Outlook 2018: The Bull Market’s Next Act
Wall Street’s eight-year love affair with stocks kicked into overdrive this year, spurred by a stronger economy, the likelihood of tax cuts, and a lack of compelling investment alternatives.
Donald Trump’s election as president in 2016 turned a bull with a midlife crisis into a high-powered charger, as investors cheered the Republicans’ pro-growth agenda and bid up anything that might benefit. Stocks have produced an 18% price gain, and a 21% total return year to date, as measured by the Standard & Poor’s 500 index, with low volatility and nary a trading session in which the popular benchmark closed down for the year. As for the market’s last big selloff—a 15% decline in February 2016—it seems a distant memory. On Friday, the S&P 500 index ended at 2651.50.
Given synchronized global growth and rising corporate profits, 2018 could be another good year for stocks, notwithstanding the bull’s advancing age. The S&P 500 could gain about 7%, mirroring similar gains in corporate profits, according to the consensus forecast of 10 investment strategists at major U.S. investment banks and money-management firms surveyed by Barron’s each December. The group’s predictions range from 2675 to 3100, with a mean estimate of about 2840.
The outlook isn’t entirely rosy: Interest rates are headed higher, stocks are expensive, and a tax overhaul could still stall or fail. But so long as corporate earnings keep climbing and the Federal Reserve raises rates in a measured way, the strategists see more room for gains.
“Rational exuberance is the stock market’s theme for 2018,” says David Kostin, Goldman Sachs’ chief U.S. equity strategist, harking back to the well-known but ill-timed “irrational exuberance” comment made by Federal Reserve Chairman Alan Greenspan in late 1996 about the rollicking bull market of that era. The market doubled after Greenspan’s veiled critique, only to lose about 50% from its top in the 2000 dot-com bust.
A rapidly expanding price/earnings ratio, or market multiple, drove the 1990s bull, but “it’s the earnings this time,” says Kostin, whose view is shared by his peers.
OUR PROGNOSTICATORS EXPECT S&P 500 earnings to climb to $145 in 2018 from an expected $131.45 this year. Most estimates assume that global growth will spur earnings gains, with an additional boost coming from U.S. tax cuts. Depending on the final tax bill, they figure that lower corporate taxes could be worth 5% to 10% of earnings growth, or anywhere from $7 to $14 a share. But in the unlikely event that no tax cuts are passed, the market could drop sharply.
Industry analysts forecast S&P earnings of $146.20 for next year, not including tax cuts. If analysts revise their estimates higher in coming months to account for the positive impact of lower taxes, stocks could get a further boost.
Market strategists are divided on whether stocks’ P/E ratios will expand. The S&P 500 trades for 18 times the next four quarters’ expected earnings, up from 17.1 times 12 months ago. While the most bullish forecasters look for P/E multiple expansion to help propel stock indexes, others worry that 2018 could be a “peak” year for P/Es.
The strategist got a few important things right last December in looking ahead to 2017. They predicted that stocks would rise this year, speculative activity would revive, and financial stocks would do well again after gaining 20% last year. Indeed, financials are up 20% this year. The strategists were too timid, however, in their market forecasts; their mean prediction put the S&P 500 at 2380 at the end of the year. That now seems highly unlikely, barring a sudden last-minute rout.
Financials, once again, are Wall Street’s favorite stocks for the new year. The industry should be helped by higher interest rates, lower taxes, and an economy growing by nearly 3% a year. The sector trades for about 15 times next year’s expected earnings, below the market multiple, and banks are some of the nation’s highest corporate tax payers.
Consumer staples, real estate, and utility stocks, on the other hand, are expected to underperform in 2018, due to rising interest rates. Because of their relatively lush dividend yields, all are considered bond proxies. The stocks are this year’s laggards: Utilities are up 14%; staples, 10%; and real estate investment trusts, 7%.
TECH STOCKS LED the market for most of this year with a gain of 35%, helped by an even more powerful rally in the so-called FANGs: Facebook (ticker: FB), Amazon.com (AMZN), Netflix (NFLX), and Google, owned by Alphabet (GOOGL). Market watchers now are neutral to positive on the foursome and the sector. At 17.7 times next year’s estimated earnings, tech valuations aren’t cheap, but they’re well below valuations in the dot-com era, and underlying earnings growth is strong.
Investors worry that next year might see a move toward greater regulation of large tech names, which, some strategists fear, could play havoc with their shares and the market. Despite its Republican pedigree, the Trump administration seems unafraid to pursue antitrust actions against giant corporations, as AT&T (T) can attest; the Department of Justice has sued to block its $85 billion takeover of Time Warner (TWX). Social-media giants such as Facebook and Google have been caught in the crosshairs of congressional investigations into possible Russian involvement in last year’s election, while some critics decry the allegedly monopolistic tendencies of Amazon.
Led by Bitcoin, up 1,500% this year, to $15,232, cryptocurrencies are likely to stay in the spotlight in 2018, gaining even more investor attention. Some market strategists—and plenty of other people—worry that the virtual coins are merely a fad, however, whose trajectory will end in tears and rattle other assets, including stocks.
With interest rates still near historic lows almost a decade after the financial crisis of 2008-09, stocks have had plenty of runway for growth. Most strategists expect rates to rise in the next year, but not to levels that would imperil the bull. Our panel looks for the Federal Reserve to lift its federal-funds rate target on Wednesday by 0.25 of a percentage point, to a range of 1.25% to 1.5%, and follow up with three rate hikes next year that would take the federal-funds rate, on which other interest rates are based, to a range of 2% to 2.25%.
Jerome Powell, successor to Fed Chair Janet Yellen, is expected to continue her easy monetary policy, but could be inclined toward less regulation. That is another reason why financials are favored in 2018.
ED YARDENI, PRESIDENT of Yardeni Research, is no stranger to Wall Street but a newcomer to our panel—and its most exuberant bull. He sees the S&P 500 ending next year at 3100, which would reflect a gain of about 17% from current levels. Just don’t give all the credit to tax relief, he says; a second year of global economic growth could ignite fresh enthusiasm for stocks. Corporate earnings growth remains a relative novelty for investors. In the three years prior to 2017, S&P 500 profits were flat at about $118.
John Praveen, chief investment strategist at PGIM Global Partners, has a 2018 year-end target of 2925. His 2017 forecast was closest to the mark, at 2575. A longtime bull, Praveen cites falling cash levels at money-management firms as a sign that institutional investors are finally embracing the rally.
While the Street’s seers believe the market has already discounted about half of the expected tax relief, the tax bill, if passed, could be a gift that keeps on giving. Dubravko Lakos-Bujas, JPMorgan’s chief U.S. equity strategist, says the impact on corporate earnings “will resonate in the first and second quarters of 2018…and continue to be a positive tailwind [for stocks] into the first half of 2018.”
With the S&P trading well above its historical average of 15 times earnings, “it is accepted wisdom that the market is expensive,” says Stephen Auth, chief investment officer for equities at Federated Global Investment Management. But he argues that’s not the case, given the economic and interest-rate backdrop, a pro-business administration, and unattractive fixed-income alternatives.
Auth has a year-end target of 3000, derived by applying a P/E of 20 to his 2018 earnings estimate of $150. For all the talk of investor exuberance, he says, “we haven’t gotten to the point where taxi drivers are giving stock tips.” JPMorgan Chase (JPM) is one of his favorite stocks; the bank could earn $10 a share next year and deserves to trade at 15 times earnings, he says. That implies a stock price of $150, compared with Friday’s $106.
WHILE ALL OUR STRATEGISTS expect stocks to head higher in 2018, some see a yellow light, not a green one, suggesting that the bull’s days are numbered. Morgan Stanley’s chief U.S. equity strategist, Mike Wilson, anticipates a “below-average year,” with the S&P 500 up about 4%, to 2750, compared with a roughly 13% annual gain since 2012. Although earnings will rise next year, he says, this is a “late-cycle environment for the American economy and equity markets.”
The market’s price/earnings multiple could contract later in 2018 as earnings growth peaks and investors sniff out potentially lower growth in 2019, he adds.
Rob Sharps, group chief investment officer of T. Rowe Price’s equity group, and another newcomer to our group, agrees. He expects market leadership to narrow in 2018, which is typical in the later stages of a bull market. Sharps calls the current environment “about as good as it gets” for financial assets, with investors buying every pullback. “You have elevated asset prices, high expectations, and aggressive positioning for ‘risk on,’ ” he says.
Unemployment has been around 4% for a while, he notes, adding that when the labor market is at full employment, the economic expansion typically is 60% to 65% complete. That suggests a recession could start in late 2019 or 2020, which investors would anticipate next year. Sharps likes Signature Bank(SBNY), a high-quality bank whose shares have dropped 16% from its peak, to $137, as the bank has had to pay more for deposits. He expects these headwinds to recede, and thinks the New York banking company could become an acquisition target.
Tobias Levkovich, chief U.S. equity strategy at Citigroup’s Citi Research, argues that investors shouldn’t look to tax cuts to keep the market roaring. They are a “one-shot deal” in boosting year-to-year earnings comparisons, and might not even be permanent. “The Street doesn’t believe that the Democrats could take the House of Representatives in 2018, but they could,” he says.
Levkovich, one of the least bullish strategists, has a year-end 2018 target of 2675 for the S&P 500. Should investors accord the same multiple to tax earnings as to operating profits? “I don’t think so,” he says.
Moreover, any gain from a tax cut could be diluted in part through research, development, and capital spending, says Savita Subramanian, head of equity and quantitative strategy at Bank of America Merrill Lynch. It isn’t clear how much corporations will get to keep and return to shareholders directly, she says. The strategist, who has a 2018 year-end target of 2800, sees positive sentiment and momentum driving stocks higher in what she calls a potential “year of euphoria.” She favors the materials sector, noting it tends to perform well in the later stages of a bull market, and likes DowDuPont (DWDP), the global chemical company.
SOME INVESTORS EXPECT a reduced tax on companies’ overseas earnings to produce a cash windfall at home. But Goldman’s Kostin warns that might not be the case. He estimates that U.S. companies have $2.5 trillion in untaxed earnings overseas, of which $922 billion is in cash. About 85% of that cash belongs to only 20 companies, chiefly in the tech and health-care sectors. Kostin, with a 2018 S&P target of 2850, favors the industrials sector, which will benefit from solid capital-spending trends and global growth. Deere (DE), in particular, is investing for growth, he notes.
While Federated’s Auth expects the FANGs to take a breather, especially with stronger growth in gross domestic product and lower taxes lifting other boats, he considers the stocks to be big growth compounders longer term. He looks for Facebook and Alphabet to get an additional lift from higher profits by the middle of 2018.
For another view, there’s JPMorgan’s Lakos-Bujas. He downgraded tech to Underweight last Monday; the sector is flat since then. He bases his negative assessment primarily on “tactical” factors—namely, a conviction that value stocks are set to outperform growth stocks, the bucket in which tech stocks fall.
The spread between value and growth has reached a point historically associated with a reversal; the Russell 1000 value index is up 9% this year, against a gain of 27% in the comparable growth index. Tax reform is a catalyst for a rotation into value stocks, as value companies generate almost 80% of their revenue in the U.S. and are subject to an effective tax rate of 30.3%, the strategist observes.
Market strategists expect U.S. stocks to outperform bonds again in 2018, especially with interest rates rising. The Bloomberg Barclays U.S. Aggregate Bond index is up only 3% this year, and 10-year Treasury yields have fallen to 2.38% from 2.45%, although they have rebounded from a low of 2.04% earlier in the year. (Bond prices move inversely to yields.) The strategists’ 2018 year-end consensus forecast for the 10-year Treasury yield is 2.8%. “It’s hard to like bonds,” says Yardeni, summing up the prevailing view.
Merrill’s Subramanian worries that yield-hungry institutional investors are “aggressively positioned and over-own” REITs and utilities, which yield more than government bonds. Compounding the problem, utilities tend to carry high debt loads, she notes. “They look like a bond, trade like a bond—and bonds aren’t where you want to be,” she says.
Globally, most market watchers say U.S. stocks are the place to be in 2018 because of earnings expectations. But fans of overseas markets note that many are earlier in the earnings-recovery cycle. Jeffrey Knight, co-head of global asset allocation at Columbia Threadneedle Investments, notes that U.S. equities rank poorly on various valuation metrics when compared with international stocks, which suggests that the rest of the world will catch up. That said, European, Asian, and emerging market stocks are outperforming the U.S. in dollar terms this year. The Stoxx Europe 600 index has returned 23%; Japan’s Nikkei average, also 23%; and the MSCI Emerging Markets index, 31%.
Knight, who has an S&P forecast of 2750, favors equity markets in developing economies, Australia, Hong Kong, and Japan.
IF MUCH IS LINED UP to go right in 2018, a few things could go spectacularly wrong. A recurrence of inflation is one thing many market watchers fear. While it has been quiescent for years—the consumer price index hasn’t met the Fed’s 2% target—stronger economic growth could ignite it. If core inflation, excluding food and energy prices, were to top 3%, it would be a problem for markets, says Federated’s Auth.
The strategists all fear that the Fed could raise interest rates too aggressively, which would take away the market’s punch bowl. There could also be a negative impact on the consumer and the economy. “I worry about the cumulative impact of rising rates on Americans,” says Citi’s Levkovich. “There are people who have financed their lives on low rates for nearly a decade.”
A regulatory attack against social-media companies, or even the hint of one, could also hit the market hard. Earlier this year, as T. Rowe Price’s Sharps notes, the president tweeted negative comments about Amazon, and executives from Facebook and Google were called before Congress to testify about how foreign nationals might have used the social-media platforms to interfere in U.S. elections. A negative policy response to the sector “could knock the legs out of the U.S. market and the rest of the world,” Sharps says.
Then there’s the parabolic rise of Bitcoin and cryptocurrencies generally—and concerns that a fear of missing out also could lead investors to chase stocks with similar desperation. Alternately, a Bitcoin crash could curdle investor enthusiasm for all risk assets.
But investors aren’t worried yet.
So long as earnings are rising, rates are low, volatility is subdued, and every stock selloff is met with more buying, as happened again this past week, the bull will still rule over Wall Street.
Email: editors@barrons.com
As China’s economy goes, so goes most of Asia and much of the rest of the world. With China’s years of double-digit economic growth seemingly over, investors now must pay attention to the details.
China has dramatically transformed over the past decade from an export-driven factory for the world to a more balanced economy, in which consumption is the main driver. This year, the economy has grown by 6.8%, but that has been enough to push the CSI China 300 Index of Shanghai and Shenzhen listed A-shares up 23% and the Hang Seng China Enterprise Index of Hong Kong–listed Chinese stocks 25% higher. Gross-domestic-product growth is expected to slow slightly next year, to 6.5%, as part of Beijing’s managed slowdown. The challenge is to ensure social and financial stability by holding economic growth to a sustainable pace, as it manages structural issues, such as deleveraging, burgeoning local government debt, and an overheated real estate market.
So what should investors keep an eye on?
One thing is the pace of monetary tightening, as Beijing tries to rein in leverage and limit financial risks. The top target is real estate. Beijing has been trying to carefully engineer Goldilocks conditions to make its hot property market “neither too hot, nor too cold” next year. Real estate values have risen nearly 100% in the past 24 months, and some local authorities are delaying, not reporting, or fudging transaction statistics to avoid angering the government. Will Beijing compel them to really rein in property prices in 2018?
NEXT YEAR WILL ALSO BE THE FIRST in which President Xi Jinping and his team have near-total control. A key plank of their strategy is to de-emphasize GDP expansion targets and focus on controlling public debt, which they consider a big threat to sustainable growth and financial-system integrity. So, a second thing to watch is just how the Xi Team does in this regard.
Chinese demand for commodities isn’t likely to rise next year, as infrastructure spending slows. And despite synchronized growth around the world, China’s share of global exports is likely to be lower. But consumption growth should be stable, with steady household income.
However, there’s still upside for equity investors. Chinese stocks aren’t expensive; they trade at just over 13.5 times 2018 estimated earnings, while analysts expect corporate earnings to rise by more than 15% next year.
However, it likely will pay for investors to rotate from the stellar-performing tech ADRs Alibaba Group Holding (ticker: BABA) and JD.com (JD) into A-shares, ahead of MSCI’s inclusion of A-shares in its emerging markets indexes, expected to begin in mid-2018. David Ng, head of China research at Macquarie Securities in Hong Kong, expects the move to help push the MSCI China index up 25% to 35% in 2018. The index gradually will include the performance of 222 large-cap Shanghai and Shenzhen stocks.
Wendy Liu, China strategist at Nomura Securities in Hong Kong, likes stocks exposed to smart-home electronics, electric vehicles, artificial intelligence, big data, and the environment. Among her top picks is the industrial-automation firm Shenzhen Inovance Technology (300124.China).
The performance of companies in her favored sectors is the third thing to watch. It will be a good barometer of how China’s economy does next year. And that will be a good measure of how the rest of the world will do, too.
Why Investors Should Steer Clear of Steinhoff
Investors don’t often see a global retail giant marked down by some 80%, yet that’s exactly what has happened this month to Steinhoff International Holdings.
Time for bargain hunters to step in? Not so fast.
Shares in Steinhoff (ticker: SNH.Germany), the parent of U.S. retail chain Mattress Firm, stabilized somewhat last week, but Steinhoff’s South Africa–based management has a lot of repair work to do before its stock starts to resemble a good deal.
The tumble came after CEO Markus Jooste resigned on Dec. 5 amid a probe into accounting irregularities. This past Thursday, the Dutch-registered company, which has been called “Africa’s Ikea,” said it will restate its fiscal 2016 results, after having delayed disclosure of its fiscal 2017 financial statements, which ended Sept. 30. Also on Thursday Chairman Christo Wiese resigned.
“A cloud of suspicion will continue to hover over all of Steinhoff’s subsidiaries until more information is released,” says Erika Sirimanne, Euromonitor International’s head of research for the home and garden industry. Even Steinhoff itself, whose other retail operations range from Poundland (variety stores) in the U.K. to Russells (discount furniture) in Africa, has advised investors to “exercise caution when dealing in the securities of the group.”
The German-listed shares of the retail behemoth, which also is listed in South Africa, have become the Stoxx Europe 600 benchmark’s worst performer in 2017, with a year-to-date loss of more than 80%.
It’s easy to say now, but the warning signs were there months ago. “With the benefit of hindsight, Steinhoff’s structure was raising a number of red flags,” say RBC’s Shelly Xie and Richard Chamberlain in a recent note. They point to the company becoming serially acquisitive, while changing its reporting period and disclosure level several times. Steinhoff also has a complex corporate structure, the RBC team points out. And news reports in August said that German authorities were investigating Jooste and other managers over accounting issues.
CAN STEINHOFF climb out of its hole? A meeting with lenders planned for Tuesday looks like an important step. “The pressure is on Steinhoff to alleviate lenders’ concerns and to garner support for its proposed standstill agreement,” Sirimanne says. Steinhoff might reveal its 2017 results to creditors, but it’s not clear whether the information will be made public as well, she adds. Thursday’s disclosure about restating results might prompt the banks to press Steinhoff on “whether the restatement is confined to 2016 and whether it applies to all subsidiaries,” the Euromonitor analyst says.
Steinhoff’s stock found some buyers in the past week after the company disclosed it had hired outside advisors to deal with its lenders and other problems. The shares climbed toward one euro ($1.18) from a recent low below €0.50, but remain far from their early December high above €3.40.
“This signals the company’s determination to keep the business in operation and to eventually recoup some of the value lost,” Sirimanne says. But she cautions that there is a chance of “total collapse,” depending on the outcome of Tuesday’s meeting and results of a probe by accounting giant PwC, which was launched as Jooste exited. The former CEO reportedly has apologized to employees for “some big mistakes” that led to financial losses for “many innocent people.”
It’s possible that Steinhoff’s “relatively high financial leverage” ends up swamping its equity, say RBC’s Xie and Chamberlain, who describe that as their “downside scenario.” They say the company has at least €6.5 billion in net debt and about €5.5 billion in capitalized leases. The RBC analysts have cut their rating on the stock to Sector Perform from Outperform, while also slashing their price target to €2 from €5 and warning about the accounting probe and lack of recent financial information.
“We use a sum-of-the-parts analysis to arrive at our implied value of €2 per share,” they say. There is value in the company’s manufacturing, logistics, and property assets, as well as its African, European, and U.S. retail operations, but the “big unknown is its balance sheet position and net debt,” Xie and Chamberlain write. And Euromonitor’s Sirimanne warns: “Should it come to it, asset disposal is unlikely to be a straightforward process, considering that the onus is now on Steinhoff to prove that assets are correctly valued.”
It’s probably best for investors to wait and see if the clouds clear a bit for Steinhoff.
LAST WEEK, the Stoxx Europe 600 hemmed and hawed, staying on track for a year-to-date gain of roughly 7%. The European Central Bank made no changes to monetary policy following its latest meeting, with ECB President Mario Draghi saying the euro zone’s economic outlook is improving, Ìbut “an ample degree” of stimulus remains necessary.
Apple has a software problem. Each new iPhone brings more dazzling features, but also a rising number of software bugs.
The escalating complexity that results from adding new capabilities at a breakneck pace risks alienating customers and constraining Apple’s ambitions. Nothing yet suggests an exodus of Apple (ticker: AAPL) customers, but more and more gotchas in the iOS software that runs iPhones is a risk, given that Wall Street increasingly measures Apple by software, not hardware.
The company’s services business, including Apple Music, accounts for 13% of annual sales, and is the tech giant’s fastest-growing division, with revenue rising by 16% annually. A loss of faith in Apple’s software could curb that growth.
There are really two Apples, a good Apple and a rotten Apple. The good Apple astounds us with each new software innovation. The TrueDepth camera on the front of the iPhone X, which recognizes a face, isn’t just a collection of sensors; it takes top-notch software to make it work reliably and easily.
Nothing suggests that Apple has lost its edge in writing software. It’s actually remarkable how well much of the company’s code works.
BUT THEN there’s the rotten Apple.
Each new version of its operating-system software, including the current iOS 11, has seen rising numbers of updates that must be installed to fix bugs. A review of iOS’ history by venture capital firm Loup Ventures, conducted for Barron’s, shows eight updates issued in the 90 days since people started using iOS 11. That compares with six last year, for the predecessor iOS 10, and five in 2014.
Apple increasingly looks a bit like the Microsoft (MSFT) of old, once infamous for endless rounds of Windows patches.
Some updates cause their own errors, such as the one in November when typing the capital letter “I” on the iPhone could cause a couple of garbage characters to appear. That followed a previous update. It’s the kind of error that makes you wonder about the nearly $900 billion company.
We tried to talk with Apple about the complaints, but the company didn’t respond.
A possible reason for all of this is complexity. Renowned computer programmers Brian Kernighan and Rob Pike, two of the creators of the Unix operating system, have observed that “the complexity of a program is related to the number of ways that its components can interact.” Apple has hundreds of millions of devices in people’s hands, with varying electronics, to which it’s adding more and more ambitious features at an annual cadence. The best programmers can’t completely avoid the pitfalls of such rising complexity.
For some customers, the problems go beyond annoyance. When Barron’s took a random, unscientific survey of people using the three prior generations of Apple’s signature devices, the iPhone 6, 6s, and 7, and who had upgraded to iOS 11, they told horror stories of their phones becoming virtually unusable. Devices that functioned just fine suddenly had precarious declines in battery life, random reboots, and apps that took forever to load.
Only Apple knows how common such issues are, but it’s probably a matter of scale: There are now hundreds of millions more people trying out the new software on older phones. The total of iPhone users may be 790 million, estimates Loup Ventures, when all models are taken into account. Of those, roughly 64% may have upgraded to iOS 11, the firm calculates. The 502 million people on iOS 11 is roughly 270 million more than were on the then-current version of the software three years ago. So, there are a lot more chances for users to be disgruntled.
Barron’s asked Apple for data showing how users are faring with iOS 11. Apple did not respond. Barring an explanation from the company, people not predisposed to conspiracy theories might start to think that Apple is deliberately degrading the experience on older devices to compel users to buy a new one.
“They have a problem,” says Loup founding partner Gene Munster. “It’s far from affecting their business, but it’s not a good thing.”
Munster, who used to cover Apple for Piper Jaffray, regularly surveys smartphone buyers. So far, he says, loyalty is holding steady, with Apple’s retention rate—the percentage of iPhone owners who say they’ll buy another—remaining in the low 90s. “People are complaining, but they are staying with the iPhone,” he says. That’s because the device’s value outweighs the pain of bugs and frequent updates, he observes. For now.
THE BREAKDOWN of older devices, even when addressed with a subsequent fix, erodes the unspoken compact between a company and its customers. It’s conceivable that users could be pushed far enough that some will adopt the Android software produced by the Google unit of Alphabet (GOOGL). Or that the number of individuals willing to switch from Android devices to iPhones could slow. Or that the propensity of people to use other Apple software services, such as Apple Music, could erode.
Apple has little choice but to keep adding features to stay ahead of the pack. One large, if hidden, cost is having to divert engineers to fix bugs, rather than build better capabilities. Only Apple knows the impact of having to delay or cancel projects to put out fires. The scariest outcome would be if software foibles force Apple to curb its ambitions.
Galapagos could see bid from Gilead (translated)
15 DEC 2017
Belgian biotechnology company Galapagos [Euronext: GLPG] [Nasdaq:GLPG] could see a takeover bid from its US competitor Gilead [NASDAQ: GILD] shortly, De Tijd reported, citing CEO Onno Van de Stolpe of the target.
Galapagos and Gilead agreed on a standstill period in 2015, when they signed a far-reaching cooperation agreement. Gilead agreed not to acquire a larger stake in Galapagos during that period. But the period will end on 1 January 2018, making it possible for Gilead to try to acquire its competitor.
Van de Stolpe said, according to the Belgian daily, that Gilead hasn’t reached out to him yet, but that he is worried that Gilead will make the takeover attempt in the next few years, possibly in 2018.
The CEO said that the agreement between the two is financially better for Galapagos than Gilead. That could make an acquisition of the company more interesting for Gilead, the Flemish-language newspaper said.
Van de Stolpe said Gilead could wait with regard to the takeover until the final results of its study on the medicine Filgotinib are out. That would put Gilead in a less-risky position, the daily said.
But the CEO emphasized that he’s not sure about Gilead’s plans.
Last year Galapagos had turnover of EUR 151m, the Dutch daily Het Financieele Dagbladreported earlier this year.
Condé Nast rumored to be for sale - speculative report
15 DEC 2017
Condé Nast, a New York City-based magazine publisher, is the subject of sale rumours, according to a report in The Daily Mail. The brief item, in the newspaper's The Dastardly Mr Deedes column, did not cite a source for the rumour.
Condé Nast chief executive Bob Sauerberg is looking to generate cost savings of GBP 74m (USD 84.3m) in 2018, according to the report.
Condé Nast has a board meeting scheduled for next week, the item added.
New York City-based Advance Publications Inc. owns Condé Nast and the Newhouse family owns Advance Publications.