Author Archives: Scalper1

Western Digital Shareholders Expected To Approve Deal For SanDisk

Western Digital ( WDC ) shareholders likely will approve the company’s $19 billion offer to acquire SanDisk ( SNDK ), says RBC Capital Markets. The vote among Western Digital shareholders is set for March 15. A definitive agreement between the two companies was reached on Oct. 21. “Given our analysis of the top 20 Western Digital shareholders and our discussions with a large number of investors, we think the probability is higher the deal gets approved vs. not,” wrote RBC analyst Amit Daryanani in a research note Monday. He said 15 of the top 20 Western Digital shareholders also own SandDisk stock, making the potential approval likely. The deal came into question late last month, when China-based conglomerate Unisplendour canceled plans to acquire a 15% stake in the disk drive maker for about $3.8 billion, on fears U.S. regulators would scuttle the deal due to national security concerns. Western Digital plans to acquire SanDisk, a leading provider of flash-memory chips used in smartphone and tablets, in a cash-and-stock transaction that was valued at $86.50 a share, or about $19 billion, when the deal was announced. After the Chinese investor pulled out, Western Digital went to its alternative offer, which it says values SanDisk at $78.50 a share. Western Digital anticipates seeing $500 million in total cost synergies, not including tax savings, from the acquisition. Daryanani rates Western Digital stock outperform, with a price target of 68. Western Digital stock was up more than 3%, near 50.50, in midday trading Monday, but its shares were near 72 when it announced the pending acquisition. SanDisk stock was up nearly 1%, near 76.50, in midday trading in the stock market today . Image provided by Shutterstock .

Apple iPhone Demand ‘Soft’; Stock Gets Price Target Cut

Apple ’s ( AAPL ) March quarter sales appear to be coming in at the low end of its guidance, based on demand and supply checks, according to Pacific Crest Securities. “Demand appears stable but soft, which prompts more-cautious estimates,” Pacific Crest analyst Andy Hargreaves said in a report Sunday. Hargreaves cut his iPhone unit sales estimate to 47.5 million from 49.0 million for the March quarter, Apple’s fiscal Q2. As a result, he lowered his fiscal Q2 revenue estimate to $50.0 billion from $51.3 billion and his EPS estimate to $8.73 from $8.89. Hargreaves also trimmed his price target for Apple stock to 127 from 132 but reiterated his overweight rating. Apple shares were down 1% to 102 in midday trading on the stock market today . “Despite this, we continue to believe valuation and the likelihood for strong growth in the iPhone 7 cycle make the risk/reward around AAPL attractive,” Hargreaves said. Apple customers largely are staying with the iPhone but waiting to upgrade to newer handsets, he said. Apple is likely to change its iPhone product lineup strategy with the expected launch of the iPhone SE on March 21. At launch, the new 4-inch iPhone will replace the iPhone 5S at the low end of the iPhone lineup. And this fall, it probably will take the place of the iPhone 6 as well, Hargreaves said. When Apple releases a new iPhone, it traditionally drops the price of the previous two generations of iPhone. But Apple likely will eliminate the iPhone 6 to avoid selling low-cost larger screen (4.7- and 5.5-inch) models. “Apple’s new ‘low-end’ iPhone, which we expect to launch on March 21, is likely aimed at maintaining differentiation in the lineup based on screen size, which should help avoid potential trade-down activity that would be a risk to gross margin,” Hargreaves said. The iPhone lineup this fall is likely to consist of the iPhone 7 series at the high end, the iPhone 6S series at the midrange and iPhone SE at the low end, he said. RELATED: How Much Will Apple Raise Its Quarterly Dividend? Apple iPhone Socked As Smartphone Market Hits The Brakes .  

AbbVie Bolsters Immunology Business, Acquires Boehringer Drug

Big pharma AbbVie ( ABBV ) said Monday that it was acquiring rights to two immunology drugs developed by German counterpart Boehringer Ingelheim, but its stock was flat as Goldman Sachs warned of increasing competition. AbbVie agreed to pay $595 million upfront plus undisclosed milestone payments and royalties for the right to commercialize BI 655066, a drug in late-stage testing for psoriasis, and in earlier testing for Crohn’s disease, psoriatic arthritis and asthma. A phase-two trial comparing BI 655066 head to head with Johnson & Johnson ’s ( JNJ ) Remicade found that after nine months of treatment, 69% of patients on Boehringer’s drug had clear or almost clear skin, compared with 30% in the Remicade arm. AbbVie also acquired rights to BI 655064, an earlier-stage drug that attacks the CD40 protein, which may be connected to lupus nephritis, Crohn’s disease and ulcerative colitis. AbbVie said in its press release that it will decide whether to go forward with that drug “after completion of certain undisclosed clinical achievements.” AbbVie said that its success in developing and commercializing Humira, currently the world’s top-selling immunology drug, gives it the expertise to do the same with Boehringer’s products. Humira is nearing the end of its patent life, leading to much speculation on Wall Street about when biosimilar competitors might launch and how much of an impact they might have. Goldman Sachs analyst Salveen Richter took a pessimistic view of the matter Monday, saying that the current political focus on lowering drug prices will probably encourage cheap Humira knock-offs. “We are not changing our 2016-2020 AbbVie forecasts and continue to believe that Humira will remain a durable asset free of U.S. biosimilars, at least until the end of the decade,” Richter wrote as he removed AbbVie stock from his Conviction Buy list and cut his price target to 68 from 80.  “However, we adjust our terminal value growth rate (from +1% to 0%) and model a faster decline curve post introduction of Humira biosimilars in the U.S. after 2020 through 2025.” AbbVie stock fell as much as 2.4% in early trading on the stock market today , but by midday it was flat, near 56. Meanwhile, Richter put BioMarin Pharmaceuticals ( BMRN ) on his Conviction Buy list in AbbVie’s place, setting his price target at 129. BioMarin, Richter noted, has guided that it will go into the black next year even without a contribution of its recently FDA-rejected muscular-dystrophy drug Kyndrisa, “showing opex restraint and a commitment to profitability.” He added that several data releases this year could bring upside for medications including BioMarin’s gene therapy for hemophilia and treatments for the rare diseases achondroplasia and phenylketonuria. BioMarin stock was up 2.5% midday Monday, near 89. Image provided by Shutterstock .