 MW, “primarily due to the closure of the Nevada market,” according to Sunrun. Current-quarter guidance for 58 MW deployed, up 53% year over year, was below Jobin’s expectations for 70 MW. Sunrun said it removed a 12 MW backlog from Nevada. For 2016, Sunrun guided to 40% year-over-year growth to 285 MW, below Jobin’s view for 78% growth (361 MW). Last month, SolarCity blamed Nevada after it came 8 megawatts short of its Q4 installation guidance. Nevada represented about 20 MW per quarter for the No. 1 residential installer. SolarCity Chairman Elon Musk also heads up Tesla Motors ( TSLA ), which operates a battery factory in Nevada. Squaring Off Against SolarCity As recently as Q3, Sunrun expected to gain share in 2016 vs. SolarCity and didn’t foresee dropping off from 2015’s 76% growth rate, Jobin wrote. In Q3, SolarCity pledged to curb growing losses by shrinking its annual 80% growth rate. SolarCity expects to grow 44% in 2016. “We believe (Sunrun) management’s credibility will suffer until the decisions made are demonstrated to be sound and the company is able to reestablish a track record of meeting guidance and expectations,” Jobin wrote. Likewise, Sunrun is angling to become cash flow positive and expects to do so this quarter by drawing down on its $250 million credit facility. Sunrun’s 40% growth target for 2016 will allow it to preserve capital resources, Jobin wrote. The solar industry is capital-intensive, and analysts worry about SolarCity and Sunrun’s narrowing access to capital, given the market’s volatility. To that end, Sunrun is pruning its channel partners to focus on those with the highest value, he wrote. “It is apparent that a portion of channel partners are less viable for Sunrun in a capital-constrained environment, particularly those who demand advance payments from Sunrun upon customer origin instead of installation,” Jobin said. Shifting from channel partners also allowed Sunrun to plump its direct business — currently 50% of sales. In 2016, Sunrun expects to double its direct business. Combined with 40% growth overall, that shows marked deceleration in the channel business, Jobin wrote. Jobin maintained his outperform rating but cut his price target on Sunrun stock to 21 from 35. Image provided by Shutterstock .