Author Archives: Scalper1

Apple iPhone To Be Dragged Into Virtual Reality Market

Apple ( AAPL ) hasn’t announced plans to join the virtual reality headset craze, but third-party hardware companies have designs on using the iPhone for VR products. Piper Jaffray analyst Gene Munster predicted Tuesday that third-party hardware firms would start selling VR products that use the iPhone as a display this fall. These devices would be much like the Samsung Gear VR headset, which uses Samsung smartphones as the display. IonVR, a privately held company specializing in third-party VR hardware, expects to have a headset in the fall that will will allow the iPhone to be used for VR and will cost between $100 and $200, Munster said. The iPhone already can be used with Alphabet ’s ( GOOGL ) Google Cardboard and Mattel ’s ( MAT ) View-Master, but those aren’t true VR experiences, he said. Virtual reality is much talked about as a hot new technology, and there are concerns that it could follow the boom and bust of 3D TV. Munster says that VR will not flop like 3D, in part because of the greater level of investment in VR and its cousin, augmented reality. Facebook ( FB ), which owns Oculus VR, is firmly committed to its success, he said. “On top of that, Apple, Google and Sony ( SNE ) are expected to all be making significant investments in VR/AR over the next five years,” he said. “We believe these investments will lay the groundwork for VR /AR becoming the next computing paradigm.” Sony is in one of the best positions to capitalize on VR, Munster said. “It has the content, distribution and user base (36 million PS4 consoles sold) to allow VR to grow rapidly,” Munster said. “We have also been impressed by Sony’s demos of ‘London Heist’ and ‘Walk The Wire,’ and the company has a slate of approximately 80 games which will be available at launch, which is expected late this year.” Oculus Rift is set to ship on March 28 in 20 countries, including the U.S. It will be available at select retailers in April. It will cost $599 and require a high-end PC with a graphics card. Bundles of the Oculus Rift headset and “Oculus-ready” PCs start at $1,499. Meanwhile, Samsung is promoting its smartphone-based Gear VR, which uses Oculus technology. Gear VR costs $99 and requires a newer Samsung Galaxy phone. Another VR headset, the HTC Vive, is due to go on sale April 5 and cost $799. Like the Oculus Rift, Vive requires a high-end PC with dedicated graphics processor. Vive is a collaboration between smartphone maker HTC and video game developer Valve.

FireEye Sees Profits In 2017 Amid Key Subscription, SaaS Transition

FireEye ( FEYE ) delivered a lofty promise Tuesday — profitability in 2017. The No. 7 cybersecurity firm (by market cap), FireEye hasn’t been in the black yet. But FireEye’s transition to a software-as-a-service subscription model could de-emphasize the competitively pressured appliance market, a William Blair analyst said Wednesday — a day after FireEye unveiled its plans and gave its profit forecast at its annual analyst day. FireEye stock was up 1% in afternoon trading on the stock market today , after earlier rising 10%. Shares fell 4.6% Tuesday despite the guidance. On Wednesday, Piper Jaffray analyst Andrew Nowinski upgraded FireEye stock to overweight from neutral, and was among at least four analysts to boost their price targets. “We believe FireEye can successfully transition to a (SaaS) model,” Nowinski wrote in a research report. “We believe FireEye is well-positioned to execute this transition due to the company’s best-in-class intelligence gathering capabilities. “No other vendor can capture a complete intelligence package like FireEye, since they lack the Mandiant and iSight capabilities.” By 2020, subscriptions and SaaS offerings will comprise 75% of total billings, FireEye executives promised Tuesday. On that path to profitability, FireEye curbed its 2016 loss expectations to $1.20-$1.27 per share, ex items. The company also slashed its capital 2016 expenditures expectations by $15 million to $35 million. Long term, FireEye expects to boost its international sales from 30% of total revenue in 2015 to nearly 50% by leveraging third-party distributors like Westcon, a key distributor that helped scale Palo Alto Networks ’ ( PANW ) international revenue, Nowinski wrote. Shifting From Core Appliance As it transitions to the “more defensible” subscription and SaaS model, FireEye is de-emphasizing its appliance offerings. Combined, FireEye’s four core appliance products comprise only 27% of billings, William Blair analyst Jonathan Ho wrote in a report. “Instead, the company sees growth in new business lines such as FireEye-as-a-Service, Email Threat Prevention, Threat Analytics Platform and Mobile Threat Protection, which appear more defensible than the core business,” he wrote. Guidance suggests that FireEye can achieve profitability while still investing in these growth areas, Ho said, retaining his outperform rating on FireEye stock. But Dougherty analyst Catharine Trebnick questioned whether FireEye can deliver on its subscription and SaaS goals given tough comparisons. In 2015, subscription billings jumped 42% year over year. “This was largely driven by unattached subscription growth of 64% year over year, while attached grew at 29% year over year,” she wrote in a report. For 2016, FireEye guided to 70% unattached subscription growth. Excluding the iSight and Invotas acquisitions, however, that signals only 26% organic growth. “The company needs products from this section to be the leading edge of growth,” she wrote. “Looking beyond 2016, the company’s to-be-released advancements may be able to accelerate this figure.” Trebnick retained her neutral rating “until we can observe meaningful progress trickle down into the field.” Turning On The Cash Spigot FireEye expects its first profitable quarter in Q4 2017, and its first profitable year in 2018. Pacific Crest analyst Rob Owens, however, questioned the logic of transitioning both profit and product-mix simultaneously. “We believe a simultaneous mix shift and profitability initiative create incremental risk, particularly given recent execution,” he wrote in a report. But, he noted, the product shift should give more visibility into FireEye’s revenue stream. In 2015, FireEye-as-a-Service delivered triple-digit customer growth, reaching a $100-million run rate. FireEye now has 363 FaaS customers, up 101% and comprising 8% of the total 4,400 customers, FBN analyst Shebly Seyrafi wrote in a report. He sees “ample headroom for further penetration” in the FaaS market. About half of FireEye’s customers use multiple families of products, Trebnick noted separately. Seyrafi boosted his price target on FireEye stock to 25 from 18 and retained his outperform rating.

Yelp Downgraded On Slowing Growth, While Competition Mires Groupon

Yelp ( YELP ) and  Groupon ( GRPN ) got hit with bearish analyst reports Wednesday, but  Angie’s List ( ANGI ) got a more positive note. Yelp stock dropped Wednesday after the consumer review website was downgraded to sell from neutral by investment bank UBS. Yelp stock was down 2.5% in afternoon trading in the stock market today , near 20, and has tumbled more than 55% in the past 12 months. UBS cited concerns over the potential of product innovation taking a hit as user growth declines. “Yelp will enter a period of slowing revenue growth and heightened margin pressures, driven by increased competition in Yelp’s core business and share gains by larger digital ad companies,” wrote UBS analyst Eric Sheridan. Decelerating traffic growth and rising hiring costs in sales and marketing also are concerns, said Sheridan. “An additional worry is the lack of operating profit to re-invest to drive innovation that might counter-act the platform strength of Alphabet ( GOOGL ) subsidiary Google and Facebook ( FB ),” Sheridan said. He added that “the companies which will succeed in the fight for local advertising budgets are those that have established large mobile user bases. In our view, Yelp (despite its efforts) has lagged in user growth, product innovation and necessary tech investments.” Groupon Pressure Mounting Business pressure is also unlikely to ease anytime soon for online daily deals marketplace Groupon, Sheridan said in another report Wednesday. Groupon stock has plunged nearly 50% in the past 12 months and was down 10.3% Wednesday afternoon, near 4. While showing signs of progress in its transformation to an e-commerce marketplace, Sheridan said, “there is still a long road ahead in strengthening the company’s positioning in the local ad and/or local ecommerce market.” Groupon is being buffeted as Google, Facebook and others “are increasing their efforts to capture local ad dollars, while Amazon.com ( AMZN )‘s same-day delivery service reduces the benefit of a local marketplace,” Sheridan said. Angie’s List Revenue Estimates Hiked Good news came to Angie’s List ( ANGI ) in the form of a revenue outlook boost from Pacific Crest Securities, which praised the online review site’s recent decision to drop its current membership model and replace it with free access to its business ratings and reviews as part of a tiered subscription plan. The addition of the free tier “should reignite user growth,” wrote Pacific Crest analyst Evan Wilson in a research report Tuesday. Pacific Crest upped its 2016 estimate for adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for Angie’s List to $34 million, up 58%. “While it’s difficult to model, we think the news of a free Angie’s List will drive an inflection of user traffic and subsequently be much more attractive to service providers,” Wilson wrote. “We think the benefits will accrue fully in 2017, and 2016 has become a tough-to-forecast transition year.” Angie’s List stock was down a fraction in afternoon trading Wednesday, near 8.