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Tesla Only Worth Half Its Share Price: Goldman

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Tesla Only Worth Half Its Share Price: Goldman

By Shoshanna Delventhal | July 5, 2017 — 5:15 PM EDT

American auto manufacturer Tesla Motors Inc. (TSLA) saw its shares plummet 7.2% on Wednesday as weaker-than-expected quarterly sales were dragged down by a production shortfall.

While investors were still digesting news that the Palo Alto, Calif.-based company would start production on the mass-market Model 3 earlier than expected, Tesla announced it had delivered 22,000 cars in the recent quarter, coming in at the low end of guidance.

Weaker-Than-Expected Q2 Production and Deliveries

Goldman analyst David Tamberrino and team responded to the pair of news by slashing Tesla’s price target to $180 from $190, compared to Wednesday close at $327.09. “We remain Sell rated on shares of TSLA where we see potential for downside as the Model 3 launch curve undershoots the company’s production targets and as 2H17 margins likely disappoint (we now forecast auto gross margin of approx. 16% vs. FactSetconsensus of approx. 24.5% from Model 3 dilution),” wrote Tamberrino.

Goldman suggests that demand for Tesla’s established production, including its Model S and Model X, appears to be plateauing slightly below a 100k annual run rate. The analysts also indicate that “cash burn should intensify” throughout 2017, though they forecast the next capital raise in 1H18.

‘More Questions Than Answers’

On the bull side, analysts at Guggenheim contend that the Model 3 launch will outweigh the lighter deliveries last quarter. The analysts reiterated a buy rating and increased their price target on TSLA to $430 from $380.

Taking a more moderate position, Bernstein’s Toni Sacconaghi and Daniel Chen suggest that “Tesla’s Q2 production and deliveries report raised more questions than answers, particularly about the Model S and Model X.” Analysts were skeptical regarding certain factors such as the timing of the release after market close on the eve of a holiday and the fact that the company left out a figure for in-transit vehicle sales. (See also: Why Tesla’s Stock May Defy The Skeptics.)

Published at Wed, 05 Jul 2017 21:15:00 +0000

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GE Just Became the 2nd Largest Oil Services Co.

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GE Just Became the 2nd Largest Oil Services Co.

By Shoshanna Delventhal | July 5, 2017 — 3:10 PM EDT

Multinational conglomerate General Electric Co. (GE) has announced the completion of the merger between GE Oil & Gas and Baker Hughes Inc. (BHI) in a deal that will secure the company’s spot as the world’s No. 2 oilfield service provider.

Industrial conglomerate General Electric saw its shares jump 2% on Monday on the announcement of the megadeal, as BHI stock soared 5.8% on its last day of trading to the top of the S&P 500.

Weathering Industry Cycles

The American industrial giant is bullish its ability to bring together the companies’ “capabilities across the full value chain of oil and gas activities—from upstream to midstream to downstream.”

GE’s decision to double down on its petroleum-related operations comes amid a historic decline in crude oil prices. However, Chief Executive officer (CEO) Jeffrey Immelt suggests that the deal, expected to close mid-2018, will result in a diversified portfolio spanning oilfield services, equipment manufacturing and technology that can “weather the cycles better than anybody.”

A One-Time Dividend Payment

Analysts at RBC believe the transaction enhances Baker Hughes’ competitive position. “We remain positive on BHI’s combination with GE O&G and are encouraged by the potential for revenue upside from digital integration and shifting focus to products and technology,” wrote analyst Kurt Hallead.

GE owns 62.5% of the newly combined entity trading under the ticker BHGE, while Baker Hughes and its shareholders own a 37.5% stake. All shares traded under the previous BHI ticker have been converted to BHGE, while a one-time dividend payment of $17.50 per share. Due to the special dividend, BHGE opened on Wednesday at $40.80, down 29.13% from BHI’s close on Monday.

Shares of Boston-based GE are trading down about 0.6% on Wednesday afternoon at $27.28, reflecting an approximate 10.4% decline over the most recent 12-month period and a 13.4% dip year-to-date (YTD). (See also: General Electric to Merge Oil and Gas Business With Baker Hughes.

Published at Wed, 05 Jul 2017 19:10:00 +0000

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Brazil’s turmoil to boost M&A pipeline after a quiet quarter, bankers say

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Brazil’s turmoil to boost M&A pipeline after a quiet quarter, bankers say

By Tatiana Bautzer and Guillermo Parra-Bernal| SAO PAULO

 

Escalating political turmoil and a widening graft scandal are driving more Brazilian companies to sell businesses, promising a strong pipeline of mergers and acquisitions after dealmaking hit its slowest pace in a year in the second quarter, bankers said.

 

While stricter legal scrutiny related to the corruption scandal helped slow second-quarter M&A, bankers said funds and multinational firms were still seeking Brazilian assets. Despite economic and political headwinds, merger activity could be reignited by falling borrowing costs and an increasingly stable currency.

 

Pressure from creditors could also speed up asset sales by companies restructuring almost 180 billion reais ($56 billion) of debt, bankers said.

 

“M&A is relatively resilient to the macroeconomic and political environment as strategic players seek opportunities with long-term potential,” said Patricia Moraes, head of Brazil banking for JPMorgan Chase & Co, which topped Thomson Reuters local advisory rankings last quarter.

 

Uncertainty surrounding the timeframe for an economic recovery from Brazil’s worst recession on record, as well as concerns about the stability of President Michel Temer’s administration, have deterred some buyers and sellers from committing to deals.

 

Companies announced $7.052 billion worth of Brazil-related mergers last quarter, down 76 percent from the prior quarter, the rankings showed. A year earlier, when tougher due diligence procedures were implemented, announced M&A deals totaled $6.861 billion.

 

Last quarter, the number of announced deals fell to 132 from 141 in the prior three months and 135 a year earlier.

 

Brazilian markets tanked in mid-May after members of the billionaire Batista family accused Temer of seeking to obstruct the massive corruption probe known as Operation Car Wash. The market turmoil compounded the impact of Brazil’s recession, keeping buyers and sellers at odds over valuations.

 

Temer has called a corruption charge filed against him by Brazil’s top prosecutor a “fiction” as he faces possible removal from office.

 

Fallout from Operation Car Wash has led to increased due diligence concerning companies ensnared in the scandal, such as building group Odebrecht SA. Usual timeframes for such proceedings have doubled over the past year, to up to six months.

 

“Deals are going though an adjustment,” said Alessandro Farkuh, head of M&A for Banco Bradesco BBI SA. “There’s a lot of work but, because of the country’s situation, M&A negotiations are taking place in an unusual way.”

 

CONSOLIDATION

 

More assets are on the block as companies seek to cut debt or improve their capital and tax structures, said Eduardo Miras, co-head of Brazil investment banking at Morgan Stanley & Co, Brazil’s No. 1 M&A bank this year.

 

“Some companies are being forced to sell,” Miras said. “Opportunistic buyers and strategic players with a long-term view find themselves with a flurry of good Brazilian assets.”

 

Car Wash-related M&A deals include J&F Investimentos SA’s planned sale of a dairy producer and the maker of the popular Havaianas flip flops, Alpargatas. Members of the Batista family, which controls J&F, admitted to bribing 1,893 politicians.

 

Roderick Greenlees, global head of investment banking at Itaú BBA SA, said he expected deals to pick up in the third and fourth quarters amid growing interest from multinational firms and buyout funds, which are more likely to meet buyers’ prices for attractive companies.

 

“Some premium assets are being sold because of the current situation, which in general keeps us excited about the dealflow ahead,” Greenlees said.

 

JPMorgan and Morgan Stanley topped value rankings for the second quarter and the first half, respectively. JPMorgan worked on Itaú’s $2 billion purchase of a minority stake in brokerage XP Investimentos SA.

 

Itaú BBA led the rankings for the number of deals after working on seven transactions last quarter and 18 this year.

 

In the first six months, the total of 273 Brazilian M&A-related transactions was worth $36.177 billion, more than three times the amount recorded in the same period of last year, the data showed.

 

For years, investment banks have derived nearly half of their annual Brazil revenues from M&A advisory. As dealmaking suffers, banks have turned to structured lending, transactional banking or, in some cases, securities trading.

 

Following is a table with Brazil M&A ranking for the second quarter and the first six months. Numbers are expressed in U.S. dollars, unless specified.

 

(Editing by Phil Berlowitz)

 

(Why?)

Published at Wed, 05 Jul 2017 12:13:58 +0000

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Stocks recover as eyes shift to Fed minutes

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Stocks recover as eyes shift to Fed minutes

By Patrick Graham| LONDON

 

Stock markets rode out the latest rise in tensions around North Korea on Wednesday, main markets in both Europe and Asia inching higher as attention moved to minutes from the U.S. Federal Reserve’s last meeting.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.3 percent, regaining half the losses it saw on Tuesday when North Korea fired a missile into Japanese waters.

The organization’s global shares index gained 0.1 percent, helped by early gains for most of Europe’s major markets.

A shift towards more hawkish language by several major central banks has dominated the past week and left markets unsure of how much longer emergency stimulus in Europe will continue to support global asset prices.

For now investors seem to be giving policymakers the benefit of the doubt that the global economy can take any tightening of monetary policy, although the latest data on Wednesday was mixed – strong in Europe and weaker in China.

The Fed minutes will be searched by investors for signs of more concern among policymakers about a downturn in inflation and activity in the United States.

“North Korea has rattled markets but central bankers are more important,” said Kathleen Brooks, research director at City Index in London.

“While North Korea’s military ambitions are a background threat for markets, we don’t think that this particular geopolitical event is at the stage yet where it will cause a spike in volatility.”

South Korea’s main index rebounded by 0.36 percent and Japan’s Nikkei ended up 0.25 percent.

Shanghai stocks rose more than 1 percent, despite a drop in the Caixin/Markit services purchasing managers’ index (PMI) to 51.6 in June, from 52.8 in May.

IHS Markit’s final composite Purchasing Managers’ Index for the euro zone was 56.3 in June, down from May but comfortably beating a flash estimate, chalking up the best performance last quarter in over six years.

Currency markets were in limbo, the euro trading just over half a cent below last week’s 14-month highs against the dollar.

The dollar and yen were the main victims of the shift in language last week, but many analysts wonder whether the European Central Bank will be able to rein in money-printing later this year if the euro keeps gaining.

“I meet a lot of people while I talk to clients who think the ECB simply won’t be able to escape its current policy setting because a stronger currency is too damaging,” said Societe Generale strategist Kit Juckes.

“The thought the ECB will resist pressure…is still leading many … to look for cheaper levels to buy euro.”

The dollar was less than 0.1 percent higher against the basket of currencies used to measure its broader strength and 0.1 percent lower at $1.1353 per euro.

(Editing by Richard Balmforth)

Published at Wed, 05 Jul 2017 08:47:26 +0000

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8 Ways To Fly First Class For Cheap

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8 Ways To Fly First Class For Cheap

By Tim Parker | Updated June 28, 2017 — 1:43 PM EDT

Nowadays, it’s a lot harder to fly at the front of the plane without paying serious money.

Want to fly in first or business class seats without breaking your wallet? Read on for some tips.

Business vs. First Class

If you’re wondering about the difference between first and business class, the answer is that it depends on the airline, the specific aircraft and the route. For some airlines, there is no difference. For others, first class is a step above business class. Especially on international flights, first class customers often don’t have a person sitting next to them, they have better service, higher quality food and drinks, and access to the most exclusive airport lounges.

But first class seats can be pricey. In some parts of the world, a ticket could cost you thousands or even tens of thousands of dollars. A first class ticket from New York to Singapore on Singapore Airlines could cost as much as $12,000. This gets you an exclusive suite on the plane.

Unless you’re truly in the financial stratosphere, it’s difficult to justify the cost of a first class seat if business class is available. The perks are similar, especially on domestic flights. (See also, Top 5 Differences Between Business and First Class)

8 Cost-Effective Ways to Get the Seats

On domestic flights, you’re more likely to see business class seats than first class. In either case, how do you get them without paying a fortune to upgrade?

1. Don’t Book Them. Business class can cost as much as five times more than a coach ticket. Although business class is a better experience, it’s not five times better. In most cases, you can get them more cheaply using other means.

2. Remain Loyal. Airline loyalty programs aren’t what they used to be. Even if you’re a frequent traveler, the perks you receive aren’t nearly what they once were. All the same, those miles will add up and eventually you can use them for a free upgrade. But watch the expiration dates and make sure to read all e-mails that come from the airline. Don’t let points expire.

3. Easy Up. Andy Abramson, CEO of Comunicano, Inc. – he was named a Business Traveler of the Year for 2014 by Business Traveler magazine – says to make use of easy-up fares. “The way you do this is you purchase an upgradeable coach or premium economy fare and then apply your points to get into first class/business class.”

4. Use Elite or Airline Credit Cards. Some of the mid-tier cards offer travel rewards, but the elite travel cards are where to find the real perks. Cards such as American Express Platinum, Chase Sapphire Preferred, and some of the co-branded cards like the Delta SkyMiles American Express card or the United MileagePlus Explorer Card offer big bonuses if you sign up and spend a certain amount within a short period of time.

Rosemarie Clancy, editor in chief of RewardExpert.com, says, “Once you pick an airline, the best advice is to get that airline’s co-branded card. Many offer 50,000 mile sign-up bonuses, which is more than half the miles needed to get to Europe in first class for instance. That is United’s current offer.”

She continues, “Once you meet your minimum spend, which is usually around $3,000, think about getting a second card for your business, spouse or even yourself, especially one with transferable points like American Express Membership Rewards or Chase Ultimate Rewards. The Chase card offers 40,000 miles on sign-up so that would be enough when combined with a 50,000 mile bonus on an airline card for one first-class round-trip ticket to London or Paris.”

If you travel a little more frequently than the average vacationer, the annual fee associated with cards like the American Express Platinum pays for itself quickly in perks and rewards.

5. Buy the Points. There are plenty of websites that allow you to buy and sell points, but steer clear since major airlines don’t allow it, and it may result in you losing your miles or not being able to use the miles you purchased.

Instead, purchase them directly from the airline. They usually cost 2.5 cents per mile, but watch for promotional pricing. Whether it results in paying less for your first class seat depends on many variables, so crunch the numbers before you purchase.

6. Fly When Business Travelers Aren’t. Business travelers fly all week. The last thing they want to do is fly on the weekends. That’s why you won’t see as many people flying in business suites on Saturdays and Sunday mornings. That might leave more business class seats up for grabs.

7. Watch for the Open Seat. If your coach seat is towards the front of the plane, listen for the cabin door to shut. If there’s an open first class seat, ask the flight attendant if you can move. Of course, it always helps if you took the time to say hi and strike up a conversation with the attendant when you first boarded the plane.

8. Upgrade at Check-In. If you really want an upgraded seat, don’t have the miles to get it free and, don’t want to gamble on a free upgrade at the gate, purchase an upgrade at check-in. If there are seats available, airlines will often offer them at a discounted rate during online check-in.

If you don’t mind the gamble, ask the gate attendant what they’re charging for the upgrade. It might be even cheaper than the reduced online rate.

The Bottom Line

Abramson says, “In the old days status fliers would get upgraded at the gate. That’s possible on long hauls when there’s plenty of first and business class inventory on the plane, but these days we have smaller planes and less seats to fill up.”

It’s not going to be easy to get the upgrade for cheap. In most cases, you will have to pay something, but especially for longer flights, it might be well worth the cost.

Published at Wed, 28 Jun 2017 17:43:00 +0000

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Altaba Stock Breaks Out After Verizon Sale

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Altaba Stock Breaks Out After Verizon Sale

By Alan Farley | June 27, 2017 — 12:34 PM EDT

Nasdaq-100​ component Altaba Inc. (AABA) holds the balance of the remaining Yahoo assets, including 15.4% of Alibaba Group Holding Limited (BABA), following Verizon Communications Inc.’s (VZ) partial acquisition. The newly minted $52 billion market cap seems pricey, but no one really knows the value of this corporate hodgepodge or how it’s going to grow in the coming years.

Technically speaking, the stock is well positioned for gains through the rest of 2017 because the new entity has adopted Yahoo’s long-term chart, yielding a timely breakout above the 2014 high at $52.62. While it’s easy to second guess this glued-together reporting, consider that other big caps including United States Steel Corporation (X) and AT&T Inc. (T) have also sewn together bits and pieces of newly acquired operations or divestitures into multi-decade price charts. (See also: What Is Altaba Anyway?)

AABA Long-Term Chart (1996 – 2017)

The former company came public at $1.49 (after adjustment for five stock splits) in April 1996 and fell into a downtrend that found support near 65 cents. It then entered a powerful trend advance driven by the awakening of the net bubble, rising to an all-time high at $125.03 in March 2000. The subsequent downtrend relinquished the majority of the prior decade’s dramatic gains, dropping the stock more than 97% to $4.01 at the end of 2002.

The subsequent uptrend topped out at $43.66 in January 2006, highlighting severe technical damage because the rally failed to reach the .386 Fibonacci bear market retracement level. A pullback into 2008 accelerated during the economic collapse, dropping the stock back into the single digits for the second time in six years. It underperformed badly after hitting a bottom in November 2008, stuck in a narrow trading range bounded by resistance in the upper teens.

The stock took off in the strongest buying impulse so far this decade in the second half of 2012, breaking out above the 2006 high in October 2014 before topping out in the low $50s a few weeks later. It then entered a steep correction that found support in the upper $20s in early 2016, ahead of an equally strong bounce that reached within a few points of the prior high in May 2017, just a few weeks before this month’s post-acquisition breakout. (For more, see: Verizon Officially Now Owns Yahoo, Mayer Resigns.)

AABA Short-Term Chart (2015 – 2017)

The sell-off into 2016 unfolded through an Elliott five-wave decline, perfectly aligned with bearish action throughout the tech universe during that period. The stock tested the September 2015 low at $27.20 in February 2016, broke down and then rallied strongly, setting off a 2B buy signal that denotes the failure of bears to hold new resistance. Rumors about a company sale or divestiture generated speculative buying interest into September, when it disclosed high-profile hacking incidents that raised questions about the company’s valuation. (For more, see: Yahoo Confirms Massive Data Breach.)

On-balance volume (OBV) topped out in 2014 and entered a persistent distribution wave that ended four months before the price bottomed out in the first quarter of 2016. This bullish divergence contributed to steady buying interest that reached a new high ahead of the Verizon sale. The transaction triggered high-volume price bars and a sharp indicator downturn to a nine-month low, signaling aggressive profit taking as well as new purchases.

The OBV downturn tells us that the stock needs to rebuild previously loyal sponsorship to continue the 16-month uptrend. However, the price remains in breakout mode, and it makes sense to ignore recent signals because they’re unfolding right at the interface between the two corporate identities. In other words, this seemingly bearish activity could reflect the natural rotation from one set of shareholder hands to another. (See also: On-Balance Volume: The Way to Smart Money.)

The Bottom Line

Altaba came to life after Yahoo sold key assets to Verizon, with the new entity using the parent’s long-term chart. The split has triggered a major breakout undermined by a bearish volume signal, but we’ll ignore that red flag for now, given broad tech strength and confusion about the new entity’s legitimate supply and demand. (For more, check out: Altaba Spends $3.5B on Its Shares in Dutch Auction.)

Published at Tue, 27 Jun 2017 16:34:00 +0000

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Have oil prices stopped plunging?

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Summer gas prices dip to 12-year low
Summer gas prices dip to 12-year low

 Have oil prices stopped plunging?

  @mattmegan5

Just six months ago, many on Wall Street thought $60 oil was a slam dunk. That turned out to be a terrible bet.

Crude oil prices plunged to $42 a barrel last week, sinking into a bear market amid renewed concerns about a massive supply glut that just won’t go away. Some even feared a return to the sub-$30 prices that spooked global investors early in 2016.

But there are signs that the notoriously-moody oil market may have gotten a bit too pessimistic.After crashing more than 10% in June, crude prices have rallied four straight days to climb back above $44 a barrel. The rebound has lifted beaten-down energy stocks like EOG Resources(EOG) and Chesapeake Energy(CHK).

Edward Morse, global head of commodities research at Citigroup, believes the worst may soon be over.

“A bottom in the oil price is likely near,” Morse wrote in a report on Monday.

Rob Thummel, a portfolio manager at energy investment firm Tortoise Capital, expects demand for oil to rise during the summer driving season when Americans take more road trips — and use more gasoline.

“Ultimately, I don’t see oil going into the $30s — and if it does it’ll be very short,” said Thummel.

Yet few are calling for a speedy return to the higher prices that many investors bet on last fall when OPEC and Russia moved to rescue the oil market by cutting production. Before that, OPEC, led by Saudi Arabia, had been pumping away aggressively in a battle to regain market share lost to U.S. shale producers.

By agreeing to dial back production, OPEC seemed to be acknowledging that its strategy wasn’t working.

OPEC’s production cuts haven’t fixed the oil glut either. U.S. crude stockpiles are higher than they were before OPEC slashed production in November.

“Oil inventories in the U.S. are still elevated. They aren’t coming down as much as everyone thought,” said Thummel.

Citigroup warned that some big investors who were banking on an oil rebound last fall may hesitate to do the same this time.

“The fund community has been burned so badly as to reduce the likelihood of them jumping back in no matter what the fundamentals,” Citi’s Morse said.

Morse lowered the odds of oil prices topping $60 this year to below 50%, citing the “badly damaged” sentiment on Wall Street.

That would be just fine with American drivers. The recent slump in oil prices led to the cheapest gas prices at the start of summer in 12 years. Gas prices fell to an average of $2.25 on Tuesday, compared with $2.372 a month ago, according to AAA.

Published at Tue, 27 Jun 2017 19:22:04 +0000

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California moves forward on letting customers sue banks, inspired by Wells Fargo

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California moves forward on letting customers sue banks, inspired by Wells Fargo

California took another step on Tuesday toward allowing state residents to sue financial institutions for fraud, rather than letting banks force customers to settle disputes in arbitration, as a bill inspired by last year’s Wells Fargo scandal passed a key Assembly committee.

The bill has already passed the state Senate. The full Assembly, the legislature’s lower chamber, is expected to approve it in a vote toward the end of August, after the summer recess.

Under the bill, judges could override contract clauses that require customers to settle disputes through arbitration in cases where a bank commits fraud using customers’ personal information. Arbitration clauses, which have become standard practice since a 2011 U.S. Supreme Court decision, make consumers agree not to sue in the future as a condition of purchasing products or services.

Clauses inserted into Wells Fargo account-opening agreements have blocked customers from taking the third-largest U.S. bank to court over last year’s revelations that it opened millions of accounts without customer knowledge. Regulators fined the bank $190 million for the alleged deceit, of which $5 million was to be paid to customers.

The Consumer Attorneys of California backs the state’s legislation, and said customers have been trying to sue over the issue since 2013, three years before regulators acted.

“By forcing customers into secretive arbitration, Wells Fargo kept the scandal out of public view, allowing the fraud to mushroom while the bank evaded full accountability,” it said in a statement.

Republicans and others say class actions, where people band together to share resources in a single lawsuit, only benefit lawyers who reap high fees and suck up time and money. Consumer-rights advocates portray arbitration as a fixed game where companies hire and pay arbitrators to ensure disputes are settled in their favor.

Momentum to do away with the clauses led the U.S. Consumer Financial Protection Bureau to propose a federal rule last year requiring companies to let customers join class actions. That proposal has stalled in the face of opposition from Republicans, who now control both Congress and the White House.

 

(Reporting by Lisa Lambert; Editing by David Gregorio)

Published at Tue, 27 Jun 2017 21:19:28 +0000

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World’s first ATM machine turns to gold on 50th birthday

World’s first ATM machine turns to gold on 50th birthday

Five decades since it heralded a transformation in the way people obtained and used cash, the world’s first ATM was turned into gold for celebrations of its fiftieth anniversary.

The brainchild of Scottish inventor Shepherd-Barron, the first ATM (automated teller machine) was opened on June 27, 1967 at a branch of Barclays bank in Enfield, north London, the first of six cash dispensers commissioned by the bank.

English actor Reg Varney, who starred in the British TV comedy show “On The Buses”, was the first person to withdraw cash from the new machine.

Now there are an estimated three million cash machines across the globe with some 70,000 cash machines in the UK alone which dispensed 175 billion pounds in 2016. The world’s most northerly machine is at Longyearbyen, Svalbard, Norway and the most southerly located at the McMurdo station at the South Pole.

To commemorate the anniversary, Barclays transformed the ATM at its Enfield branch into gold, added a commemorative plaque and placed a red carpet in front for its users.

“Even though recent years have seen a huge uptake of digital banking and card payments, cash remains a crucial part of most people’s day-to-day lives,” said Raheel Ahmed, Head of Customer Experience and Channels at Barclays.

 

(Reporting by Michael Holden; editing by Guy Faulconbridge)

Published at Tue, 27 Jun 2017 10:42:19 +0000

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Your money: Now you can get miles for your student loan

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Dana Friend was skeptical about all the offers flooding her inbox to refinance her student loan with a private company, but what sold her in the end was not the offer to cut her interest rate in half – it was the bonus of 50,000 JetBlue miles.

The 30-year-old psychologist from Boynton Beach, Florida dropped from paying 6.8 percent to 3.75 with lender SoFi, and also scored free trips to New York and Jamaica.

“When I got the email for refinancing directly from JetBlue, I figured they must be legit if a major airline is working with them,” said Friend.

SoFi and CommonBond, two startup private student loan refinancing companies, are getting increasingly aggressive with their signup bonuses to get new borrowers to refinance with them. Both companies offer cash referral programs – SoFi’s offer is $300 and Commonbond’s is $200. In addition, Credible.com, a student loan comparison site, offers between $250 and $1,000 per referral.

CommonBond and SoFi also both offer social programs, like happy hours and lectures, and career services. Unemployed borrowers who ask for help generally average three months to find a new job, said Phil DeGisi, a CommonBond spokesperson.

CommonBond also has a social impact program where for every person who borrows a new student loan, one child’s education is paid for in Ghana.

JetBlue is SoFi’s first outside partner, but over the next 15 months, the company plans on adding new opportunities, said Catesby Perrin, SoFi’s partnership manager.

“A lower payment isn’t enough anymore to encourage refinancing. Borrowers want to know the private lender cares about them,” said Perrin.

But no matter how low the interest rate is or services or bonuses, there are tradeoffs, said Thomas Harnisch, director of state relations and policy analysis at the American Association of State Colleges and Universities. “These plans generally do not have a strong safety net like federal student loans for borrowers that cannot make their payments.”

It is important to first check eligibility for income-driven repayment plans and public service loan forgiveness, programs where remaining balances can be forgiven after 10 years of payments and work deemed by the U.S. Department of Education to be of public service, said Harnisch.

Going private also means giving up guaranteed breaks from repayment that came with your federal student loan when you have an economic shortfall. CommonBond offers up to 24 months of forbearance, while SoFi offers a program of up to 12 months when unemployed. The repayment break timeframes should be in each lender’s contract.

Friend found refinancing through a private company well worth it. Cutting her interest rate in half means with the same payment, she will pay off her balance in 5 years rather than 10.

(Editing by David Gregorio)

Published at Mon, 26 Jun 2017 13:11:04 +0000

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EpiPen maker’s $98 million payout is just way too much, shareholders say

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Mylan CEO grilled by Congress over EpiPen price hikes
Mylan CEO grilled by Congress over EpiPen price hikes

EpiPen maker’s $98 million payout is just way too much, shareholders say

EpiPen maker Mylan got a rare scolding from shareholders who are fuming over a $98 million pay package for its former CEO.

A majority of Mylan shareholders on Thursday rejected the drug company’s 2016 plan for paying its executives. Critics have blasted the plan as outrageous given the controversy over EpiPen price hikes.

It’s highly unusual for investors to vote down “say-on-pay” proposals. The Mylan vote signals deep dissension over the $98 million in compensation awarded to former CEO Robert Coury, who is now the drug maker’s executive chairman. Mylan CEO Heather Bresch was also awarded $13.8 million in total compensation and a larger equity award in 2016.

The shareholder vote was nonbinding. Mylan said its board of directors and compensation committee “will carefully consider these results” as it speaks to investors and designs its “compensation programs going forward.”

The company declined to tell CNNMoney whether the vote will trigger an adjustment to the 2016 pay awards that shareholders disapproved of.

The thumbs-down vote was a “rare and resounding” rebuke, said Eleanor Bloxham, the CEO of the The Value Alliance, which advises boards on corporate governance.

Bloxham said that just 2% or 3% of say-on-pay proposals fail to receive a majority of shareholder support. One high-profile rejection occurred in 2012 when Citigroup(C) shareholders rejected a $15 million raise for then-CEO Vikram Pandit.

Even though Mylan isn’t required to change its compensation plans, Bloxham strongly urged it to do so anyway.

“You can legally go through a yellow light, but is that the best way to drive? No. That’s exactly what got Mylan in the position it’s in today,” Bloxham said.

Mylan raised eyebrows earlier this year by awarding Coury $98 million despite the bitter public criticism the company got for jacking up the price on a two-pack of EpiPens by 400% over seven years. Mylan’s stock also plunged 29% last year.

Mylan has defended Coury’s compensation, saying most of it was earned during his 15-year tenure as a senior exec when he engineered the company’s “strong financial performance.”

A coalition of pension funds launched a campaign to oust Mylan’s directors, citing the compensation practices and a failure to provide adequate oversight in the EpiPen scandal. That campaign was backed by Institutional Shareholder Services, an advisory firm that recommended investors vote against all Mylan directors.

Despite the opposition, Mylan said the board of directors was re-elected. Mylan did not release vote totals yet so it’s not clear what level of support directors received.

It’s possible Mylan’s directors received less than a majority of the votes cast. That’s because the company’s bylaws require two-thirds of the votes cast at a meeting to unseat a director.

“It’s simply untenable for directors who received substantial opposition to remain in the boardroom. Doing so would further erode confidence in this company,” New York City Comptroller Scott Stringer said in a statement.

Stringer and New York State Comptroller Thomas DiNapoli led the campaign against Mylan’s board, citing “public relations debacles” and costly oversight failures.

Published at Thu, 22 Jun 2017 19:09:23 +0000

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Schedule for Week of June 25, 2017

Schedule for Week of June 25, 2017

by Bill McBride on 6/24/2017 08:11:00 AM

The key economic reports this week are Personal Income and Outlays for May, Case-Shiller house prices, and the third estimate of Q1 GDP.

—– Monday, June 26th —–

8:30 AM: Durable Goods Orders for May from the Census Bureau. The consensus is for a 0.4% decrease in durable goods orders.8:30 AM: Chicago Fed National Activity Index for May. This is a composite index of other data.

10:30 AM: Dallas Fed Survey of Manufacturing Activity for June.

—– Tuesday, June 27th —–

Early: Reis Q2 2017 Apartment Survey of rents and vacancy rates.Case-Shiller House Prices Indices9:00 AM ET: S&P/Case-Shiller House Price Index for April.

This graph shows the nominal seasonally adjusted National Index, Composite 10 and Composite 20 indexes through the March 2017 report (the Composite 20 was started in January 2000).

The consensus is for a 5.9% year-over-year increase in the Comp 20 index for April.

10:00 AM: Richmond Fed Survey of Manufacturing Activity for June.

—– Wednesday, June 28th —–

7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.Early: Reis Q2 2017 Mall Survey of rents and vacancy rates.

10:00 AM: Pending Home Sales Index for May. The consensus is for a 0.5% increase in the index.

—– Thursday, June 29th —–

8:30 AM ET: The initial weekly unemployment claims report will be released. The consensus is for 239 thousand initial claims, down from 241 thousand the previous week.8:30 AM: Gross Domestic Product, 1st quarter 2017 (Third estimate). The consensus is that real GDP increased 1.2% annualized in Q1, unchanged from the second estimate of 1.2%.

Early: Reis Q2 2017 Office Survey of rents and vacancy rates.

—– Friday, June 30th —–

8:30 AM: Personal Income and Outlays for May. The consensus is for a 0.3% increase in personal income, and for a 0.1% increase in personal spending. And for the Core PCE price index to increase 0.1%.9:45 AM: Chicago Purchasing Managers Index for June. The consensus is for a reading of 58.2, down from 59.4 in May.

10:00 AM: University of Michigan’s Consumer sentiment index (final for June). The consensus is for a reading of 94.5, from the preliminary reading 94.5.

Published at Sat, 24 Jun 2017 12:11:00 +0000

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It’s official. Business isn’t investing in Britain.

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The headaches of negotiating Brexit
The headaches of negotiating Brexit

 It’s official. Business isn’t investing in Britain.

  @ivanakottasova

The man running Britain’s economy has warned that uncertainty over Brexit is stopping businesses from investing in the country.

“There is a large amount of business investment that is being postponed until business can see more clearly what the likely outcome of [Brexit] is,” Treasury chief Philip Hammond said Thursday in a televised interview.

It’s not the only warning to sound in recent weeks.

Research from Bank of America Merrill Lynch showed that business investment dropped in the final quarter of 2016 to its weakest level in almost three years. And a recent survey of 700 businesses conducted by the Bank of England indicated that uncertainty was causing some companies to rethink investments.

The British government kicked off divorce negotiations with the European Union on Monday.

But it’s still not clear exactly what Prime Minister Theresa May hopes to achieve before the clock runs out on talks in March 2019. May had promised a clean break with the EU, but that was before a disastrous election wiped out her majority in parliament and emboldened rivals who want to maintain closer ties to Europe.

Investors have now been dealing with elevated uncertainty for a year. But huge risks still loom.

“If we leave the single market and the customs union, the costs involved will be significant,” said Vicky Pryce, an economist at the Centre for Economics and Business Research. “Businesses have been very worried.”

Corporate leaders are most anxious about a scenario in which Britain crashes out of the EU without a deal. They would face new trade barriers and huge amounts of red tape.

Hammond favors a transitional period to help British companies adapt to life outside the bloc.

“The earlier we can give business that reassurance the more quickly we will get businesses investing again,” he said on Thursday.

While there have been some big investments announced in the wake of the referendum — especially in the tech sector, broad momentum appears to be fading.

Several major banks have already announced they will move jobs and investment out of the country. The budget airline Ryanair(RYAAY) said it will pivot investment out of the U.K.

The German car maker BMW(BAYRY) is considering whether to produce the new electric version of its iconic Mini car in mainland Europe rather than at its main U.K. facility in Oxford.

“There have been some purchases, mainly because foreign companies took advantage of the weaker pound, but very little in terms of real investment,” said Pryce.

Bank of England Governor Mark Carney also raised warning flags this week. He said that Britain is in a vulnerable position because it imports more goods and services than it exports.

“The U.K. relies on the kindness of strangers at a time when risks to trade, investment, and financial fragmentation have increased,” he said in a speech to financial titans.

Published at Thu, 22 Jun 2017 15:50:26 +0000

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U.S. Demographics: The Millennials Take Over

U.S. Demographics: The Millennials Take Over

by Bill McBride on 6/22/2017 02:29:00 PM

From the Census Bureau The Nation’s Older Population Is Still Growing, Census Bureau Reports

New detailed estimates show the nation’s median age — the age where half of the population is younger and the other half older — rose from 35.3 years on April 1, 2000, to 37.9 years on July 1, 2016.

“The baby-boom generation is largely responsible for this trend,” said Peter Borsella, a demographer in the Population Division. “Baby boomers began turning 65 in 2011 and will continue to do so for many years to come.”

Residents age 65 and over grew from 35.0 million in 2000, to 49.2 million in 2016, accounting for 12.4 percent and 15.2 percent of the total population, respectively.

U.S. Population by AgeClick on graph for larger image.

This graph uses the data in the July 1, 2016 estimate released today.

Using the Census data, here is a table showing the ten most common ages in 2010 and 2016.

Note the younger baby boom generation dominated in 2010.  By 2016 the millennials have taken over.  The six largest groups, by age, are in their 20s – and eight of the top ten are in their 20s.

My view is this is positive for both housing and the economy.

 

Population: Most Common Ages by Year
2010 2016
1 50 25
2 49 26
3 20 24
4 19 23
5 47 27
6 46 22
7 48 55
8 51 28
9 18 21
10 52 55

 

Published at Thu, 22 Jun 2017 18:29:00 +0000

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Solar Energy to Cost Less Than Coal by 2021

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Solar Energy to Cost Less Than Coal by 2021

By Shoshanna Delventhal | June 20, 2017 — 7:45 PM EDT

A recent survey by Bloomberg New Energy Finance expects solar energy to outrun coal and natural gas with lower costs much sooner than previously forecasted. Within a few years, renewables will be cheaper than coal almost everywhere in the world, according to the research group.

The study concluded that in the U.S. and Germany, solar already rivals the cost of new coal power plants, and is expected to do the same in high-growth markets such as China and India by 2021.

The cost of electricity from solar energy, or photovoltaic panels has fallen nearly 25% since 2009, and is expected to to decline another 66% by 2040. Onshore wind, after experiencing a 30% reduction in price over the same period, is forecast to slash costs another 47% in just over two decades. (See also: 2017: A Turning Point for the Solar Industry.)

Renewable Energy Prices Are Falling

If the projections turn out correct, total global carbon dioxide pollution from fossil fuels may actually begin to decline after 2026. By contrast, the International Energy Agency’s central forecast sees emissions continuing to grow for decades to come. “Costs of new energy technologies are falling in a way that it’s more a matter of when than if,” said BNEF researcher Seb Henbest, the lead author of the report.

Total coal-powered generation in the United States is estimated to be slashed in half by 2040, compared to an 87% drop in Europe, where environmental laws have increased the price of using fossil fuels. A whopping 369 gigawatts of coal projects stand to be canceled, amounting to the entire electricity output of Germany and Brazil combined.

Despite President Donald Trump’s decision to pull out of the Paris Agreement on climate change and his stated commitment to bringing back the U.S. coal industry, BNEF expects the world’s hunger for coal to subside in less than 20 years as governments work together to reduce emissions. “Beyond the term of a president, Donald Trump can’t change the structure of the global energy sector single-handedly,” wrote Henbest.

Wind and solar are expected to make up nearly half of the world’s total installed generation capacity by 2040, compared to just 12% now. (See also: Oil Giant Total Sees Bright Future in Electricity.)

Published at Tue, 20 Jun 2017 23:45:00 +0000

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No holy guacamole: Chipotle sinks on weak outlook

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5 Stunning stats about Chipotle

No holy guacamole: Chipotle sinks on weak outlook

Good news for Chipotle: Customers have come back following the chain’s E.coli nightmare a few years ago. Bad news for Chipotle: Higher marketing costs and surging avocado prices may eat into its profits.

Shares of Chipotle(CMG) tumbled 6% Tuesday — making it the worst performer in the S&P 500 — after it said in a regulatory filing that operating costs in the second quarter would be higher than originally expected and potentially up from the first quarter as well.

Chipotle said specifically that an increase in marketing and promotional expenses was the main reason for the higher costs.

That’s why Wall Street is worried. Instinet analyst Mark Kalinowski cut his earnings forecast and price target for Chipotle by 6% Tuesday following Chipotle’s new outlook.

But Chipotle, which launched a major national ad campaign earlier this year, must feel it needs to get the word out to convince any customers still skeptical about food safety that it’s okay to go back and eat burrito bowls and sofritas.

Sales plunged in late 2015 after the E.coli outbreak was first reported — and sales continued to fall as more and more illnesses throughout the U.S. were linked to the chain. The CDC ultimately found that 60 people in 14 states wound up getting sick.

But the increase in marketing is working — even if it is proving to have a bit of a negative impact on profits.

Chipotle reiterated in its filing with the Securities and Exchange Commission that it still expects same-store sales (which measures the performance of restaurants open at least a year) to rise in the high single digits for the full year.

And shares of Chipotle are up nearly 15% so far in 2017 — despite the big drop on Tuesday.

Still, a recent surge in avocado prices due to concerns about a shortage in Mexico could be another problem for the company as well.

For now, Chipotle still thinks that food costs will account for a little more than 34% of its sales in the second quarter — the same as what it told Wall Street in April. But avocado prices have shot up in recent months.

That could put pressure on the company to raise prices for guacamole, which, of course, is one of its key menu items. (Chipotle, to its credit, has resisted the urge to jump on the Millennial-fueled avocado toast train.)

An increase in guac prices could potentially alienate customers who may still be skittish about Chipotle to begin with after the E.coli outbreak. But if Chipotle doesn’t raise prices to deal with rising commodity costs, that may lead to another drop in profits.

So Chipotle could be in a bind for the rest of the year.

It can’t afford to cut back on its TV commercials since it still needs to woo back former customers who have yet to return. And it may have to eat those higher avocado costs too because a big price hike won’t help its reputation either.

Published at Tue, 20 Jun 2017 17:17:09 +0000

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Has Alphabet Topped Out?

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Has Alphabet Topped Out?

By Alan Farley | June 19, 2017 — 10:11 AM EDT

Alphabet Inc. (GOOGL) has rewarded institutional and retail shareholders for months, but its impressive uptrend may be coming to an end, replaced by an intermediate correction that could relinquish 200 or more points before committed buyers return in force. As a result, investors and market timers who have profited from this rally should tighten up stops, take profits or institute options plays to protect their hard-earned gains.

While the tech giant has delivered a broad assortment of innovations and initiatives in the past decade, search engine advertising revenues still comprise a much greater share of quarterly revenues than cloud computing, self-driving cars or artificial intelligence. That cyclical force could dampen profitability in coming quarters, given weaker-than-expected U.S. growth in the first half of 2017. This type of shortfall is typical late in an economic expansion, often presaging a recession lasting one or two years. (For more, see: The Business of Google.)

GOOGL Long-Term Chart (2004 – 2017)

The company came public at $50 in August 2004, after adjustment for the 2014 split that created two equity classes and a new corporate identity. It ground sideways for two weeks following its introduction and took off in a historic uptrend that continued into the first quarter of 2006, when it stalled at $237.55. The stock then eased into a broad trading range, ahead of a cycle-ending rally burst that ended at $373 in November 2007. (See also: Why Google Became Alphabet.)

The stock plunged in two broad waves during the 2008 economic collapse, coming to rest at a two-year low just above $120 in December. The subsequent recovery wave lagged other tech stocks, requiring nearly four years to complete a 100% round trip into the prior-decade’s high. A 2013 breakout caught fire, lifting the stock in a stairstep pattern that featured quick rally bursts interspersed with long periods of sideways consolidation.

A 2015 breakout lost momentum in the first quarter of 2016, giving way to choppy sideways action, ahead of a 2017 breakout that mounted a four-year trendline of rising highs in April. The uptick then ran into a buzzsaw of selling pressure, declining to new support in a testing process that is still under way as we head toward the third quarter. This marks a binary setup in which new highs will continue the uptrend while a breakdown may signal the rally’s end, ahead of a multi-month trading range or long-term top. (To learn more, check out: Identifying Tops and Topping Patterns With Surprising Accuracy.)

GOOGL Short-Term Chart (2015 – 2017)

A July 2015 gap ended more than a year of lagging performance, generating a two-step rally that topped out near $800 at the start of 2016. The stock stretched toward $840 in the second half of the year, grinding out a rising wedge pattern that finally broke to the upside in April 2017. That uptick also broke long-term resistance at the rising highs, reaching $1,000, where aggressive selling pressure triggered an intermediate reversal.

The quick downturn at the magic number raises the odds that the April rally signaled a climax event that will soon give way to a multi-month correction. However, bulls will retain control as long as the price holds above new support at the unfilled gap between $890 and $920. Sidelined players should avoid long and short positions between that level and the all-time high at $1,008 until one side takes control with a breakout or breakdown. (See also: The Anatomy of Trading Breakouts.)

On-balance volume (OBV) has faithfully tracked price action since 2014, also rising in stairstep increments. It reached a new high in May 2017, signaling bullish convergence that keeps bulls in charge, at least for now. However, the first leg of the downturn at $1,000 generated the highest selling volume since the fourth quarter of 2016, when the stock fell nearly 100 points in under four weeks.

The Bottom Line

Alphabet broke out above a multi-year rising trendline in April 2017, highlighting significant relative strength, ahead a rally burst just above $1,000. Aggressive sellers then triggered a sizable reversal, setting up a key test of the uptrend, with a decline through $890 signaling the start of a major correction or long-term market top. (For related reading, see: The Tech Bubble Will Burst: The Question Is When.)

Published at Mon, 19 Jun 2017 14:11:00 +0000

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Verizon Now Biggest Dog in the Dow

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Verizon Now Biggest Dog in the Dow

By Alan Farley | June 19, 2017 — 1:22 PM EDT

Dow component Verizon Communications Inc. (VZ) completed its controversial acquisition of key Yahoo! Inc. (YHOO) assets on June 13, but sidelined market players hardly took notice, dropping the stock into a weekly loss. This bearish turn continues a long string of misfires that have now dumped the telecom giant into the 30th slot in Dow component relative strength.

Wireless subscriber growth has stalled in recent years due to worldwide saturation, with heavy competition from AT&T Inc. (T), T-Mobile US, Inc. (TMUS) and Sprint Corporation (S) eating into profit margins. Rival AT&T’s DirecTV and pending Time Warner Inc. (TMX) acquisitions have been tough to duplicate, highlighting doubts about the Yahoo purchase. Taken together, Verizon stock may have peaked for this bull market cycle, opening the door to profitable short selling. (See also: Verizon Officially Now Owns Yahoo, Mayer Resigns.)

VZ Long-Term Chart (1993 – 2017)

The stock underperformed in the first two-thirds of the 1990s, gaining ground in a shallow uptrend that stalled in the low $30s in 1993. It tested that level three years later and pulled back, ahead of a 1997 breakout that posted healthy gains into the October 1999 all-time high at $64.75. It built a volatile topping pattern at that level and broke down into the new millennium, joining the market universe in the bursting of the dotcom bubble.

Selling pressure ended in the third quarter of 2002 at a seven-year low in the mid-$20s, ahead of a recovery wave that posted a lower 2003 high at $41.29. That level resisted three breakout attempts into 2005, highlighting significant relative weakness during the mid-decade bull market. The stock tested that barrier for the fourth time in October 2007 and reversed once again, in perfect timing with the multi-year market top. (For more, see: Verizon to Lay Off 1,000 Across AOL, Yahoo: Report.)

Verizon stock broke the 2002 low during the 2008 economic collapse, descending to a 16-year low at $21.48. That deep print finally ended the nine-year string of lower highs and lower lows, ahead of a powerful bounce that reached a 12-year high at $54.31 in 2013. That level has marked resistance in the past four years, triggering a July 2016 reversal that is still in control of price action nearly one year later.

The monthly stochastics oscillator fell into a sell cycle in the summer of 2016 and bounced just above the oversold level in the fourth quarter, yielding a lower high in the first quarter of 2017. This marked a significant failure, ahead of fresh downside move that reached a 14-month low in May. The indicator finally hit an oversold technical reading earlier this month, but the first quarter failure used up considerable buying power that is likely to undermine the next recovery attempt. (For more, see: Stochastics: An Accurate Buy and Sell Indicator.)

VZ Short-Term Chart (2015 – 2017)

The 2013 top near $54 gave way to a two-year decline that finally ended at $38.06 after the August 2015 mini flash crash. Multiple swing highs in the lower $50s into that climactic low reinforced long-term resistance that was tested repeatedly in 2016. Slightly higher highs between $54 and $57 failed to attract momentum buying interest, generating a series of failure swings that trapped breakout buyers.

On-balance volume (OBV) topped out in 2013 and entered a steep distribution wave that failed to respond to 2015 and 2016 breakout attempts. The indicator fell off a cliff at the start of 2017, pointing to wholesale institutional abandonment, breaking 2016 range support while dropping to the lowest low since 2012. This signals a major bearish divergence when taken together with range-bound price action, raising the odds for a secular downtrend that could last for many years. (See also: On-Balance Volume: The Way to Smart Money.)

The Bottom Line

Verizon topped out in 2013 and has built a multi-year trading range that could signal the end of gains for this bull market cycle. Even through deep support in the upper $30s may delay long-term sell signals, war-weary shareholders may now wish to reduce or eliminate exposure to this market laggard. (For more, check out: How to Pick the Best Telecom Stocks.)

Published at Mon, 19 Jun 2017 17:22:00 +0000

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Why Mattel Is Down 30% While Hasbro Is Up 30% in 2017

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Why Mattel Is Down 30% While Hasbro Is Up 30% in 2017

By Shoshanna Delventhal | June 17, 2017 — 2:17 PM EDT

U.S. global toy maker Mattel Inc. (MAT) saw its stock take another hit this week as its newly instated Chief Executive Officer (CEO) Margo Georgiadis unveiled plans to revive sales by slashing the company’s dividend in half to support its modernization in the digital age and expand into emerging markets.

Shares fell nearly 8% on Thursday as analysts rubbed salt in the wound in a series of bearishresearch notes. In the aftermath, MAT stock reflects an approximate 30% loss so far this year compared to a 30% return secured by its top U.S. toy rival, Hasbro Inc. (HAS). (See also: Mattel Tanks as It Slashes Dividend to Fund Turnaround Plan.)

Applauding Hasbro’s Diversification

D.A. Davidson analyst Linda Bolton offered a downbeat view on Mattel given the El Segundo, Calif.-based company’s “deteriorating near-term business fundamentals.” Bolton downgraded MAT to neutral and cut her price target from $30 to $24 per share, compared to a Friday close at $20.72.

UBS also downgraded shares of the struggling toy maker on concerns over a lack of specifics in the CEO’s turnaround plan that she hopes to fund. Analyst Arpiné H. Kocharyan suggests that Georgiadis’ presentation fell short of details, especially regarding Mattel’s recovery time and left questions regarding how its reinvestment plan will change the company’s profit profile next year.

Jefferies chimed in with another negative view, indicating that a lack of clarity means “a full de-risking of estimates in unlikely,” as the investment firm reiterated a hold rating on MAT and cut its price target to $19. Earlier this month, Jefferies named Pawtucket, R.I.-based Hasbro as their favorite toy player, echoing the Street’s sentiment that the firm will continue to gain from improving leverage, a strong digital focus and a pipeline of new content helping drive multiyear earnings per share (EPS)upside. (See also: A Tale of Two Toy Makers: Mattel and Hasbro.)

Published at Sat, 17 Jun 2017 18:17:00 +0000

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Amazon is buying Whole Foods for $13.7 billion

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Why Amazon is buying Whole Foods
Why Amazon is buying Whole Foods

Amazon is buying Whole Foods for $13.7 billion

  @CNNMoney

Amazon is making a big bet on physical stores and the business of food.

The online retail giant announced Friday that is buying organic grocery chain Whole Foods(WFM) for $13.7 billion in cash. The deal values Whole Foods at $42 a share, 27% higher than where the stock was trading Thursday.

Amazon(AMZN, Tech30) said Whole Foods stores will continue operating under that name as a separate unit of the company. Whole Foods CEO John Mackey will stay on to lead Whole Foods, which will keep its headquarters in Austin, Texas.

The deal shows Amazon’s interest in moving into the business of operating traditional brick-and-mortar stores, even as many retailers that have been crippled by Amazon’s growth have announced a series of store closings.

It also shows Amazon’s growing interest in groceries. The company has its own delivery service, AmazonFresh, and is experimenting with a “click and collect” model, offering customers to buy groceries online, then pick them up in person.

The supermarket business, like many other parts of retail, has been hit hard by increased competition from Amazon itself, as well as Walmart(WMT).

Grocery giant Kroger said Thursday that its profits for the year would be lower than Wall Street expected, sending its stock plunging nearly 20%.

Then Kroger’s stock plummeted 13% further on Friday after the Amazon-Whole Foods detail was announced.

Shares of other retailers with a big presence in groceries, such as Target(TGT), Costco(COST), SuperValu(SVU) and Sprouts(SFM), plunged as well.

And Walmart was down 5%, despite announcing another online commerce deal of its own Friday. It bought men’s apparel company Bonobos.

But Amazon’s stock rose 3% on the news. Investors don’t seem too concerned by how much the company is spending. A warning of a possible credit downgrade by ratings agency S&P Global Ratings didn’t hurt Amazon either.

S&P said that Amazon may need to take on more debt as a result of the acquisition. But Amazon finished the first quarter with $21.5 billion in cash and securities on its balance sheet — and only $7.7 billion in long-term debt.

Amazon’s deal for Whole Foods also further demonstrates the financial might of the Jeff Bezos-led company, whose market value is greater than that of the 12 largest traditional general retailers combined.

“Millions of people love Whole Foods Market because they offer the best natural and organic foods, and they make it fun to eat healthy,” said Bezos.

Whole Foods, founded in 1978, is widely credited with helping to make organic food go mainstream. The company now has about 87,000 employees and more than 460 stores — mostly in the U.S. But Whole Foods has also expanded to Canada and the U.K.

The company has been moving aggressively in big cities, targeting millennial shoppers with a store format called 365 by Whole Foods Market that, like rival Trader Joe’s, has lower prices than the ones found at core Whole Foods stores.

High prices, of course, have been a problem for Whole Foods. The company is often derisively referred to as Whole Paycheck since the company charges a pretty penny for spelt and quinoa.

The company was accused of overcharging customers by regulators in New York City in 2015 and that had a huge negative impact on Whole Foods. Sales plunged for several quarters.

And the company became the butt of jokes by late-night comedians. HBO’s John Oliver did a savage skit about the company’s high prices. (HBO, like CNNMoney, is owned by Time Warner.)

Oliver ran a mock commercial showing, among other things, a block of ice with an avocado balanced on top for $25.99, a pomegranate that listened to NPR for $64.99, and tilapia-wearing yoga pants for $84.99.

Mackey eventually wound up apologizing to customers. But the damage was done.

Sales growth at Whole Foods has slowed and profits have yet to return to levels before the price scandal. That may be one reason why Whole Foods was willing to sell to Amazon.

It will be interesting to see if Amazon — which has a reputation for keeping prices low — will turn Whole Foods into more of a bargain retailer as well.

It’s also worth noting that Whole Foods stock did not move much higher than $42 on Friday — the price that Amazon agreed to pay. That could be a sign that Wall Street does not expect a bidding war for the company that would push the sale price higher.

So it looks like Bezos will inherit the bad PR baggage that comes with Whole Foods. I wonder if it’s too soon for people to ask Alexa where they can find stalks of asparagus in a bottle of water for $6.

Published at Fri, 16 Jun 2017 19:47:30 +0000

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