After Hours Summary: FSLY -26.6% down sharply as it lowered Q3 rev guidance; VRTX -11.4% drops on clinical news; SNBR +9.4% is no-snooze fest, stock up big on robust earningsAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: ORGO +26.5% (guides Q3 and FY20 revs above consensus), CARS +14.2% (guides Q3 revenue above consensus), SNBR +9.4% (also says intends to resume share repurchases in Q4), VSH +3.7% (raises guidance for Q3 revenue)
Companies trading higher in after hours in reaction to news: ARWR +10.1% (VRTX news seen as positive for ARWR), GNCA +4.3% (announces upcoming data presentations), LIVX +3.1% (stock offering), RDFN +2.6% (convertible notes offering), IGT +1.9% (announces partnership with the NBA), ACI +1.8% (declares first dividend), VCYT +1.6% (announces two presentations), PRPL +1.5% (in sympathy with strong SNBR earnings), CPSS +1.1% (acknowledges receipt of interest from third party), REGN +0.7% (FDA approves Inmazeb for Ebola virus infection), AVNT +0.5% (raises dividend)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: FSLY -26.6% (lowers Q3 rev guidance below consensus), ACCD -6.7%, AA -4.9%, UAL -0.1%, PACW -0.1%
Companies trading lower in after hours in reaction to news: VRTX -11.4% (to stop dosing in Phase 2 trial of VX-814 and will discontinue development), LEAF -9% (files for $100 mln mixed shelf offering; also files for 8 mln share offering by selling shareholders), NET -7% (in sympathy with weak FSLY guidance), SIBN -6.3% (stock offering), AKAM -3.8% (in sympathy with weak FSLY guidance), AZRE -3% (files for $250 mln mixed shelf offering; also files for offering by selling shareholders), ROKU -0.5% (says it's pleased with patent non-infringement verdict), AMZN -0.2% (reaches NFL playoff game streaming deal, according to Variety)
Closing Stock Market SummaryThe S&P 500 lost 0.7% on Wednesday for its second straight decline, as the market appeared influenced by disappointing earnings reactions and some consolidation activity. The Nasdaq Composite declined 0.8%, the Dow Jones Industrial Average declined 0.6%, and the Russell 2000 declined 0.9%.
Shares of UnitedHealth (UNH 321.85, -9.57, -2.9%), Bank of America (BAC 23.62, -1.33, -5.3%), and Wells Fargo (WFC 23.25, -1.49, -6.0%) fell between 3-6% despite the companies reporting mixed-to-positive earnings results. Goldman Sachs (GS 211.23, +0.42, +0.2%) was little changed despite reporting blowout quarterly results.
BAC and WFC contributed to the underperformance of the financials sector (-1.1%), which joined the consumer discretionary (-1.4%), communication services (-1.2%), and real estate (-1.2%) sectors as today's laggards. The industrials (+0.5%), materials (+0.4%), and energy (+0.3%) sectors closed higher.
Some attributed today's decline in part to Treasury Secretary Mnuchin expressing some doubt about a stimulus package before the election, and France announcing night-time restrictions to curb a "second wave" of coronavirus in the region.
The market might not have been so distraught by these latter developments since several cyclical sectors did finish in positive territory. The energy space particularly benefited from higher oil prices ($41.02, +0.83, +2.1%) and M&A speculation surrounding Concho Resources (CXO 48.66, +4.52, +10.2%).
Therefore, it's reasonable to think that the market needed to find reasons to cool down from a hot start to the month, including the rally on Monday.
U.S. Treasuries finished with small gains amid the decline in equities and cautious-minded economic commentary from Goldman Sachs. The 2-yr yield declined two basis points to 0.13%, and the 10-yr yield declined one basis point to 0.72%. The U.S. Dollar Index decreased 0.2% to 93.38.
Reviewing Wednesday's economic data:
- The Producer Price Index for final demand increased 0.4% m/m (consensus +0.1%) while the index for final demand, less food and energy, also increased 0.4% (consensus +0.3%).
- The key takeaway from the report is that the monthly surprises were tempered by the absence of any nettlesome inflation pressure on a year-over-year basis. The index for final demand was up just 0.4% yr/yr while the index for final demand, less food and energy, was up 1.2%.
- The weekly MBA Mortgage Applications Index decreased 0.7% following a 4.6% increase in the prior week.
Looking ahead to Thursday, investors will receive the weekly Initial and Continuing Claims report, the Philadelphia Fed Index for October, the Empire State Manufacturing Index for October, Import and Export Prices for September, and possibly the Treasury Budget for September, which has been delayed for fiscal year end reconciliation.
- Nasdaq Composite +31.2% YTD
- S&P 500 +8.0% YTD
- Dow Jones Industrial Average -0.1% YTD
- Russell 2000 -2.8% YTD
NASA loads 14 companies with $370M for ‘tipping point’ technologies
Image Credits: NASA
NASA has announced more than a third of a billion dollars worth of “Tipping Point” contracts awarded to over a dozen companies pursuing potentially transformative space technologies. The projects range from in-space testing of cryogenic tech to a 4G LTE network for the Moon.
The space agency is almost always accepting applications for at least one of its many grant and contract programs, and Tipping Point is directly aimed at commercial space capabilities that need a bit of a boost. According to the program description, “a technology is considered at a tipping point if an investment in a demonstration will significantly mature the technology, increase the likelihood of infusion into a commercial space application, and bring the technology to market for both government and commercial applications.”
In this year’s awards, which take the form of multi-year contracts with multiple milestones, the focus was on two main areas: cryogenics and lunar surface tech. Note that the amounts provided are not necessarily the cost of developing the tech, but rather the sums deemed necessary to advance it to the next stage. Here’s a brief summary of each award:
Cryogenics
- * Eta Space, $27M: In-space demonstration of a complete cryogenic oxygen management system
- * Lockheed Martin, $89.7M: In-space demonstration of liquid hydrogen in over a dozen cryogenic applications
- * SpaceX, $53.2M: Flight demonstration transferring 10 tons of liquid oxygen between tanks in Starship
- * ULA, $86.2M: Demonstration of a smart propulsion cryogenic system on a Vulcan Centaur upper stage
Lunar surface innovation
- * Alpha Space Test and Research Alliance, $22.1M: Develop a small tech and science platform for lunar surface testing
- * Astrobotic, $5.8M: “Mature” a fast wireless charging system for use on the lunar surface
- * Intuitive Machines, $41.6M: Develop a hopper lander with a 2.2-pound payload capacity and 1.5-mile range
- * Masten Space Systems, $2.8M: Demonstrate a universal chemical heat and power source for lunar nights and craters
- * Masten Space Systems, $10M: Demonstrate precision landing an hazard avoidance on its Xogdor vehicle (Separate award under “descent and landing” heading)
- * Nokia of America, $14.1M: Deploy the first LTE network in space for lunar surface communications
- * pH Matter, $3.4M: Demonstrate a fuel cell for producing and storing energy on the lunar surface
- * Precision Compustion, $2.4M: Advance a cheap oxide fuel stack to generate power from propellants
- * Sierra Nevada, $2.4M: Demonstrate a device using solar energy to extract oxygen from lunar regolith
- * SSL Robotics, $8.7M: Develop a lighter, cheaper robotic arm for surface, orbital, and “terrestrial defense” applications
- * Teledyne Energy Systems, $2.8M: Develop a hydrogen fuel cell power system with a 10,000-hour battery life
Website-tracking data suggests Netflix's subscriber surge during the pandemic started to slow internationally in the third quarter
Fed's Kaplan (FOMC dissenter):key element on new fed framework is clarity the Fed will be less pre-emptive than in the past
- Reiterates sense of moderate inflation is around 2.25% and tolerance for an overshoot will be guided by rate of change
- Structural forces limiting inflation are likely to show themselves to be more powerful than previously believed
- Prefers to avoid forward guidance that ties hands of future committees
- Sees a difference between remaining accommodative and keeping Fed funds rate near zero
- Reiterates in some situations keeping Fed funds rate at zero could be increasing accommodation, not just maintaining it
Supply-Chain Tech Firm E2open to Go Public in SPAC Deal
The software provider is capping an acquisition spree with a reverse-merger agreement, bypassing traditional IPO process
Supply-chain software provider E2open LLC plans to go public through an agreement with a blank-check company, making it the latest in a stream of companies bypassing the traditional path to a Wall Street listing.
Austin, Texas-based E2open is set to merge with CC Neuberger Principal Holdings I, a special-purpose acquisition company, or SPAC, in a deal that would value the company at about $2.57 billion, the companies said Wednesday. The transaction is expected to close in the fourth quarter, with the company to be listed on the New York Stock Exchange under the symbol ETWO.
CC Neuberger is led by senior professionals of private-equity firm CC Capital Partners LLC and asset manager Neuberger Berman Group LLC, and completed its initial public offering in April.
2open’s current majority investor, private-equity and venture-capital firm Insight Partners, whose legal name is Insight Venture Management LLC, took the cloud-based software company private in 2015 after buying it for $273 million. The company has since grown through a series of acquisitions, and its customers include Procter & Gamble Co. , Cisco Systems Inc. and Microsoft Corp.
E2open’s network-based technology funnels information from varied operations into a central platform and synchronizes the data “like a giant decoder ring” to make it “all usable by software applications,” Chief Executive Michael Farlekas said. “We orchestrate end-to-end supply chain for the world’s largest companies.”
The coronavirus pandemic has raised interest in such visibility, Mr. Farlekas said, as the push to make supply chains more resilient with strategies such as adding more suppliers in different locations has made sourcing and distribution operations more complicated.
The deal with CC Neuberger will give E2open access to capital as the company seeks to take advantage of increased interest in supply-chain software, Mr. Farlekas said.
E2open is going public through a process that has grown increasingly popular this year as a way of bypassing the traditional process for initial public offerings.
Such blank-check mergers have exploded since the coronavirus pandemic rattled traditional markets for initial public offerings. A SPAC turns the traditional IPO model on its head by going public as a shell business and raising cash for the sole purpose of acquiring a business. The acquired firm then takes over the spot on the exchange once the deal is complete.
Companies that have turned to the strategy include electric-car maker Fisker Inc. and sports fantasy and betting platform DraftKings Inc. Electric-truck business Nikola Corp. went public in June through a merger with VectoIQ Acquisition Corp.
E2open is going public after a buying spree that extended its core supply-chain management technology to include transportation and trade technology. The acquisitions included container shipping booking platform Inttra in 2018 and the $425 million purchase of trade management software company Amber Road, then a publicly traded company, in 2019.
Telecoms industry looks to Apple for 5G ‘tipping point’
Operators pin hopes on iPhone 12 after slow adoption of the new networks among consumers
Telecoms companies are pinning their hopes on Apple and its new iPhone 12 to kickstart the long-promised shift to 5G, after slow adoption of the new networks among consumers over the past 18 months.
Apple gave 5G top billing in Tuesday’s iPhone 12 launch, marking a stronger push for networking technology by the Silicon Valley company than in any previous transition in mobile infrastructure.
“It is a tipping point for 5G,” said Marc Allera, chief executive of BT Consumer.
The “fifth generation” of cellular wireless was launched to great fanfare last year, initially in the US and South Korea, with operators in markets including the UK and Germany quickly following suit.
Carriers claim that 5G can offer download speeds up to 20 times faster than existing 4G networks, though coverage remains limited for now.
However, the new network has generated more interest from the corporate and industrial market than among consumers. Analysts at research firms Canalys and IDC estimate that just 13 per cent of smartphones shipped globally in the first half of 2020 were 5G-capable.
Even though Samsung and LG launched their first 5G handsets in mid-2019, operators say that none has yet offered the allure of a new iPhone. While the iPhone 12’s features may not offer anything radically different from previous devices, they believe Apple’s marketing power and loyal customers will make a stronger case for 5G.
“The iPhone is more important than any device, even though we have great devices already from Samsung and others,” said Johan Wibergh, chief technology officer of Vodafone, which has launched 5G in seven European markets.
Mr Allera, whose EE brand launched 5G networks in the UK 18 months ago, argued that Apple had a strong record in promoting growth in technology categories, including touchscreen phones, smartwatches and the app market, despite other companies already offering those services. “They will blow it up,” he said.
Waiting for the ‘killer app’
According to GSMA, the mobile trade body, operators are expected to spend 80 per cent of their mobile capital expenditure, or nearly $890bn, on 5G networks in the next five years, driving 1.8bn 5G connections by 2025.
5G promises faster download speeds and lower latency, opening the door to entirely new kinds of applications, from self-driving cars to holographic video calls.
However, telecoms executives admit that — even with the launch of Apple’s 5G-enabled iPhone — there is as yet no “killer app” that will immediately transform the way consumers use their smartphones.
The launch of global 5G networks has coincided with increased pressure from US authorities on governments around the world to ban Huawei, the world’s largest telecoms equipment supplier, from them. That has stalled progress in some markets, including the UK, as telecoms companies have had to reverse their plans and react to new laws about high-risk vendors.
Meanwhile, the huge amount of capital needed for 5G, and a collapse in the share prices of some of the largest players in the industry, has put pressure on telecoms companies to justify the outlay.
In Europe, just under 2m 5G devices were sold in July, according to Jan Stryjak of Counterpoint Research. That is a higher portion of total smartphone sales than earlier in the year but, at just 11 per cent, sales are “still a long way from what is expected from a technology that has now been around for more than a year in many markets”, he said.
The pandemic has kept consumers at home more this year, where they can use their own WiFi networks, and away from city-centre areas that often have the best 5G coverage.
But Mr Stryjak said the biggest reason for slow 5G device sales was a “dearth” of good devices.
Operators now expect the iPhone 12 launch to drive a rapid adoption in 5G at a faster rate than in previous generations. “It is clearly a trigger for bigger upgrades,” said Mr Wibergh.
They are also offering consumers generous incentives to trade up. In the US, AT&T is offering hundreds of dollars’ worth of subsidies in one of the largest such promotions of recent years.
‘The iPhone won’t change the world immediately’
Apple has not always leaned so heavily on the iPhone’s marketing of the networking technology that underpins its products.
When it introduced the first iPhone in 2007, it did not even support 3G — five years after Nokia had unveiled its first device to use what was then the fastest network available.
This week, Apple’s presentation pointed to mobile gaming as one key use case for 5G, introducing a new iPhone version of the popular multiplayer game League of Legends. But arguments over the App Store’s commercial terms have prevented new games streaming services such as Microsoft’s xCloud, Google’s Stadia and Facebook Gaming from launching on the iPhone so far, potentially limiting the new device’s appeal among gamers.
Another selling point touted by Apple was the iPhone 12 Pro’s ability to shoot, edit, watch and share high-quality video footage using the new Dolby Vision HDR format. However, it chose to illustrate this feature with footage of professional filmmakers shooting wild horses in a desert environment — far from the densely populated urban areas where operators are deploying their first 5G networks today.
Indeed some analysts questioned whether Apple lived up to operators’ expectations in convincing consumers of the real benefits of 5G.
“New and better cameras are great, but the real 5G cycle is at least a year or two away,” said Craig Moffett, senior analyst at MoffettNathanson.
“The iPhone won’t change the world immediately,” said Mr Wibergh. But he argued that the benefits of the introduction of 5G will be apparent over a longer period. “We tend [in telecoms] to overpromise in the short-term and underestimate the long-term impact,” he said.
Apple will now be looking to app developers to produce the novel experiences, such as augmented-reality games, that can take full advantage of 5G.
“Apple will do more for 5G than 5G will do for the new iPhones,” said Thomas Husson of Forrester Research.
Aston Martin by Ben Collins — the car world’s answer to Savile Row
This pacy history of a legendary brand is a love letter to an era of gears and gasoline now accelerating towards its twilight
A boy, sketch pad in hand, waits expectantly at the corner of the Brooklands racetrack in Surrey as the leading vehicle heaves into view. Suddenly, caught by a bump, the car and its driver are thrown into the air, before landing in a miracle manoeuvre and haring off down the home straight. The awed 12-year-old was Ian Fleming; the car, one of the first hand-built Aston Martins. A love affair was kindled.
The incident, from 1921, is recounted in Aston Martin, a lively history of the carmaker by Ben Collins, a former racing driver best known as The Stig from BBC’s Top Gear. Years later, Fleming’s fictional spy James Bond would take the wheel of an Aston.
The 007 films made the cars among the most recognised and sought after in the world. Even amid head-turning Maseratis or Ferraris, Aston has kept a dapper image — the car world’s answer to Savile Row.
Yet for all the cool glamour, Aston has long suffered from problems — under the bonnet and on the balance sheet. Its teetering financials figure frequently, from its 1925 bankruptcy — the first of seven — to the admission that Aston was an “expensive hobby” for its longtime owner the late David Brown, whose initials are still found on the DB11 and DBS cars. Its latest owner, the billionaire Lawrence Stroll, is mentioned in passing; a disastrous 2018 initial public offering receives only a single reference.
Yet the book is more than a corporate account of a turbulent enterprise: it is a love letter to an era of gears and gasoline now accelerating towards its twilight. For Collins, whose father’s purchase of a dragon-green Aston sparked a thirst for speed, that past is not just worth remembering, but celebrating.
Ultimately, it is all about the car, the heart of a brand whose vehicles have adorned bedroom walls and bucket lists worldwide, and the men (it is almost all men) who tended them at the expense of their wallets and, for the racing drivers, sometimes their lives. Parts are heavily and unapologetically technical, crammed with details of piston configurations, the crafting of cylinder blocks and everything that goes into fine-tuning a machine built for speed and endurance. It is visceral stuff — and refreshingly analogue in an age of software-driven machines.
Collins also writes of his stunt driving in films, including some Bond ones. Finished as the pandemic struck, his book even overtakes 007’s latest caper, No Time To Die, with details of one car chase that viewers will now not get to see until at least April 2021.
To truly claim a place on tomorrow’s roads, the “prince of British carmakers” will have to adapt. Collins is optimistic. Survival runs through the company like petrol through a finely honed engine. As he writes, “we feel free to reminisce, but Aston Martin’s soul will always belong to the future”.