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Micron Snubs Tsinghua, Favors Another Chinese Partnership: Analyst

Micron Technologies ( MU ) rebuffed Tsinghua Unigroup’s $23 billion bid, but that doesn’t mean the memory chipmaker has scrapped plans for Chinese partnership, MKM analyst Ian Ing wrote Tuesday in a research report. That partnership could come in the form of a joint venture, Ing wrote in a research report after Micron’s analyst day on Friday. Ing reiterated a buy rating and 19 price target on Micron stock, which was up 7.3% in afternoon trading in the stock market today , near 10.80. “We think Micron would require control of both IP and production decisions in the structure of any JV,” he wrote. “The biggest benefit to Micron is the ability to produce output as a ‘local supplier’ and national champion for China’s domestic market.” Chinese Investment In Micron China plans to invest $55 billion in local chipmaking businesses by 2020 in an effort to curb reliance on foreign semiconductors. But state-sponsored Tsinghua Unigroup’s bid for Micron was doomed from the start, analysts say, as U.S. regulators would have shut it down. A joint venture, however, wouldn’t necessarily spike regulators’ concerns. Credit Suisse analyst John Pitzer said he “would not be surprised by an equity investment in Micron from one of the Chinese private equity companies.” After its failed Micron bid last year, Tsinghua Unigroup invested $3.8 billion in Western Digital ( WDC ), days before Western Digital announced its plan to acquire flash memory chip maker  SanDisk ( SNDK ). “(Micron) has a presence in all major memory markets, which makes it particularly interesting from M&A or an equity investment target for China Inc.,” Pitzer wrote in a report. “While (the Committee on Foreign Investment in the United States) could be an issue for outright sale, the company could still attract equity investment in China.” Pitzer reiterated his outperform rating and 20 price target on Micron stock. Summit Research analyst Srini Sundararajan rates Micron stock a buy, with a 21 price target. Micron Pulling Ahead In Samsung Rivalry “The backdrop of any buy thesis on Micron over the medium term should be that Samsung is not doing well,” Sundararajan wrote in a research report. Apple ( AAPL ) and Chinese LCD manufacturers are scooping share, and Samsung has yet to squeeze much profit out of its nascent 3D Nand flash chips, he wrote. DRAM (dynamic random-access memory) profitability could be Samsung’s “salvation,” but its capital expenditures cut has yet to bear fruit. DRAMs are the most common memory chips in computers. Meanwhile, Micron is slimming costs, Sundararajan wrote. In 20-nanometer DRAM, Micron is targeting a cost reduction CAGR (compound annual growth rate) of 15%-25% through fiscal 2017, Pitzer wrote. Micron also sees 25% cost reduction CAGR in 3D Nand. “Any progress in closing the cost ‘gap’ will drive stock performance,” Pitzer wrote. A rebound could pull Micron stock out of its trough, Mizuho analyst Vijay Rakesh wrote in a report as he upgraded Micron stock to buy from neutral. Sundararajan also expects Micron to let Intel ( INTC ) work out the kinks in the jointly-owned 3D X-Point chip and then “exploit it advantageously” from 2018. “Good times will come should Micron execute,” he wrote. “Micron has dashed hopes and portfolios in 2015, hence it is important to ignore those getting out of Micron stock and take a fresh look.” Even with Tuesday’s gain, Micron stock is roughly 70% off a nearly 16-year high touched in January 2015.

Paris Terrorist Attacks Likely To Impact Priceline Q4 Earnings

Online travel agency giant Priceline Group ( PCLN ) is set to report its Q4 earnings on Wednesday before the market open, with the global economy in focus. Analysts polled by Thomson Reuters are expecting single-digit sales and earnings gains. The top line is estimated to grow nearly 6% from the year-earlier quarter, to $1.95 billion. Earnings per share minus items are expected to rise almost 9% to $11.80. Priceline stock is up more than 4% in afternoon trading on the stock market today , near 1,106. The company has an IBD Composite Rating of 72, in which 99 is the highest. Like most stocks, Priceline has had a tough year since touching a record high above 1,476 in November. Priceline stock hit a 29-month low of 954 last week. Online travel rival Expedia ( EXPE ) last week said the terrorist attacks in Paris last year did have an impact on Q4 earnings results. Expedia executives, however, said they were confident that foreign exchange would be less of a factor in 2016, which eased investor worries as travel stocks rose. TripAdvisor ( TRIP ), a travel reviews site, last week also released better-than-expected Q4 earnings , further bolstering the sector. But, RBC Capital Markets analyst Mark Mahaney says several factors will contribute to Priceline’s growth in Q4 being “less than usual.” The terrorist attack on Paris in November likely hurt revenue, he wrote in a research note Feb. 12, and Web traffic is slightly lower. Still, Mahaney says that Wall Street estimates are “reasonable.” Citing data from Smith Travel Research, Mahaney wrote that the hotel industry has experienced slightly negative occupancy rates and other key metrics. For Q4, Mahaney forecasts an 8% decline in U.S. bookings but a 23% rise in international bookings. The profit margins of earnings before interest, taxes, depreciation and amortization (EBITDA) might continue to fall, he says. Mahaney reiterated RBC’s price target of 1,700 on Priceline stock, citing three new areas of growth: outbound travel from China and (to a lesser extent) Latin America, and growth in vacation rentals and alternative accommodations. San Francisco-based privately held Airbnb — which investors have valued at over $20 billion (Wall Street values Priceline at over $54 billion) — has pioneered the alternative accommodations category, but as of late has been criticized for its approach to new markets. Critics say “begging for forgiveness vs. asking permission” is an expensive strategy that is unsustainable in the long term. Airbnb spent more than $8 million in San Francisco to fight legislation that would have further tightened regulations targeting firms such as itself and Expedia-owned HomeAway, which also is in the alternative accommodations business. Priceline and Expedia have taken note of Airbnb’s success and are building up competitive offerings.

T-Mobile Earnings: Leasing, Free-Video Impact, User-Growth Eyed

T-Mobile US ( TMUS ) reports earnings early Wednesday for the first time since launching its Binge On mobile video service in November, as analysts await guidance on how the aggressive promotion has impacted subscriber growth, data service revenue and capital spending. Analysts are also expecting earnings-call commentary on how phone leasing plans are impacting revenue and EBITDA (earnings before interest, taxes, depreciation and amortization). “With (the customer) base transitioning to leasing, equipment cost is now treated as depreciation expense and, therefore, excluded from EBITDA. As such, we expect T-Mobile to provide both reported and cash EBITDA guidance for 2016,” said Nomura analyst Jeffrey Kvaal in a research report. T-Mobile, controlled by Deutsche Telekom ( DTEGY ), is expected to report a 1% year-over-year gain in revenue, to $8.2 billion, with EPS ex items rising 28% to 15 cents per share. The company’s Q3 revenue missed estimates, as leasing plans lowered equipment revenue. While T-Mobile in 2013 was first to offer consumers monthly installment payment plans for purchasing mobile phones, it has followed Sprint’s lead into leasing plans. With leasing plans, wireless firms retain ownership of the devices and revenue is recognized over the terms of the leases, usually 18 months or longer. T-Mobile preannounced at a Jan. 6 conference that it added 917,000 postpaid phone subscribers in Q4.   Verizon Communications ( VZ ) in January reported that it added 449,000 postpaid phone customers — those billed monthly and more lucrative than prepaid users — while Sprint ( S ) added 366,000. AT&T ( T ) lost postpaid subscribers for the fifth quarter in a row, shedding 342,000. At the same Citigroup conference on Jan. 6, T-Mobile executives said they expect to generate more free cash — revenue from operations minus capital expenses — in 2016. T-Mobile is expected to be a bidder in an upcoming government auction of radio spectrum now used by local TV broadcasters. Along with its “Binge On Demand” promotion that provides free video streaming. T-Mobile in November also doubled its data allowances on many plans.  T-Mobile, though,  raised prices for all plans above entry-level. Many analysts expect its recent moves to boost its monthly ARPU, or average revenue per user.