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Apple Gains In Morgan Stanley Online Video Survey, Netflix Tops

Most cord-cutters still replace cable TV services with Netflix ( NFLX ) — no surprise there — but Apple TV gained in an annual Morgan Stanley survey of consumers who watch Internet video. Apple ( AAPL ) rolled out its fourth-generation TV hardware in late 2015, but it has shelved plans, at least temporarily, for a Web-based TV service amid stalled negotiations with programmers. The Apple TV streaming device costs from $149 to $199. Apple customers can subscribe to Netflix, HBO and full-season sports subscriptions as well as watch movies and TV shows served up from the iTunes store. Among those planning to cancel pay TV subscriptions, some 35% of the 2,500 consumers surveyed say they are most likely to switch to Netflix, says Morgan Stanley.  That’s down from about 40.7% in the year-earlier study. Apple TV moved up to 23%, from about 17% a year earlier. YouTube, the video website of Alphabet ( GOOGL )-owned Google figures two ways in the survey, in which respondents could give more than one answer. Some 20% of respondents said they might replace pay TV with YouTube Red, the new subscription service, while 29% cited the free, ad-supported version of YouTube. Amazon.com ’s ( AMZN ) online video service and Hulu were tied at 27%, with Time Warner ’s ( TWX ) HBO Now service right behind, with 25% of pay TV subscribers saying they were likely to switch to the service. “Among those without a pay TV subscription, Netflix usage is meaningfully higher (47%) vs. Amazon Instant Video (21%), suggesting Netflix is viewed as more of a replacement service to traditional pay TV,” said the Morgan Stanley report. “Netflix remains the leading online video platform for TV/film content in the US, with 40% of respondents saying that they use the service, still well ahead of YouTube (33%), Amazon Instant Video (22%) and Hulu Plus (14%).” Hulu is a joint venture of 21 st Century Fox Entertainment ( FOXA ), Walt Disney ( DIS ) and Comcast ( CMCSA ).

Apple Music Rival Pandora Spending More To Boost Its ‘Lean Forward’

Pandora Media ( P )  is spending big as it digests its $75 million purchase of Web-streaming service Rdio, said investment bank Needham, which on Wednesday significantly lowered its 2016 EBITDA estimate for the No. 1 music streaming service. Pandora stock has sagged since the June launch of Apple ( AAPL ) Music — a service combining paid subscription music streaming with a 24/7 live global Internet radio station. While Pandora remains the Internet streaming leader, its market share is falling as competition grows. Pandora stock was down almost 3%, below 10, in late-afternoon trading in the stock market today . Besides Apple Music, Pandora is also in a heated battle with rivals including Spotify, iHeartRadio, Amazon.com ‘s ( AMZN ) Amazon Prime Music and Google Play Music from Alphabet ( GOOGL ). Needham analyst Laura Martin cut her 2016 EBITDA (earnings before interest, taxes, depreciation and amortization) estimate for Pandora to “negative $70 million” from her prior positive $50 million. “The gap downward is largely due to $50 million extra research-and-development spending for a new on-demand service, $30 million for Rdio employees (mostly engineers) and $40 million to market/launch a new on-demand service,” Martin wrote in a research note. “By implication, about $90 million of spending might get pushed into next year if Pandora can’t complete agreements with all record labels by Q3 2016.” Pandora posted an EBITDA loss of $31.1 million in 2015, according to Needham, down 57% from $72.5 million in 2014. “Recall that today Pandora competes in the 80% of the market that is ‘lean back,’ ” said Martin, referring to curated versions where the music-streaming service picks the tunes listeners hear. The remaining 20% is “lean forward,” she said, a term referring to more personalized music that “Pandora is investing in during fiscal year 2016 in order to create an on-demand service similar to Spotify.” Needham maintained a buy rating and 12 price target on Pandora stock. Pandora bought Ticketfly for $450 million in October, vaulting the online music-streaming leader into the live-event and ticket sales business. The company completed its purchase of Rdio in December. Overseas expansion will likely take center stage in 2016, analysts say. Pandora’s biggest rival outside the U.S. is Spotify, which is in more than 60 markets. Besides the U.S., Pandora operates only in Australia and New Zealand, launching in those markets in 2012. Pandora must pay to acquire music rights country by country, which can significantly add to its already heavy spending on music-acquisition costs. Pandora reported a fourth-quarter earnings miss in February, as its active listener base fell and acquisitions and other costs took a toll.

Inphi Rockets Speedy Digital Drone To Rival Apple, Amazon, Facebook

Inphi ( IPHI ) and Microsoft ‘s ( MSFT ) 100-gigabit “drone” — likely to rival infrastructures by Apple ( AAPL ), Facebook ( FB ) and Amazon.com ( AMZN ) — earned chipmaker Inphi at least three price-target hikes Wednesday, as shares rocketed to a record high. Midday on the stock market today , Inphi shares were up more than 6%, near 32.50, after earlier flying as much as nearly 8% to an all-time high above 33. Shares outperformed a lazy Wall Street on Wednesday that saw the S&P 500, Nasdaq composite and Dow Jones industrial average all down. Deutsche Bank analyst Ross Seymore upgraded Inphi stock to a buy rating from hold and upped his price target to 40 from 30, acknowledging the pricey entry point. Analysts with Northland and Stifel Nicolaus boosted their price targets on Inphi stock to 36 from 31, and to 40 from 38, respectively. “We have long acknowledged Inphi’s solid execution and technology position but have maintained a hold rating awaiting an opportunistic entry point,” Seymore wrote in a research report. But “the size and diversity of the growth drivers the company is addressing are too compelling to ignore.” On Tuesday, Inphi unveiled its 100G “drone,” capable of connecting multiple data centers within 80 kilometers (about 50 miles). The current industry solution is for a much slower 10G platform, says Jeff Cox, Microsoft senior director of network architecture. Microsoft sought out Inphi in 2013 to solve its data center problem, Cox told IBD. The 100G “long-haul” solution was too costly, power-consumptive and required excess space for metropolitan data transfers. But the 10G “drone” solution wasn’t fast enough. So the duo developed ColorZ, which is an industry first, according to Inphi CEO Ford Tamer. ColorZ is slated to deploy in Q3. Seymore expects Microsoft to account for 5% of Inphi’s Q4 and 2017 sales. The new product will drive growth, Seymore wrote. Linking data centers to amass cloud size — and speed — is becoming increasingly necessary. Cloud users like Apple, Alphabet ( GOOGL ), Amazon and Facebook have all expanded their online operations, Cox said. Chipmakers such as  Intel ( INTC ), Qualcomm ( QCOM ), Broadcom ( AVGO ), Nvidia ( NVDA ) and Integrated Device Technology ( IDTI ) have redoubled their data-center efforts in the past year to increase share. But Tamer says they’re at least 18 months behind Inphi. Seymore increased his 2016 estimates for Inphi to $300 million in sales and $1.37 earnings per share ex items, up 34% and 33%, respectively, vs. 2015 metrics. For 2017, he now expects $370 million and $1.70. The consensus of 12 analysts polled by Thomson Reuters forecasts $290.7 million and $1.26 for 2016, and $357.7 million and $1.62 for 2017.