TheChek News Flow

GoPro is relaunching its Karma drone today, three months after the company recalled the aircraft following reports that some units suffered a power failure during flight and fell from the sky.

The drone is now on sale — again. GoPro says that the power failure on its original, recalled model was due to a problem with a latch that secured its battery, a problem the company says has been resolved in the latest version of the drone.

The Karma is a foldable drone designed to mount a GoPro camera. When it was announced last fall, the drone was poised to rival DJI’s foldable drone, the Mavic Pro. But less than a month after the Karma first hit the market in October last year, all GoPro drones were recalled. Customers were issued a full refund.

2016 wasn’t a great year for the sporty camera company. The company reported in November it was cutting 200 jobs and that Tony Bates, the president of GoPro since June 2014, would step down. Before GoPro, Bates served as the CEO of Skype.

GoPro also shared last November that it was cutting its entertainment division after reporting its shares lost half their value in 2016.

Now GoPro is hoping (again) that it can revive sales with its Karma drone. Even if the drone does fly as intended this time, recovering from a total recall due to a dangerous power malfunction isn’t an easy lift. The Karma costs $800 without a GoPro camera and $1,100 with the camera.

DJI’s rival, the Mavic Pro drone, folds even smaller than the Karma and can fit in a backpack. The Karma requires its own carrying case — not ideal if you’re on a hike or some kind of outdoor adventure.

On Thursday, GoPro is expected to share its earnings from its latest quarter.

Here’s the company’s latest video of its drone.

A jury ruled Oculus founder Palmer Luckey violated a non-disclosure agreement.

Facebook has been ordered to pay $500 million as the result of a successful lawsuit by gaming company ZeniMax that claimed Oculus co-founder Palmer Luckey violated an NDA agreement in order to build early prototypes of its Oculus Rift headset, according to Polygon.

Facebook later acquired Oculus for more than $2 billion.

A Texas jury sided with ZeniMax, awarding the company $500 million in damages following a trial in which Facebook CEO Mark Zuckerberg testified on the stand. ZeniMax was seeking as much as $6 billion in damages.*

Facebook can afford $500 million, of course. But it’s not a great look for the company or Zuckerberg, who was accused during the trial of rushing through due diligence during the acquisition process.

Investors don’t seem to care. Facebook stock is up more than 2 percent ahead of Facebook’s Q4 earnings, which the company is set to report later today.

A Facebook spokesperson did not immediately respond to a request for comment. We’ve also emailed lawyers for ZeniMax and have not yet heard back.

Update: We spoke with Facebook COO Sheryl Sandberg about the lawsuit. She said that it was “not material” to Facebook’s business. “We’re disappointed in certain elements of the decision and we’re considering our options to appeal,” she added.

A Facebook spokesperson also sent over the following statement.

“The heart of this case was about whether Oculus stole ZeniMax's trade secrets, and the jury found decisively in our favor. We're obviously disappointed by a few other aspects of today's verdict, but we are undeterred. Oculus products are built with Oculus technology. Our commitment to the long-term success of VR remains the same, and the entire team will continue the work they've done since day one – developing VR technology that will transform the way people interact and communicate. We look forward to filing our appeal and eventually putting this litigation behind us.”

*Correction: A previous version of this story inaccurately stated the amount that ZeniMax was seeking in damages.

Sony’s profit drops 84% to $169M as film business takes $920M write-down

The Japanese tech giant posted a 19.6 billion JPY ($169 million) profit on revenue of 2,397.5 billion JPY ($20.7 billion) for Q3. Revenue was down seven percent year-on-year, but net profit sunk by 84 percent on unfavorable foreign currency rates and a 112.1 billion JPY ($920 million) impairment charge of goodwill for Sony Pictures, announced earlier this week.

In the wake of the Pictures write-down, Sony lowered its full-year profit expectations by 22 percent to 196 billion JPY ($1.7 billion), despite raising its revenue forecast by three percent.

The games business, Sony’s most lucrative unit, posted a five percent rise as revenue reached 617.7 billion JPY, $5.3 billion, with a 50 billion JPY ($431 million) operating profit — up 25 percent.

Sony’s Mobile Communications, once the source of huge losses, has been tamed through downsizing that has seen it focus on mid-range devices and markets where the brand is competitive. The smartphone business alone was responsible for a $544 million loss in the previous financial year, and in Q3 it carded a 21.2 billion JPY ($183 million) operating profit with revenue down 35 percent on that cost-cutting.

Changing currency rates had a big impact on many of Sony’s other business units, many of which recorded drops in revenue and operating profit. That included Sony’s home entertainment business saw revenue drop 12 percent to 353.4 billion JPY ($3 billion) with profit down 17 percent.

President Trump’s ‘America First’ policies have added excessive hope to the US equity market, as

we wrote last week in Trouble in America. With downside risk to the S&P500 we do not think

Europe will directionally decouple, but we do see an appealing relative trade.

Unlike the US, European earnings have little in the way of headwinds from wage inflation, FX or

finance costs, and margins remain unstretched. Valuations also demand far less in terms of

delivery, balance sheets have more flexibility (incl. for M&A) and Europe is more pro-reflation.

We revisit our Stratometer scorecard. While less positive for the US, the interplay of financial

conditions, economic growth momentum and political risk bodes better for Europe

To implement our ‘long Europe’ call we look for margin upside at a reasonable price and/or with

domestic demand exposure. We also seek to capitalise on overplayed political risk.

Banks and Insurers remain a core overweight for us and it’s too early to buy back the Staples. But

in Utilities and Media we find misperceptions on reflation sensitivities as an opportunity to change

tack. Construction moves back to overweight on domestic demand leverage, as we also move the

more structurally challenged Financial Services to Underweight.

We also highlight 12 top picks in Eurozone equities: ISP, SocGen, Iberdrola, St Gobain, Randstad,

Orange, Merlin, Volkswagen, STMicro, Carrefour, Airbus and Allianz.

1) Non-financial cyclicals: In a typical rally, cyclicals outperform defensives by 20%, but the current rally has already reached 24%. More significant cyclical outperformance has tended to come early in the cycle, and yet the US, Japan and China appear to be entering later-cycle phases. The ratio of cyclicals to defensives moves closely in line with PMI new orders, but is now discounting levels of PMI consistent with 3-4% euro area and US GDP growth and a 3% US 10yr bond yield. Valuations are clearly expensive on book and earnings measures in the US, although they are more neutral in Europe. Historically, 70% of the time cyclicals have been this overbought relative to defensives, they have then underperformed. Finally, sector risk appetite in the US, Japan and the UK is in 'euphoria' at a time when we think President Trump's policies could disappoint. In aggregate, we raise European defensives to benchmark at the expense of cyclicals. We remain overweight financials.

Areas to be cautious: (i) Expensive cyclicals on HOLT® with negative earnings momentum: Dufry, Tui, Metso, SKF, Illinois Tool Works, SPX Flow, Emerson; (ii) China-exposed and growth capital goods stocks that remain abnormally expensive (Sandvik, Alfa Laval).

Areas to focus on: Financials are cheaper than cyclicals, have superior earnings momentum and are positively correlated with bond yields, which we believe will rise to c.1% in Germany and 3% in the US by end-2017. European banks have lagged cyclicals (unlike US banks) and life companies remain a play on a steeper yield curve. We also focus on domestic demand plays in Europe: CapGemini, SAP, WPP and Adecco are all eCAP stocks with high cont. European exposure. We stick to our overweight of temp. employment agencies and believe investors should favour bond proxy areas that offer a degree of cyclicality: toll road operators (Vinci) and selected telecoms (Orange). Defensive names that have positive earnings momentum, are cheap on HOLT and Outperform-rated include: RWE, Sanofi and UnitedHealth.

2) US high-yield spreads: Our model suggests that spreads should rise. Historically, when the unemployment rate has fallen below the NAIRU, spreads have risen 75% of the time over the subsequent 12 months. Corporate leverage is back to previous highs and thus we would be cautious on US names with high financial leverage and low operational leverage: NiSource and Southern are rated Underperform and have downside potential on HOLT.

3) Industrial commodity prices: All our macro proxies suggest industrial commodity prices should fall by 10-15%. Chinese real estate prices have peaked, suggesting iron ore should too, and some supply-side response is being seen at a time when inflation-adjusted commodity prices are back to long-run norms. The miners are discounting a sharp fall, but the mining capital goods stocks look expensive on book and earnings measures (Sandvik).

4) US small cap: US small caps are at the top end of their historical range on valuations and have discounted ISM and credit spreads staying at this level.

BofAML EMEA Indications

NOKIAN - 4Q operating profit EU108.5m, est. EU106.9m (36.24)................+3%

Nokia - 1st take, beat at EBIT showing cost cutting & deal synergies (4.35).+3%

DASSAULT - Q4 beats, guidE in-line. Q4 is 3% ahead of consensus (1087.37)...+2%

DANSKE - 4Q income DKK12.9b, est. DKK12.1b, Buy Back DKK10b Shares (235.11)+2%

ING Earnings and capital beat part offset marginal divy miss (13.62)........+1%

SWED - Q4 results solid, c3% clean operating beat (226.75)..................+1%

IFX - 2% beat on revs at €1.65bn and 8% beat on EBIT at €246m (17.32).......+1%

DNB - Q EPS Beats Est.; Declares NOK5.7/Share Div; Plans Buyback (141.2)....+1%

CABK - 4Q NII EU1.08B, CET1 FULLY-LOADED 12.4% (3.43).......................+1%

Compass - 1Q17 in line. 1Q17 org reve grwth +2.8% vs. BAML +2.5% (1410.97)..+1%

AZN - Sales: 5,585 vs cons 5,579,Core Op Profit:2,026 vs cons 1,925 (4247) unch

DAIMLER - 4Q adj Ebit EU3.58b vs EU3.48b yr ago. 2016 rev. rises 3% (69.32).-1%

RECKITT - in talks to buy Mead Johnson confirmed by RB & MJN (6693.4).......-2%

DBK - Q4 pretax loss of 2.4 bln eur, vs 1.4 bln street view (18.7)........-2.5%

Assa Abloy - first take a bit negative –org growth slightly light (164.32) -3%

NOVO - NetSales:29,572 vs cons 29,477 Op profit: 11,206 vs cons 11,496 (242)-3%

Swatch - FY16 results a miss vs.cons expectations.Net sales -10.8% (336.68).-4%

CS:

Aberdeen -1% AuM slightly better but outflows slightly worse

AMS -1% US peer Cirrus -10% after hours on negative outlook

Assa Abloy -1-2% Org growth +1% vs est +1.9%

AstraZeneca +0.5% Q16 total rev. - $23b vs est. $23.1b, EPS beat

Bucher M/P FY Turnover inline, FY Order intake 2% ahead

Caixabank -1% Q4 NII 3% ahead, op revs 7% ahead, net income 50% light

Compass M/P H1 org rev 2.8% CS est 2.9%, North America strong

Cranswick M/P 3Q trading inline with expectations

Daimler -2% 4% EBIT miss offsets stellar 4Q MBC margin

Dassault Sys M/P FY revs EUR3.065b vs EUR3.04b, confident of 5y goal

Deut Bank -1-2% Capital 11.9% vs 11.3%, impact on the franchise, S&T miss

Dialog semi -1% US peer Cirrus -10% after hours on negative outlook

Dong +1% 2016 EBITDA 19.1bn vs bbg consensus 18.4bn

Fortum +1-2% FY EBITDA 4.6% miss, dividend better

Glencore M/P Volumes in line, no change to guidance

Imagine Tech -1% US peer Cirrus -10% after hours on negative outlook

ING +2% NII 4% ahead, CET1 strong at 14.2% cons 13.8%

Infineon +1-2% Q1 Rev EU 1.65b est EU 1.62b, outlook unchanged

JMAT +1-2% Revs 876mln CS at 882mln, reiterate guidance

Miners -1% Copper +0.45%, Brent +0.10%, Iron Ore CLOSED, China CLOSED

Modern Times +1-2% Q4 sales SK5.02b vs cons SK4.90b

Nokia +5% 4Q net sales EU6.72b, est. EU6.79b, margins better

Nokian +2% Solid Q4 figs, with 4% sales beat, 1.5% op profit beat

Novo Nord +2% FY Sales DK 111.8bln est DK 111.7bln

Novartis M/P Teva loses court bid to dlay generic forms of Copaxone Drug

Tesco M/P Could be forced to dispose of more than 600 stores, Times

Qiagen M/P Q4 net sales slightly light, confirm FY17 outlook

Reckitts UNCH In discussions ty buy baby formula maker MEAD JOHNSON

Shell -1% Miss in integrated gas, E&P a little light

Swatch -4-5% 7% op profit miss and H2 sales growth -9% vs est -7

Swedbank +0.5-1% Core revenues beat and expectations low into Qtr

Telenor +1% 4Q rev. NOK33.1b vs est. NOK33.5b, Declares NOK7.80 divi

Unibail M/P EPRA NAV ahead and LfL net rental income growth behind

Vodafone +2% Q3 Organic serv rev up 1.7% est up 1.5%

Shore

CRANSWICK - trading in line,revs well ahead of prior yr,scope for upgrades..+2%

JRP - IFRS margin to exceed prev g'dance,merger synergies ahead of schedule.+2%

GVC - NGR +7% in Q4,sees pro-forma clean EBITDA towards upper end...........+2%

VODAFONE - Q3 organic service rev +1.7%(Est+1.5%).FY guidance confirmed......+1%

ASTRAZENECA - Sees 2017 rev down low to mid single digit percent............UNCH

COMPASS - Q1 organic sales growth in line with estimates/margin moved ahead.UNCH

JOHNSON MATTHEY - Says Q3 adj ptp ahead of last year.Sales increased 14%.....+1%

ABERDEEN - £2.4b to be withdrawn from portfolios this quarter...............-2%

NETPLAY - 9p cash bid from Betsson AB.......................................+10%

REAL GOOD FOOD - strong sales in Q3 +8% yr-on-yr,targets price increases.....+2%

AVON RUBBER - order intake encouraging,confident of meeting FY expec........UNCH

CARILLION - signs extension to Opeanreach framework agreement...............+1%

WORLDPAY - Ship Global 2 sells enitire holding (214m shs) placed at 282.75p.MKT

SHELL - a miss on lower refining earnings...................................-2%

TESCO - Tesco may have the satisfy the CMA by selling 635 stores (times)....UNCH

MF

*RECKITT BENCKISER-In talks to buy Mead Johnson says WSJ................-2% 

*SWATCH-FY OP CHF805m(865.4),Sales 7.55b(7.74),Divi 6.75(7.5)...........-5% 

*NOKIA-OP 940m(766.2),Sales 6.72b(6.79),Gross Margin 42%(40.1)..........+3% 

*ING-FY Pft 4.98b(4.63),Q4 Net 1.38b(1.15),CET1 14.2%,Div 42c...........+2% 

*DBK-Net -1.89b(-1.32),PT -2.42b(-1.49),Restructuring 114m(330).........-1.5% 

*ATLANTIA-Said to consider bid for Mexico's RCO from Goldman............+0.5%

*NOVO-FY16 Sales 111.8b(111.7),Ebit 48.4b(48.65),B/B of 16bln...........-2% 

*DANSKE-NII 5.79B(5.58),Inc 12.9b(12.1),NI 5.59b(4.59),B/B 10b..........+1%

*IFX-Q1 Rev 1.65b(1.62),Seg Pft 246m(233.6),EPS 17C(17).................+1% 

*MUNICH RE-Open to possible bif acq's,tgts still too expensive..........-0.25% 

*DIALOG-Read across from Cirrus Logic -10% a/hrs(Q4 Revs light).........-0.70% 

*HANNOVER RE-Raises guidance from 950m to +1b(1.03b),CR 96%.............+1.5% 

*HELLA-ABB 2.2m shares,coming from the family,price 37-37.5(38.24)......-1%

*DAIMLER-Q4 Adj Ebit 3.58b(3.74),Rev 41b(40.4),slight grth in Rev etc...-2%

*KESKO-Q4 Net Sales 2.77b(2.73),Ebit 63.3m(68.7),outlook cmnts +ve......-2%

*QIAGEN-Q4 Sales 366.5m(371.7),Ebit 112.7m(112),EPS 39c(38).............-1% 

*NOKIAN REN-Q4 Sales 460.7m(442.1),OP 108.5m(106.9),2017 exps 5% grth...+2% 

*DNB-EPS 3.16(3),CET1 16%,Considers B/B,plus Cash Divi..................-1% 

*ASSA ABLOY-Adj OP 2.91b(3.2),Sales 19.5b(19.7),Org Grth Rev +1%(2).....-2% 

*TIETO-Net Sales 403.6m(412.1),Adj OP 49.5m(48.9),FY16 Divi €1.37.......-1%