Microsoft: Credit Suisse Tech Conference call, stock moves slightly lower
- Says is better positioned now in the cloud than last year
- Most immediate opportunity to grow in business
- Cloud market is exceeding MSFT's expectations for growth
- Over time, expects to continue to see improvement in cloud gross margins
- Bets on Azure from a few years ago are starting to pay off
- Reiterates on-prem products still growing alongside IaaS, PaaS and SaaS products -- states customers aren't willing to cast aside server and storage already invested in
- Feels hybrid approach (cloud/on-prem) will be viable for some time
- Reiterates will not lose a deal based on price as it relates to cloud/hybrid offerings (according to CFO Dave O'Hara, price match comments made earlier)
- Cost of building out cloud (catching up to AWS, which was launched before Azure) not totally behind MSFT; starting to flatten out, seeing better scale and better engineering investment utilization
- Not focused on maximizing price, more focused on maximizing share
- Feels AI may be a "deep pocket" race; still in the first inning of AI
- Comments on Microsoft Teams, use with Slack
From: elaumann@oscargruss.com At: 11/29/17 15:15:37
To: elaumann@oscargruss.com, lanreder@oscargruss.comSubject: TWX-T OG Risk Arb comments 11-29-17
DISCLAIMER This information represents neither an offer to buy or sell any security nor, because it does not take into account the differing needs of individual clients, investment advice. Those seeking investment advice specific to their financial profiles and goals should contact their Oscar Gruss & Son Incorporated sales representative. Oscar Gruss & Son Incorporated believes this information to be reliable, but no representation is made as to accuracy or completeness. This information does not analyze every material fact concerning a company, industry, or security. Oscar Gruss & Son Incorporated assumes that this information will be read in conjunction with other publicly available data. Matters discussed here are subject to change without notice. There can be no assurance that reliance on the information contained here will produce profitable results. A security denominated in a foreign currency is subject to fluctuations in currency exchange rates, which may have an adverse effect on the value of the security upon the conversion into local currency of dividends, interest, or sales proceeds. The value of securities and depositary receipts of foreign issuers that are denominated in United States dollars are also influenced by fluctuations in currency exchange rates. © 2017 Oscar Gruss & Son Incorporated. All rights reserved.
Autodesk: Color on Quarter
KeyBanc Notes: Analyst, Monika Garg, reiterated her Overweight rating on shares of Autodesk (NASDAQ: ADSK) and cut her price target to $134 from $136 after FY18 net subscription guidance was disappointing and ARR guidance was reiterated due to a greater mix of customers moving to lower volume but higher priced products and lesser cloud promotion activity.
Deutsche Bank Notes: Analyst Alex Tout lowered his price target for Autodesk to $140 saying the Q3 earnings report was a disappointment after a "very solid" Q2. The single most important metric of net subscriber additions slowed sequentially, at 146,000 versus 152,000 last quarter, Tout tells investors in a post-earnings research note.
MUFG Notes: Analyst Stephen Bersey reiterates an Underweight rating on Autodesk following the company's Q3 results. The analyst ticked up his price target for the shares to $52 from $51. Traditional operating metrics remain "muddied" during Autodesk's transition period, and new metrics provided offer "relatively little operating strength visibility," Bersey tells investors in a post-earnings research note.
JPMorgan Notes: Analyst Sterling Auty believes his long-term thesis is intact following Autodesk's Q3 results and that the post-earnings selloff provides a buying opportunity. While the net subscriber addition outlook came down, it does impact revenue or the long-term outlook, Auty tells investors in a research note. He keeps an Overweight rating on Autodesk with a $130 price target.
Price action: Shares slid drastically after cutting FY18 subscription guidance, hitting a low of $109.00, currently trading around $114 pre-market
Gapping down
In reaction to disappointing earnings/guidance:
In reaction to disappointing earnings/guidance:
- WAIR -16.2%, ADSK -12.1%, GSUM -6.5%, PSTG -4.8%, HTHT -4.1%, YIN -4%, OCSL -3.8%
Other news:
- KOOL -9.2% (continued weakness; proposes registered public offering of its common stock)
- RYB -9.1% (China Police say parents made up claims against RYB but one teacher apologies for using needles for discipline purposes, according to SCMP)
- STNG -6.4% (announces public offering of 30 mln common shares)
- TDOC -6.1% (files for $175 mln mixed securities shelf offering; proposes 3.25 mln share common stock offering - includes 3,250,000 shares offered by Teladoc and 830K by certain stockholders)
- XNET -3.7% (issues statement clarifying recent market developments, has requested that Big Data stop using the 'Xunlei' brand name immediately)
- MCF -2.9% (Frontier Communications will replace Contango Oil & Gas in the S&P SmallCap 600)
- NAVI -2.9% (Department of Education plans to look past traditional student loan servicing cos to manage portfolio of loans, according to WSJ)
- ATO -1.9% (prices offering of 4,558,404 shares of common stock for gross proceeds of approx $400 mln)
- APTO -1.6% (Aptose Biosciences files for 6,041,567 common share offering by the selling shareholder Aspire Capital), .
Analyst comments:
- WING -3.9% (removed from Conviction Buy List at Goldman; downgraded to Neutral from Buy at Guggenheim)
- PCAR -1.2% (downgraded to Neutral from Buy at Citigroup)
Marvell: Color on Quarter
- Needham raises their MRVL tgt to $27 from $25. MRVL reported F3Q18 results in line with its positive pre-announcement reflecting strength in its core business, particularly in Connectivity. F4Q18 guidance exceeded expectations on strength in Networking and Connectivity. They are encouraged by the better than expected results in the Connectivity segment, the new product driven re-acceleration of Networking revenue growth and the clearance of excess inventory in the HDD channel. Additionally, the co's cash generation and cash return to shareholders remain impressive. They remain positive on MRVL as the core business continues to outperform expectations and as the Cavium acquisition should prove highly accretive.
- Cowen notes that, with another excellent Q, a bullish C2018 Networking outlook and some hand-holding on growth opportunities within Connectivity, this was another great quarter without question. There is not much here to dislike, but investors continue to underestimate MRVL's organic growth potential. See estimates moving higher that should provide a financial "bridge" ahead of the highly synergistic CAVM deal.
- B. Riley FBR raises tgt to $29 from $27. They note MRVL's F3Q18 results exceeded the Street as signaled with 11/20's positive pre, but with better margin and EPS quality than we expected. Ahead, new Networking products drive surprising F4Q outlook upside to the Street and their estimates, even as mix-related margin momentum persists. Shares added 2% AMC despite a +27% MTD gain. Yet again, they believe takeaways skew favorably.
- Stifel raises tgt to $19 from $16. They note Marvell turned in another solid quarter with revenue slightly beating estimates combined with gross margins and expense control led to a beat on the bottom line. The 14 week 4QFY18 guidance provided more of the same. Slight beat on top and bottom line. They continue to be impressed with the mgmt team's execution to their strategy for margin expansion over revenue growth to return value to investors.
- Jefferies tgt to $28
- Loop Capital tgt to $28
- Morgan Stanley to $20.50
Gapping up
In reaction to strong earnings/guidance:
In reaction to strong earnings/guidance:
- PLAB +16.6%, NUAN +9.4%, OOMA +5%, ATKR +4.4%, XCRA +3.6%, MRVL +2.7%, MCHP +0.5%
M&A news:
- MLNT +7.7% (to acquire the infectious disease business from The Medicines Company (MDCO) for $270 million in upfront consideration and guaranteed payments)
- RGC +5.6% (Regal Entertainment confirms Cineworld Group plc discussions about possible all-cash acquisition of Regal at $23.00 per share), AMC +1.9%
Other news:
- CAPR +29.2% (FDA has cleared its IND for a new clinical trial of CAP-1002)
- NLST +21.2% (U.S. International Trade Commission votes to institute an investigation of certain memory modules and components thereof)
- SEED +21% (Origin Agritech and KWS SAAT SE enter into commercial license and collaboration agreement)
- MARA +18.4% (after closing down ~40%)
- RXII +16.4% (announces results of a consumer/functional testing program with RXI-231)
- PETX +12.1% (terminates stock offering (per Nov 27 announcement))
- DPW +10.9% (after closing down nearly 40%)
- TEUM +7.6% (continued volatility)
- IDRA +7.4% (FDA has granted Fast Track designation for the company's lead development candidate IMO-2125 in combination with Ipilimumab)
- OVID +6.4% (announces OV101 shows comparable PK profile in Ph 1 study of adolescent patients; now anticipates data from the STARS trial to be available in the second half of 2018)
- CMG +3.5% (launches search to identify a new CEO; Founder Steve Ells to transition to Executive Chairman; provides Q4 comp guidance)
- PSTI +2% (announces publication of preclinical findings from its PLX-PAD studies in journal Cytotherapy), .
Analyst comments:
- MULE +3.8% (upgraded to Outperform from Perform at Oppenheimer)
- DPZ +1.9% (upgraded to Buy from Neutral at Nomura)
- AGN +1.8% (upgraded to Overweight from Equal-Weight at Morgan Stanley)
- ZTS +1.5% (upgraded to Overweight from Equal-Weight at Morgan Stanley)
- CHD +0.8% (upgraded to Buy from Hold at Societe Generale)
Cineworld/Regal: recline, don’t decline
Faced with a contracting market, Regal investors should take any cash bid
Like Groundhog Day, the movie business can seem remarkably resistant to change. In 2002, when Philip Anschutz floated Regal Entertainment Group, Spider-Man and Star Wars were two of the three biggest movie hits of the year. Fifteen years on, with Regal a likely seller to the UK’s Cineworld, the same superhero and spaceship series are still churned out.
The brutal reality is more like Requiem for a Dream. Headline box-office receipts might have changed little — US takings were $9.1bn in 2002 and stand at $9.7bn so far this year — but adjust for inflation and they are down a quarter. In volume terms, ticket sales peaked in 2002 at almost 1.6bn. They were 1.3bn last year and are at 1.1bn so far in 2017.
The secular decline is real, and the problem is not just rubbish superhero movies such as Justice League. Better, cheaper and shorter home entertainment options, such as Netflix, have changed the landscape.
Regal, share price down 20 per cent this year before Reuters reported the Cineworld talks, has adapted better than US rival AMC, down 60 per cent. Its signature initiative has been reclining seats, with a quarter of its cinemas getting them so far. People will apparently still leave their houses if they can lie down at the other end.
Yet Regal’s enterprise value is nine times earnings before interest, tax, depreciation and amortisation. The UK chain commands 10 times even after investors took fright at the prospect of a dilutive rights issue to fund the bid, and marked the shares down 15 per cent. Before that, it was 12 times. That kind of valuation gap is also why AMC plans to spin off its European business in an initial public offering in the next two years.
Given the environment, and despite carefully costed promises to boost takings via installing more recliners and selling more beer, Regal investors should be tempted to get out altogether via a Cineworld deal. The mooted $23 a share cash offer is a 40 per cent premium to the undisturbed share price, which had recently fallen to $16 — the same price as Regal’s 2002 IPO. Some things really are stuck in time.