Author Archives: Scalper1

Netflix Gaining In Europe, But Faces Regulatory Mandates

Netflix ( NFLX ) is successfully fending off a host of rivals in Europe thanks to its mix of Hollywood and local content, analysts say. After examining the online video markets in the U.K., Germany, France, Italy and Spain, investment bank UBS concluded that Netflix is well positioned for growth. “We think Netflix is doing quite well across Europe despite intense focus from local competitors in each market, not to mention competition with Amazon ( AMZN ), who was earlier to enter the U.K. and Germany,” UBS analyst Doug Mitchelson said in a research report Sunday. Mitchelson reiterated his buy rating on Netflix stock, with a 12-month price target of 141. Netflix stock was up 2%, near 94.50, in afternoon trading on the stock market today , but it has been trading below its 50-day moving average since posting disappointing earnings last month. Netflix’s early success in foreign markets comes as the company is ramping up production of original shows in local languages. “Management continues to suggest that only about 20% of international viewing is from local content and that U.S. content continues to travel well everywhere, including in the rest of world markets launched this year,” Mitchelson said. “Thus, we expect Netflix to continue to focus the majority of its content budget on U.S. content, though increasingly originals and almost exclusively content with global rights.” Europe Seeking More Local Content From Video Services Last week, the Financial Times reported that Netflix and other on-demand video services could be forced to devote at least 20% of their catalogs to European movies and TV shows as part of an overhaul of the EU’s broadcasting rules. The services also would be required to prominently display European content. Streaming video services currently are not covered by laws that require national broadcasters to ensure that the majority of their content is European. Those same regulations force broadcasters to contribute financially to the production of European films and TV shows. Netflix has opposed the proposed regulations, the FT reported. Investors are increasingly focused on Netflix’s international growth, as its service nears the saturation point in the U.S., Piper Jaffray analyst Michael Olson said in a report Monday. He rates Netflix stock as overweight, with a price target of 122. “While in calendar year 2016 we expect international will account for 35% of revenue, we are modeling 50% by 2020,” Olson said. RBC Capital Markets analyst Mark Mahaney on Sunday maintained his outperform rating on Netflix stock, with a price target of 140. RBC’s recent surveys of online users found strong usage and high satisfaction for Netflix in the U.S. and rising demand in France and Germany, Mahaney said. RELATED: Netflix Signs Programming Deal With Hispanic TV Leader Univision

Apple Shakes Off Concerns About Becoming The Next BlackBerry

Apple ( AAPL ) stock rose Monday as investors digested a positive iPhone 7 production report, along with a cautionary article that suggested Apple was at risk of becoming the next BlackBerry ( BBRY ). Apple stock was up 1.6%, near 97, in afternoon trading on the stock market today . Taiwan’s Economic Daily News reported Monday that Apple has ordered contract manufacturers to produce 72 million to 78 million iPhone 7 handsets this year, a record figure for a new iPhone and above analyst estimates of 65 million units. The iPhone 7 is expected to be released in September, with a slimmer design, faster processor and improved camera as compared to earlier iPhones. This 10th-generation iPhone might even sport a waterproof design for the first time. Apple Falling Behind In AI Meanwhile, influential tech blogger and Web developer Marco Arment on Saturday posted an article that argued Apple is falling behind Amazon.com ( AMZN ), Facebook ( FB ) and Alphabet ( GOOGL )-owned Google in artificial intelligence (AI), digital assistants and voice interfaces. He said Apple could miss the next big shift in computing, just as onetime cellphone giant BlackBerry missed the move to smartphones from email-centric feature phones. “Amazon, Facebook, and Google — especially Google — have all invested heavily in Big Data Web services and AI for many years, prioritizing them highly, iterating and advancing them constantly, accumulating relevant data, developing effective algorithms and attracting, developing and retaining tons of specialized talent,” Arment wrote. Arment says Apple is not putting the same emphasis on Big Data and AI as its rivals. “Becoming a major Big Data AI services company doesn’t happen completely in secret and suddenly get released to the world, completed, in a keynote,” Arment said. “It’s a massive undertaking, spanning many years, many people and a lot of noticeable interaction with the world. It’s easier to conceal the development of an entire car than a major presence in AI and services.” Analysts Keep Buy Ratings On Apple Stock Investors on Monday were more focused on the Economic Daily News article and a trio of reassuring analyst reports. Pacific Crest Securities analyst Andy Hargreaves on Sunday reiterated his overweight rating on Apple stock with a price target of 123. “We believe concerns about a potential lack of innovation in the iPhone 7 underestimate the extraordinary growth in the user base over the past two years, which is likely to drive increased replacement volume and overall iPhone unit growth in fiscal 2017, almost regardless of the hardware,” Hargreaves said. BMO Capital Markets analyst Tim Long also is positive on Apple because of the potential for iPhone users to upgrade with the iPhone 7 cycle. “What we find most interesting is that we believe we are entering the iPhone 7 cycle with the highest percentage of phones in the installed base at least two years old, at about 26% (compared to 23% for iPhone 6),” Long said. “This translates to about 120 million phones. As a result, we believe the device will drive an improved replacement rate, even if it has lackluster features.” Also, the huge growth in used iPhone sales will increase the installed base of iPhone users and boost services revenue, Long said. He reiterated his outperform rating on Apple stock, with a price target of 117. Nomura analyst Jeffrey Kvaal maintained his buy rating on Apple with a price target of 120. He noted the success of Apple’s recent iPhone SE launch but cautioned that the lower-cost smartphone could cannibalize sales of iPhone 6S handsets. Apple chip suppliers Broadcom ( AVGO ), Skyworks Solutions ( SWKS ), Qorvo ( QRVO ) and NXP Semiconductors ( NXPI ) were up Monday intraday. Broadcom climbed 1.5%, Skyworks 2.4%, Qorvo 2.9% and NXP Semi 1.1%. RELATED: Apple Has Largest Cash Stockpile, Twice That Of Microsoft’s Apple Faces ‘Existential Threat’ From Messenger Bots .

Will Amazon’s Transportation Fleet Bring Down Hammer On FedEx, UPS?

It’s an ambitious plan by Amazon ( AMZN ), to procure a fleet of 40 airline freighters and lessen its dependence on FedEx ( FDX ) and United Parcel Service ( UPS ). The 40 aircraft that Amazon plans to have fully operational by 2018 will enable it to bring as much as 30% of its current delivery volume in-house, according to a research report Monday by Moody’s Investors Service analyst Jonathan Root. In terms of short- and medium-haul aircraft, Amazon’s fleet would be 21% the size of UPS’ and 14% the size of FedEx’s, says Root. In terms of payload capacity, Amazon’s fleet would be 26% the size of UPS’ and 17% of FedEx’s, excluding their largest freighters that fly mostly long-haul routes for those companies, Root wrote. “As significant as that sounds, the business that UPS and FedEx will lose may not be as bad as it sounds,” Root wrote. “Revenue and average daily volumes at UPS and FedEx will be hurt, but there’s plenty of opportunity for them to replace that lost business with growing volumes from higher-yielding customers” and growth in e-commerce. Root also says that Amazon is one of the least profitable customers for UPS and FedEx, because Amazon’s size enables it to negotiate considerable discounts. “The extent to which UPS and FedEx can offset volume declines from Amazon with new business from other customers will determine how beneficial or detrimental Amazon’s plan will be to the companies’ segment operating margins,” Root wrote. Amazon stock was down a fraction, near 700, in afternoon trading in the stock market today , after touching a record high above 722 on May 12. It’s an IBD Leaderboard stock. UPS stock was down a fraction, while FedEx was up a fraction. The threat would grow if other large retailers follow Amazon’s lead, which he says is possible. “We understand that Wal-Mart Stores ( WMT ) is investing to improve its e-commerce positioning by building eight e-commerce warehouses,” Root wrote. Wal-Mart already offers free shipping on orders of more than $50, and it might broadly offer an e-commerce membership that includes free shipping, as Amazon does with its Amazon Prime membership service. Still, it’s not clear how deeply Amazon will dive into transportation services. “We estimate that Amazon could build a competing U.S. ground network for between $8 billion and $15 billion,” Root wrote. “We believe the company has the financial capacity to continue adding fulfillment centers, pickup locations and local and regional delivery operations, it if chooses to do so.” More than that, Amazon could offer its delivery services to the many third-party sellers on its site. “Such an offering would be more problematic for UPS’ and FedEx’s longer-term financial performance,” Root wrote.