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Apple-Alphabet Cloud Accord Could Help Google Catch Up With Amazon

Google-owner Alphabet ( GOOGL ) has snared iPhone maker Apple ( AAPL ) as a customer for its Google Cloud Platform, a deal that could help Google’s service catch up with industry leader Amazon.com ( AMZN ), says an industry note from Pacific Crest Securities on Thursday. Amazon unit Amazon Web Services (AWS) is now the biggest provider of infrastructure as a service (IaaS), where customers rent computer servers and data storage systems via the Internet. Microsoft ( MSFT ) and Alphabet’s Google rank next. Apple signed a contract worth between $400 million and $600 million to use Google’s Cloud Platform, according to CRN . Apple now uses cloud services from Amazon and Microsoft, but intends to end its reliance on all its rivals in the next few years, as it builds its own data centers, according to Re/Code. While Apple has reportedly used AWS historically for iCloud, “the more surprising shift is from Apple to Google, which are odd bedfellows given the two companies’ mudslinging and competition in other areas,” wrote Pacific Crest Securities analyst Evan Wilson. “Did Google throw in free cloud as a way to renegotiate the search contract? Definitely adds to the perception of Google’s momentum,” Wilson added. The deal has not been confirmed by Google or Apple, but Apple did disclose its reliance on AWS and on Microsoft’s Azure in a 2014 white paper. The alleged Apple-Google accord would help “Google Cloud Platform catch up to Amazon and Microsoft — at least in terms of perception — as a real third player in the space instead of a distant third. Google has done similar deals with Snapchat, PricewaterhouseCoopers, General Mills ( GIS ) Coca-Cola ( KO ), HTC and Best Buy ( BBY ),” said Wilson. In total, the cloud opportunity is big enough for all three Internet powerhouses, said Wilson, who estimated “a potential $25 billion windfall opportunity in cloud services for Amazon, Microsoft and Google, collectively.” While AWS has been the biggest IaaS price-cutter of the last decade, Google Cloud Platform (GCP) has been aggressive since moving into the market. Google slashed prices in March 2014, October 2014 and May-June 2015, Goldman analyst Heather Bellini said in an industry report last month. Goldman Sachs says that the top three service providers are gaining share as Verizon Communications ( VZ ), Hewlett Packard Enterprise ( HPE ) and others exit the public IaaS market and focus on private clouds. Goldman Sachs estimates that AWS’ revenue will hit $12.5 billion in 2016, up from $7.88 billion last year. Apple stock was down a fraction in midday trading in the stock market today , near 106. Alphabet was up a fraction, near 760, while Microsoft stock was also up a fraction, near 55. IBD 50 stock Alphabet gets a best-possible Composite Rating of 99 from IBD. Microsoft has a 75 and Apple a 70. Image provided by Shutterstock .

Vivint Solar-SunEdison Debacle Buoys Rivals SolarCity, Sunrun

Vivint Solar ‘s ( VSLR ) SunEdison ( SUNE ) woes benefited competitors SolarCity ( SCTY ) and Sunrun ( RUN ) in January and February, as the pair swiped market share and drove pricing up 5%, a Credit Suisse analyst wrote Thursday. Intraday on the stock market today , Vivint Solar stock sank about 6%, heading toward a four-day losing streak. Shares are down 64% for the year, including a 20% single-day plunge on March 8 when it scrapped its sale to SunEdison . Wall Street gave 1.2% back to the solar name on March 9, when Vivint Solar announced its plan to sue SunEdison for “willful breach” of contract. SunEdison stock was down more than 1% Thursday afternoon, but SolarCity was up about 1.5%, and Sunrun trended up more than 3%. IBD’s 21-company Energy-Solar industry group was up more than 1%, and ranks 48 out of 197 groups tracked. Vivint Solar’s Q4 results reinforced uncertainty that began with SunEdison’s planned acquisition in July 20, Credit Suisse analyst Patrick Jobin wrote in a research report. Jobin retained his neutral rating on Vivint Solar stock but slashed his price target to 6 from 16.50. Shares hit a year-high July 21 and then plunged through December as SunEdison cut its bid on Vivint Solar, leading Vivint to question SunEd’s ability to pay. Analysts, meanwhile, said Vivint’s fundamentals had deteriorated on the shaky M&A ground. Headcount in Vivint’s operations and sales/marketing segments have declined 17% and 9%, respectively, since Q2 2015, “validating concerns of human capital loss during the drawn-out uncertainty of the company’s acquisition by SunEdison,” Jobin wrote. That uncertainty played out in Q4 when Vivint Solar reported 59 megawatts in installations, down 3% sequentially and below Jobin’s expectations for 60 MW. But bookings jumped 54% year over year, and 13% sequentially, to 80 MW. With only enough tax equity to fund 55 MW in current-quarter deployments, Vivint Solar needs to access more tax equity funding or seek aggregation facilities, Jobin wrote. As of Dec. 31, the company had fully drawn its working capital facility, but it still had $456 million in aggregation facilities and loans. But, Jobin noted, the most recent loan — a $200 million bridge financing loan — “appears to be at onerous terms.” The first $75 million will incur a 5.5% interest rate, according to Vivint Solar’s 10-K, filed March 14. The remaining $175 million will be at an 8% interest rate.

Q4 Earnings Beat For Chinese Online Travel Firm Ctrip.com

Leading Chinese online travel agency Ctrip.com beat Wall Street estimates in Q4 but missed on Q1 guidance, sending the stock down Thursday. Fourth-quarter revenue jumped 50% from a year earlier to $444 million, the company reported , ahead of analysts’ average expectation of $438 million, in a Thomson Reuters poll. “Our philosophy is to underpromise and overdeliver,” Ctrip.com Chief Financial Officer Cindy Xiaofan Wang said. “It was another very strong quarter and it concludes the exciting year of 2015.” Earnings per American Depositary Share on a GAAP diluted basis were 3 cents, or RMB 0.19, better than the slight loss expected in Thomson Reuters’ analyst poll. ( Excluding share-based compensation charges (non-GAAP), Ctrip’s diluted earnings per ADS were 11 cents for the quarter.) Ctrip shares were down 0.4% near 42.50 in afternoon trading on the stock market today , after diving as low as 39.52 in the morning. Ctrip.com has an IBD Composite Rating of 84, where 99 is the highest. Ctrip.com guidance for the current quarter misses the average view of analysts polled by Thomson Reuters. In a statement accompanying the earnings results, the company said its top line would grow between 75% and 80% in Q1 2016, “reflecting the consolidation of Qunar’s financial results.” Goldman Sachs analyst David Jin called the Q1 guidance “soft” but maintained his buy rating with a price target of 55. A Ctrip share trade in October with Chinese Internet company Baidu ( BIDU ) gave Baidu a greater role in the online travel industry, as China Internet companies position for growth from the online-to-offline, or O2O, services niche. The share-swap deal gave Ctrip.com a larger stake in Qunar Cayman Islands ( QUNR ), which also reported earnings on Wednesday. Qunar stock was up about 1.9% near 36.20 in afternoon trading Thursday. “The deal will help the whole industry have a chance to achieve long-term profitability,” Xiaofan Wang said. “In the past, competitors have lost tons of money to compete for market share.” Alibaba Group ( BABA ) and Tencent Holdings ( TCHEY ), which reported earnings Thursday morning , have become early players in that field. American online travel giants such as TripAdvisor ( TRIP ) and OTA giant Priceline ( PCLN ) assuaged Wall Street’s concerns about a slowing global economy — neither firm reported a material impact from the signs of a slowdown. Though rival Expedia ( EXPE ) missed Wall Street expectations for Q4, the company’s executives also said they were not seeing a slowdown — but the strong dollar has continued to weigh heavily on its results. That may change in the future, Expedia executives said. RELATED: 3 Chinese Internet Stocks Make Moves After Earnings .