>>> US Gapping up

Gapping up
In reaction to strong earnings/guidance:
  • OCLR +8.6%, NFLX +6.5%, CHKP +4.3%, MTG +3.7%, UNP +2.9%, TAL +2.8%, WTFC +2.7%, BK +2.6%, PTC +2.4%, KEY +0.7%, BBT +0.6%
M&A news:
  • CYTX +14.5% (to acquire certain assets from Azaya Therapeutics; Cytori to issue $2 mln in common stock up front)
  • PIP +4.4% (PharmAthene and privately-held Altimmune announce merger in an all-stock transaction)
  • NTNX +2.4% (M&A speculation (Cisco for Nutanix) from the Street.com afte
  • HPE bought hyperconverged peer SimpliVity)
  • LQ +1.7% (La Quinta Holdings says pursuing the separation of its businesses into two stand-alone publicly traded companies, which could involve spinning off our owned real estate assets as a separate company)
Select Rail names showing strength after Hunter Harrison steps down as Canadian Pacific CEO to 'pursue opportunities involving other Class 1 Railroads':
  • CSX +16.8%, NSC +3.6%, UNP +2.9%, KSU +2.4%
Other news:
  • SSH +15.3% (continued strength), ABEO +13.7% (EMA has granted Orphan Drug Designation for its gene therapy program ABO-101 for children impacted by Sanfilippo syndrome type B), NVCR +10.1% (announces physicians at 500 cancer treatment centers in the U.S. have been certified to prescribe its Optune to newly diagnosed and recurrent glioblastoma patientsg), SYN +8.5% (confirms plans to initiate a Phase 2b/3 adaptive pivotal trial for SYN-010; anticipates initiating this trial by the end of 1Q17), GALT +6.9% (Richard E. Uihlein discloses 7.89% active stake),MNK +4.2% (modestly rebounding; confirms details regarding FTC / Questcor matter; says no impact on Mallinckrodt net sales and will host call tomorrow at 7:30am ET), TDOC +2.4% (prices 8.25 mln share common stock offering (6.65 mln by Teladoc and 1.6 mln by stockholders) at $16.75/share), PSO +2% (modestly rebounding following yesterday's sell off), BHP +1% (preliminary agreement with federal prosecutors on behalf of Samarco Mineracao SA)
Analyst comments:
  • TSLA +4% (upgraded to Overweight from Equal Weight at Morgan Stanley)
  • MBLY +4% (upgraded to Buy from Neutral at Goldman)
  • HPQ +1.5% (upgraded to Buy from Neutral at UBS)
  • PNRA +1.3% (upgraded to Buy from Neutral at Goldman)
  • SWN +1.3% (upgraded at UBS)

>>> US Early premarket gappers

Early premarket gappers

Gapping up: SSH +21%, CSX +15.3%, OCLR +9.3%, OCLR +9.3%, NFLX +8.2%, GALT +6.9%, SYN+6.1%, MNK +4%, CHKP +3.8%, TSLA +3.2%, TAL +2.8%, WTFC +2.7%, MBLY +2.3%, VRX +1.9%,LQ +1.7%, PSO +1.7%, BK +1.7%, HPQ +1.5%, FNSR +1.3%, MTG +1.3%, MTG +1.3%, ACIA +1%,MJN +1%, BHP +1%, SWN +0.9%, KEY +0.9%, KSU +0.6%, BBT +0.6%

Gapping down: AMDA -22.4%, RCII -12.7%, ZYNE -10.3%, VNOM -7.6%, KMI -4.6%, AAN -4.4%,HRTX -3.1%, HTGC -3%, EPE -2.9%, AKS -2.9%, GNC -2.6%, PLXS -2.3%, X -1.8%, ASML -1.6%,VALE -1.5%, FCX -1.2%, CP -1.2%, CP -1.2%, SBNY -0.9%, SBGL -0.8%, RDS.A -0.8%, ERIC -0.8%,PTC -0.8%, PTC -0.8%, SLM -0.8%, AA -0.5%

>>> Netflix: Color on Qtr --> +7% Pre-Market 340k shares traded

Netflix: Color on Qtr

  • Needham Research notes 1) paid sub adds 27% above estimates; 2) higher profit margins than expected; 3) more owned IP (1,000 hours produced) suggests growing library value; and 4) rising profitability as NFLX grows revenue. What worries firm includes: 1) NFLX seems to be priced for perfection, hitting all-time highs; 2) FY16 FCF guidance 90 days ago was for negative $1.5B, yet FY16 came in at $1.6B and guidance is for negative $2B in FY17, implying NFLX must access capital markets to close its funding gap; 3) 1Q17 sub growth guidance & tough comps vs global launch in FY16; 4) no planned price increases implies no ASP growth; and 5) NFLX up only 8% on 27% subscriber over-delivery.
  • FBR Capital raises tgt to $144 from $100, retains Market Perform. NFLX accelerated to surprisingly robust sub growth in 4Q16, its second quarter in a row of meaningful upside versus guidance. This argues that the disappointing performance earlier in 2016 from un-grandfathering has run its course and that some of those who dropped the service are coming back. It also, more basically, suggests that NFLX's offer is really resonating with consumers. As great as 4Q16 was, the outlook for 2017 is one of sub growth not accelerating from a high peak-while price hikes decelerate.
  • Stifel Research raises tgt to $155. Firm notes Netflix is on track to surpass 100mm subscribers by 2Q:17 and the company remains committed to its long-term strategy of building the most dominant, globally-appealing library of content it can finance. Guidance for 1Q:17 came in slightly below consensus expectations domestically but materially above forecasts internationally. Approximately 47% of total members are now from outside the U.S., and firm expects the international crossover point to occur by 3Q:17. Netflix guided to 2017 GAAP operating margins of 7% (from ~4% in 2016) with its target of generating "material global profits in 2017 and beyond."
  • RBC Capital is raising its tgt to $175 from $150. Netflix posted better-than-strong Q4 EPS results, beating expectations in terms of subs AND profits. Still firm's #1 Pick. Although it faced elevated churn in mid-‘16 due to price increases, it did succeed with the price increase. The Key Domestic Evidence is accelerating Revenue Growth in Q4 (27%) and record-high Contribution Margin (38%). The Key International Evidence is Record High Sub Adds (5.1MM) and first-ever Contribution Profit ($16MM in Q1). Cash burn remains high but this should be the peak burn year. Meanwhile, Operating Margins are now likely to consistently grind higher (4% in '16, 7% in '17, 9% in '19...).
  • Pivotal Research is raising its tgt to $170 from previous street high $155. NFLX continued the strong trends from 3Q, as they have taken advantage of the drawing power of originals to generate strong better than expected subscriber growth while also taking a successful material price hike, a very powerful combination. Reflecting the benefits of their grandfathered price increases ARPU per streaming subscriber rose +12% in-line with consensus. The moderate slowdown in 1Q are reflective of the launch schedule for key original content releases (as an example House of Cards release was moved from 1Q to 2Q) and it appears new content launches are weighted toward 2Q and beyond. The only area that was worse than expectations was free cash flow as NFLX generated a (-$639M) loss in 4Q vs. (-$500M) guidance which appears related to timing. Guidance for free cash flow losses for '17 was also higher than expected reflecting the more upfront nature of the cash costs associated with developing content in-house.

Safran’s share-based offer for Zodiac Aerospace works out to be more valuable at

Safran’s share-based offer for Zodiac Aerospace works out to be more valuable at current prices than the cash tender offer.
  • Safran is initially expected to launch a tender offer for Zodiac Aerospace shares at EU29.47 per share and then a subsequent merger on the basis of 0.485 Safran shares for one Zodiac Aerospace share
    • Based on the current share price of Safran, the subsequent merger offer involving shares is worth ~EU30.4 per share
    • The subsequent merger offer is currently ~3.2% higher vs the cash tender offer
    • Zodiac is trading at ~3.6% discount to the cash offer and at ~7% discount to the shares-based merger offer
      • Click here for cash offer deal spread and here for the shares-based merger offer (ex-special div.
  • Replying to a question on the conference call about non-core shareholders tendering into a cash offer that is worth less than the subsequent merger offer, Zodiac CEO Olivier Zarrouati said, “I’m sorry, I will have to consider that."
    • "It’s way too early for me to speculate on the way the market will receive this operation, ” Zarrouati added
    • ”As we all know, the market sometimes can surprise us. We’ll see if such a scenario develops”
  • The tender offer acceptance threshold is 50% and is among conditions, including shareholder approvals, for the final merger
    • Family shareholders, two institutional investors (FFP, Fonds Stratégique de Participations) which are Zodiac’s reference shareholders and in total own 32%, to remain long-term shareholders of the combined entity, will contribute their shares to the subsequent merger offer
  • Completion of tender offer expected by end 4Q 2017, completion of merger expected early 2018

Reuters - Dead found in Italian hotel hit by avalanche after quakes, reports say

A number of people were killed in a small hotel that was hit by an avalanche in the mountains of central Italy after a series of earthquakes, Italian media reported on Thursday.

Up to 30 people were believed to be in the hotel when the avalanche hit on Wednesday night, officials said.

SkyTG24 television said some dead were found inside the Hotel Rigopiano in the town of Farindola on the Gran Sasso mountain in the central Abruzzo region.

On its website, Italian news agency Ansa quoted the head of a rescue squad that reached the hotel as saying "there are many dead."

No further details were immediately available.