Research Calls
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Upgrades:
- 3M (MMM) upgraded to Buy from Hold at Deutsche Bank; tgt raised to $150
- Akamai Tech (AKAM) upgraded to Buy from Neutral at Guggenheim; tgt $128
- Alphabet A (GOOGL) upgraded to Buy from Accumulate at Phillip Securities
- BAE Systems (BAESY) upgraded to Buy from Neutral at Citigroup
- Booz Allen Hamilton (BAH) upgraded to Overweight from Equal Weight at Wells Fargo; tgt lowered to $165
- Capital City Bank (CCBG) downgraded to Neutral from Overweight at Piper Sandler; tgt raised to $34
- Carrier Global (CARR) upgraded to Neutral from Underperform at BofA Securities; tgt raised to $72
- Edwards Lifesciences (EW) upgraded to Peer Perform from Underperform at Wolfe Research
- Eni S.p.A. (E) upgraded to Outperform from Sector Perform at RBC Capital Mkts
- Northrop Grumman (NOC) upgraded to Buy from Hold at Deutsche Bank; tgt raised to $575
- Olin (OLN) upgraded to Overweight from Neutral at JP Morgan; tgt $55
- Sarepta Therapeutics (SRPT) upgraded to Outperform from Sector Perform at RBC Capital Mkts; tgt $182
- The Shyft Group (SYHF) upgraded to Buy from Neutral at DA Davidson; tgt raised to $18
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Downgrades:
- 1st Source Corp (SRCE) downgraded to Neutral from Overweight at Piper Sandler; tgt raised to $67.50
- Alexandria RE (ARE) downgraded to Neutral from Buy at BofA Securities; tgt lowered to $126
- Amedisys (AMED) downgraded to Hold from Buy at Deutsche Bank; tgt $101
- Bristol-Myers (BMY) downgraded to Equal Weight from Overweight at Barclays; tgt $41
- Carlyle Secured Lending (CGBD) downgraded to Underweight from Neutral at JP Morgan; tgt $17
- Charles Schwab (SCHW) downgraded to Neutral from Overweight at Piper Sandler; tgt lowered to $64
- Evotec SE (EVO) downgraded to Equal-Weight from Overweight at Morgan Stanley; tgt lowered to $6
- First Commonwealth (FCF) downgraded to Neutral from Buy at Janney; tgt raised to $19
- First Hawaiian (FHB) downgraded to Underweight from Neutral at JP Morgan; tgt $24
- Fortinet (FTNT) downgraded to Neutral from Buy at Guggenheim
- Hugo Boss AG (BOSSY) downgraded to Hold from Buy at Stifel
- Iovance Biotherapeutics (IOVA) downgraded to Neutral from Overweight at Piper Sandler; tgt lowered to $10
- SLR Capital Partners (SLRC) downgraded to Underweight from Neutral at JP Morgan; tgt lowered to $15
- Stellantis (STLA) downgraded to Hold from Buy at Deutsche Bank
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Others:
- Abivax SA (ABVX) initiated with a Buy at Laidlaw; tgt $48
- AerCap (AER) resumed with a Buy at TD Cowen; tgt $125
- Air Lease (AL) resumed with a Buy at TD Cowen; tgt raised to $58
- Astria Therapeutics ATXS) initiated with a Buy at TD Cowen; tgt $35
- Fed Agricult Mortg (AGM) downgraded to Mkt Perform from Outperform at Keefe Bruyette; tgt raised to $215
- Lithium Americas (LAC) initiated with a Neutral at Piper Sandler; tgt $3.90
- Modine Manufacturing (MOD) initiated with an Outperform at William Blair
- Nuwellis (NUWE) initiated with a Buy at ROTH MKM; tgt $17
- Simulations Plus (SLP) initiated with an Overweight at KeyBanc Capital Markets; tgt $47
- Smurfit Westrock plc (SW) resumed with a Hold at Jefferies; tgt $52
Gapping down
In reaction to earnings/guidance:
In reaction to earnings/guidance:
- IART -18.9%, AMG -2.8%
Other news:
- SNDX -14.5% (announces PDUFA action date extension for revumenib NDA for relapsed or refractory KMT2Ar acute leukemia)
- ENLT -4.2% (announces financial close on Atrisco Energy Storage project)
- CNK -3.4% (achieved best summer opening weekend box office of all time with the release of Deadpool & Wolverine)
- LWLG -2.7% (files for $100 mln common stock offering)
- MGM -2.1% (BETMGM reports H1 update)
- NDAQ -1.8% (secondary public offering of 41,604,207 shares of its common stock)
- PR -1.2% (public offering of class A common stock)
Gapping up
In reaction to earnings/guidance:
In reaction to earnings/guidance:
- INSP +11.3% (guidance), PHG +9.8%, OIS +5.5%, RVTY +4.3%, L +3.9%, CNA +2.7%, RDY +2.1%
Other news:
- CGTX +17.7% (proof-of-concept Phase 2 SHINE trial demonstrates consistent improvement in cognitive outcomes with once-daily oral CT1812)
- LGVN +15.7% (presents study results from CLEAR MIND Phase 2a Clinical Trial of Lomecel-B in Mild Alzheimer's Disease at the Alzheimer's Association International Conference)
- AVXL +14.1% (reports results from Anavex Life Sciences Landmark Phase IIb/III Trial of Blarcamesine Presented at Alzheimer's Association Conference)
- GH +12.6% (Shield blood test approved by FDA as a primary screening option, clearing path for medicare reimbursement and a new era of colorectal cancer screening)
- PBI +9.1% (trades higher after hours on report logistics startup Stord is acquiring its e-commerce fulfillment services ops, according to TheInformation)
- NAMS +5% (to Announce Topline Data from Pivotal Phase 3 BROOKLYN Clinical Trial)
- ALEC +4.8% (presents baseline characteristics for INVOKE-2 Phase 2 Clinical Trial of AL002 at the Alzheimer's Association International Conference 2024)
- ABOS +4% (presents patient experience and biomarker data from Phase 1 INTERCEPT-AD Study)
- CAMT +2.9% (receipt of orders for over $25 million from a tier-1 manufacturer specializing in High Bandwidth Memory)
- AZN +2.1% (reports Calquence fixed-duration combo improved 1L CLL PFS)
- CGEN +1.7% (FDA clearance of IND for COM503 for the treatment of solid tumors)
- VTLE +1.3% (Northern Oil & Gas announces second joint acquisition with Vital Energy (VTLE) in the Delaware Basin) SSL +1.3% (conclusion of the decision of the Minister of Forestry, Fisheries and the Environment on Sasol's appeal related to its Clause 12A Application)
- TLRY +1.1% (Aphria RX GmbH has received a trading license)
VinFast Auto discloses restatement of 2023 audited financial statements resulting from internal review and accounting reclassification (4.13)
On July 29, 2024, the management of VinFast and the co's board of directors and audit committee concluded that the co's previously-issued (i) consolidated financial statements as of and for the year ended December 31, 2023 prepared in conformity with accounting principles generally accepted in the United States of America, and associated report of Ernst & Young Vietnam Limited ("Ernst & Young Vietnam"), the co's independent registered public accounting firm, (ii) unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2024, and (iii) press releases, earnings releases, and investor communications describing the co's financial performance for the year and period then ended, should no longer be relied upon because the Company expects to restate the aforementioned financial statements and financial information for the relevant reporting periods due to the following accounting errors that the Company has identified:
- The sale of 454 EVs and 2,192 e-scooters to its affiliate, GSM Green and Smart Mobility Joint Stock Company ("GSM") were invoiced in fiscal year 2023. However, a regular internal review by the Company identified that the dispatching of these EVs and e-scooters for delivery began in early 2024, and therefore these sales should not have been recognized as revenue in 2023. Accordingly, the co's revenue for fiscal year 2023 was overstated by ~$17.2 million.
- The Company sold 205 EVs to an unrelated third party in Vietnam in 2023 and recognized revenue from those sales for fiscal year 2023. A regular internal review by the Company has identified that a majority of these EVs were returned to the Company in February 2024 for a software update and re-delivered to customers between April and June 2024. Under these circumstances and the delivery terms of the co's sales agreements, revenue for these sales should not have been recorded in fiscal year 2023 because risk and control of these EVs had not been fully transferred to the customers as of December 31, 2023. Accordingly, the co's revenue for fiscal year 2023 was overstated by ~$10.5 million.
Out of the approximate $27.7 million of overstated revenue due to the accounting errors, ~$15.7 million is expected to be recognized in the first quarter of 2024 with substantially all of the remaining amount expected to be recognized in the remainder of 2024. Because the forthcoming restatement will require the Company to make adjustments to revenue-related cut-off items, the Company also intends to record an additional adjustment to revenue for an immaterial and unrecorded audit difference that it is aware of. In June 2023, the Company announced an additional goodwill after-sales policy that provides eligible customers with cash or service vouchers if their vehicles experience a technical issue that requires servicing. The Company recognized expenses in relation to vehicles sold prior to effectiveness of this policy in selling and distribution costs in fiscal year 2023 rather than as a reduction to revenue. As the after-sales expenses policy is tied to previously recognized revenue and current customer agreements, the support provided qualifies as "Consideration payable to a customer" and should have been recorded as a reduction to revenue during fiscal year 2023. Accordingly, the Company will reclassify ~$6.1 million from selling and distribution costs to a reduction to revenue. There will be no impact to net loss for the fiscal year 2023 arising from this reclassification. Due to the foregoing factors, the co's revenue, selling and distribution costs and net loss for fiscal year 2023 were overstated by ~$33.9 million (~2.8% of its previously reported total revenue), $6.1 million, and $1.8 million, respectively.
>>> Up
* Alphabet Raised to Buy at Phillip Secs; PT $205
* Altri Raised to Buy at Bestinver; PT 7.05 euros (++)
* Apple Raised to Hold at Aletheia Capital
* Apple PT Raised to $250 from $220 at TD Cowen (+)
* Aixtron Raised to Neutral at BNPP Exane; PT 20 euros
* Argenx Raised to Buy at Kepler Cheuvreux; PT 545 euros (++)
* Eni Raised to Outperform at RBC
* Eni Raised to Outperform at RBC
* Lem Raised to Buy at Research Partners; PT 1,470 Swiss francs (+)
* Lonza PT Raised to 700 Swiss francs at Jefferies
* Maisons du Monde Raised to Buy at TP ICAP Midcap; PT 5.40 euros (+)
* Thales Raised to Buy at Citi; PT 168 euros
* UCB PT Raised to 185 euros from 167 euros at Jefferies
* Zalando Raised to Outperform at Grupo Santander; PT 31.20 euros
* Zurich Airport Raised to Buy at Stifel; PT 265 Swiss francs
>>> Down
>>> Down
* Bertrandt Cut to Hold at Bankhaus Metzler; PT 30 euros (+)
* Drax Cut at Morgan Stanley, Re-Rating Limited in Short-Term
* Evotec SE ADRs Cut to Equal-Weight at Morgan Stanley; PT $6
* Evotec SE Cut to Equal-Weight at Morgan Stanley; PT 12 euros
* Hugo Boss Cut to Hold at Stifel; PT 40 euros
* Iovance Biotherapeutics Cut to Neutral at Piper Sandler; PT $10
* Stellantis Cut to Hold at Deutsche Bank (+)
* Thyssenkrupp PT Cut to 4 euros from 4.60 euros at Morgan Stanley
* Thyssenkrupp Nucera Cut to Hold at Bankhaus Metzler (+)
* Umicore cut to Strong Sell from Sell at Center for Financial Research & Analysis, PT EUR10
>>> Initiation
* Umicore cut to Strong Sell from Sell at Center for Financial Research & Analysis, PT EUR10
>>> Initiation
* CT Automotive Group Rated New Buy at N+1 Singer; PT 120 pence (++)
* Prisma Properties Rated New Buy at Nordea; PT 31 kronor
* Prisma Properties Rated New Buy at Nordea; PT 31 kronor
* Prisma Properties Rated New Buy at ABG; PT 32 kronor
* Sacyr Reinstated Neutral at BNPP Exane; PT 3.50 euros
* Sandoz Group Rated New Overweight at Barclays
* Smurfit WestRock Rated New Hold at Jefferies; PT $52
* TSMC ADRs Rated New Buy at SPDB Intl HK; PT $197.60
>>> Call
>>> Call
* Alibaba Shares Rise in Hong Kong; Jefferies Sees More Catalysts
* BAE Raised to Buy at Citi, More Confidence in Growth Outlook
* Drax Cut at Morgan Stanley, Re-Rating Limited in Short-Term
* Drax Cut at Morgan Stanley, Re-Rating Limited in Short-Term
* Evotec Downgraded at Morgan Stanley on Limited Visibility
* Hedge Funds Modestly Bought US Stocks After Big Unwinds: Goldman
* Morgan Stanley Says Glum Profit View to Dent Economy-Tied Stocks (++)
* RBC’s Calvasina Says Earnings Don’t Support Small-Cap Rotation (++)
* Reckitt, Abbott Sentiment Likely Hit by Formula Award: Jefferies
* Thales Share Price Decline Seems Overdone, Raised to Buy at Citi
Early premarket gappers
-
Gapping up:
- LGVN +27.9%, NAMS +14.4%, AVXL +11.1%, PHG +10%, PBI +9.6%, GH +9.1%, RVTY +6.8%, AZN +2%, SSL +1.8%, SGML +1.3%, L +1.1%, ABOS +0.9%, GSK +0.9%, LDOS +0.8%
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Gapping down:
- IART -9.4%, NOG -5.2%, PR -3.3%, LWLG -2.7%, MGM -2%, NDAQ -1.8%, COLL -1.5%
Amazon Paid Almost $1 Billion for Twitch in 2014. It’s Still Losing Money.
The live-video service has slowing user growth, and workers are expecting more layoffs, changes ahead
Amazon.com AMZN 1.47%increase; green up pointing triangle paid nearly $1 billion to acquire the live-video startup Twitch Interactive in 2014. A decade later, the retail giant has received little financial return from one of its bigger acquisitions.
Known for hourslong broadcasts of videogame play, Twitch remains unprofitable despite periods of explosive popularity, according to current and former employees knowledgeable about its finances.
Documents reviewed by The Wall Street Journal show Twitch’s biggest-paying users are opening their wallets less, and third-party data reflect that growth in new users and engagement has slowed.
Following two rounds of layoffs in the past year, staffers are concerned that a third round could come this fall following an annual operational review, according to people familiar with the matter. Amazon Chief Executive Andy Jassy, who took over in 2021, has led a profitability review at the company and shown little tolerance for unprofitable businesses.
Insiders said they worry Twitch is at risk of becoming what they called a “zombie brand” at Amazon—internal projects or acquisitions that have been sidelined because they haven’t lived up to expectations. These staffers pointed to book-review app Goodreads, online task finder Mechanical Turk and discount website Woot.
A spokeswoman for Amazon said it has always taken a long-term view of Twitch and noted its ability to attract harder-to-reach audiences. The company said it remains confident in Twitch’s potential.
Amazon’s journey with Twitch underscores the challenge companies face as they seek to grow through acquisitions, especially when they bet on trendy startups that aren’t making money.
Twitch, which remains a tiny part of Amazon, continues to get millions of visitors a day. However, its business model is challenging. Enabling tens of thousands of simultaneous livestreams is expensive, and the company has had to invest in tools to moderate the content. Insiders said the content itself poses challenges, as long-form live video doesn’t align well with selling ads.
“I’ll be blunt: We aren’t profitable at this point,” Twitch CEO Dan Clancy said on the platform in January, shortly after the company laid off around 500 workers. More recently, Twitch closed its operations in South Korea, disbanded its Safety Advisory Council and raised prices on its subscription offerings for the first time.
Broader trends aren’t in Twitch’s favor. Spending on videogames has slowed, and consumer preferences have generally shifted to short, concise videos spanning a range of topics.
Still, Twitch has little competition for livestreaming of videogame play, and the company said it is seeing success beyond videogames with its “Just Chatting” category, where creators discuss a variety of topics with viewers, and that its sports, travel and music sections are growing.
The company said a livestream in June featuring creator Kai Cenat and comedians Kevin Hart and Druski broke the company’s North American record for most viewers when it reached 712,600 concurrent viewers. It surpassed a 2018 record set by musician Drake and Ninja, a videogame creator.
Twitch said its creators’ connections with their audiences can be beneficial for advertisers. The company’s users have also included former President Donald Trump, rapper Post Malone and pro race car driver Charles Leclerc.
Profit woes from the start
In 2011, Twitch was spun out of livestreaming platform Justin.tv, with a focus on videogames. About a year later, Amazon took up game publishing and saw Twitch as a vehicle for promoting its titles.
The company also sought to convert Twitch’s mostly young, male users into customers of Amazon’s other businesses and further leverage the site’s live-video strengths, analysts said.
For many early Twitch employees, working on the livestreaming service was a passion project, with little focus on profitability or accountability built into the company’s culture, according to people familiar with the matter. Some employees didn’t take their jobs seriously after the acquisition, they added, an attitude colloquially referred to in Silicon Valley as “rest and vest.”
Producing profit was a problem from the beginning. Twitch executives presented a three-year profitability plan during one of Amazon’s annual reviews, only to reintroduce the same plan in subsequent reviews, according to people familiar with the matter.
The tech giant has taken a mostly hands-off approach, current and former staff members said, as it focused on the company’s bigger projects and businesses. In 2021, Amazon began integrating Twitch’s ad sales team into its own, aiming to drive better results.
Amazon doesn’t break out Twitch revenue figures. In 2023, the livestreaming service generated about $667 million in ad revenue and $1.3 billion in commerce revenue, according to internal documents reviewed by the Journal. That amount accounted for less than 0.5% of Amazon’s total 2023 revenue.
Amazon is expected to report its second-quarter results on Thursday.
‘Fortnite’ and the pandemic
Twitch grew rapidly when its popularity soared from the success of the game “Fortnite” in 2018 and again during the pandemic’s lockdowns, but its expenses rose too.
The company spent more than $100 million on exclusive contracts for top broadcast talent and for the rights to stream major esports events, people familiar with the matter said. It invested in new products that it ended up abandoning or deprioritizing, such as a communications platform, a karaoke offering and watch parties.
“If you can’t be profitable when you have a surge in demand, you have something structurally wrong,” said Mike Hickey, a digital-entertainment analyst at Benchmark.
In recent years, Twitch’s biggest payers, who are crucial to its revenue, have been spending less on the platform’s subscriptions and donations to creators, according to documents reviewed by the Journal. Twitch takes a cut of those payments, and internal projections forecast that if that trend continues, the platform could shed nearly a quarter of a billion dollars in revenue by the end of 2025.
The company said overall commerce revenue is continuing to grow year over year.
Twitch’s advertising sales have plateaued since the pandemic ended, according to the documents and people familiar with the matter.
Overall, the platform is the 18th largest source of U.S. web traffic, down from fourth in 2014 when Amazon bought it, according to network analytics and security firm Nokia Deepfield. Web traffic is a measure of bandwidth used by the site.
Change at the top
Last year, Twitch’s longtime CEO and co-founder Emmett Shear left the company and was succeeded by Clancy, formerly an executive at Google and Nextdoor. Clancy joined Twitch as president in 2019 before taking the reins from Shear.
In a “State of Twitch” memo issued to employees in May, Clancy listed improving the platform’s mobile experience to drive shorter and more frequent user sessions as a critical goal.
Reflective of that plan, Twitch introduced a different look to its mobile app to a small subset of creators in May with new features, including a so-called discovery feed that is filled with short snippets from creator livestreams. The company said it plans to release its new app, its first redesign since 2019, to all users this year.
Employees have criticized Clancy for his work trips to meet Twitch creators around the world and host livestreams from various locations as the company is laying off employees and saying it remains unprofitable.
In a June email to employees viewed by the Journal, Clancy defended his actions and included the itinerary of his Europe trip with stops in France, Switzerland and the Netherlands. Each one included “medium sized dinners” with creators, he wrote.
“If I was running a manufacturing company I would be meeting with the companies that provided us raw materials as well as the companies that we sold our widgets to,” Clancy wrote in the email. “Our streamers serve a similar role to Twitch.”