As Apple Inc. (NASDAQ: AAPL) gears up for its September 15 event, fans of the iDevice company can expect a spotlight on the Apple Watch Series 6; new iPads; and the rumored Apple One subscription bundle.
Those eager to learn more about the iPhone 12 — patience. There’s another event scheduled for October (h/t Bloomberg News).
Until then, here are some fun — or rather frustrating — facts about your Tim Cook-led tech giant:
Apple currently has $193.817 billion cash on hand, per the Cupertino-based company’s fiscal third-quarter earnings report. That’s up from its fiscal second quarter of 2020, when the company reported a $192.8 billion cash pile — enough to give everyone in the U.S. $500 each with more to spare.
With a market cap that currently hovers just below $2 trillion, Apple exceeds the GDP figures of some major nations, including Mexico, Indonesia, The Netherlands, Saudi Arabia, Turkey, and Switzerland. (Just 14 countries have annual GDP figures greater than Apple’s market cap).
Apple surpasses all of the top 72 stock exchanges in the world (by market cap), with the exception of 11: NYSE; Nasdaq; Shanghai Stock Exchange; Japan Exchange Group; Hong Kong Exchanges; Shenzhen Stock Exchange; Euronext; LSE Group; Saudi Stock Exchange; TMX Group and Deutsche Boerse AG.
Apple’s market cap exceeds the the federal budget deficit for fiscal 2019 by about $916 billion. But for fiscal 2020, the U.S. government has a year-to-date deficit of about $2.8 trillion, according to the Treasury Department’s Bureau of the Fiscal Service.
If you add up the net worths of the world’s billionaires — with Jeff Bezos at the top with $183.8 billion — you’d equal Apple’s market cap.
Century 21, J.C. Penney And J. Crew Are Just 3 Retailers On A Long List Of 2020 Bankruptcies
September traditionally signals back-to-school, but has the month signaled something else for investors? To follow up a historic rally, September has seen steep losses across the board, with the S&P 500 slipping 5% since the month kicked off. This decline has led some to wonder, is this just a correction, or is it the beginning of another bear market? Hedge fund manager David Tepper has said the market is “maybe the second most overvalued” he has ever witnessed, only behind the 1999 dot-com bubble. “The market’s pretty high and the Fed’s put a lot of money in here … the market is by anybody’s standard pretty full,” he commented. That said, while Tepper is taking a “relatively conservative” stance, he is still watching out for opportunities. Based on Tepper’s storied career, it makes sense why the Street is giving serious thought to his commentary. The legend, who began as a credit and securities analyst with Equibank, co-founded hedge fund Appaloosa Management in 1993. Appaloosa wowed clients early on as the fund, which started with $57 million in capital, delivered 57% returns on its assets and grew to $300 million in 1994, $450 million in 1995 and $800 million in 1996. If $1 million had been invested at the time of inception, it would have grown into $181 million. To this end, Appaloosa now manages about $13 billion.Bearing this in mind, we decided to look at Appaloosa’s recent activity for inspiration. Running two stocks the fund picked up during Q2 through TipRanks’ database, we found out that the analyst community is also on board, as each sports a “Strong Buy” consensus rating. Boston Scientific Corporation (BSX) First up we have Boston Scientific, which develops and manufactures interventional medical devices. Following its recent estimate-beating performance, some believe this name’s long-term growth narrative is strong. During Q2, Appaloosa pulled the trigger on 835,000 shares, increasing its holding by a whopping 727%. With the fund’s total BSX position now standing at 950,000 shares, its value comes in at $38,275,000. Five-star analyst Matt O’Brien, of Piper Sandler, sides with the bulls. Citing the company’s Q2 earnings release, the analyst tells clients he is confident in the recovery outlook. Turning to the details of the print, sales landed at $2 billion. Although this figure reflects a 29% year-over-year decline, it surpassed both O’Brien’s and the Street’s estimates. Going forward, BSX still believes Q3 total sales will be down, but not to the same degree as Q2, and Q4 organic revenue is expected to increase year-over-year. To this end, O’Brien has several takeaways. “First, as it relates to the elective procedure recovery, Boston was pleased with the sequential improvements delivered throughout the quarter (and even into July). Boston is well positioned as a result of the more emergent nature of their procedures (most procedures can only be deferred for weeks rather than months) and the ability to complete the majority in an outpatient setting,” he explained. On top of this, O’Brien sees BSX’s pipeline as a key point of strength. The company is not only set to launch new products in 2H20, but specific products “are gaining momentum amongst the medical community.” The analyst added, “In addition, Boston remains committed to investing in the infrastructure and digital capabilities that support these new product rollouts (which we believe will help bolster training and the willingness of clinicians to adopt the product).” The final piece of the puzzle? O’Brien highlights BSX’s strong capital position. “In our opinion, the company has struck the right balance in terms of managing their capital structure, improving liquidity to help manage through COVID-19, and ensuring that the company can both re-invest and execute on tuck in M&A. With COVID-19 impacting almost every sector imaginable, Boston remains assured in its ability to achieve its longer-term goals of 6% to 9% top-line growth with the ability to drive operating margin improvement (under a more normalized environment),” he noted. It should come as no surprise, then, that O’Brien stayed with the bulls. He kept an Overweight rating and $50 price target on the stock, implying 24% upside potential. (To watch O’Brien’s track record, click here) All in all, other analysts echo O’Brien’s sentiment. 13 Buys and 3 Holds add up to a Strong Buy consensus rating. With an average price target of $46.07, the upside potential comes in at 14%. (See Boston Scientific stock analysis on TipRanks) HCA Healthcare Inc. (HCA) HCA Healthcare counts itself as one of the largest integrated healthcare delivery systems in the U.S., with its scale and infrastructure making it a leader in the space. Given its solid showing against the backdrop of the pandemic, this stock has earned quite a bit of praise. Among HCA’s fans is Tepper. 765,000 shares were bought up by Appaloosa in Q2, with the total position now landing at 1,050,000 shares. After this 269% boost, the position is valued at $140,700,000. Writing for RBC, five-star analyst Frank Morgan told clients, “HCA is again demonstrating why it should be a core holding in the healthcare space, delivering a strong upside vs. our expectations (which were well above consensus) despite the significant challenges related to the COVID-19 outbreak… driven by a better-than-expected month-to-month volume recovery, strong patient acuity and payor mix, and impressive cost controls.” Looking at the volume improvement, SS admits for June were 1%, an impressive rebound from -12% in May and April’s -27%. This improvement was driven by the reopening of HCA’s markets and the execution of reboot strategies. The same trend was also witnessed in ER visits and surgical procedures. “Management estimates ~40-50% of the cases that were deferred during the shutdown period have been recaptured (either performed or scheduled), and is hopeful it can recapture the remainder,” Morgan noted. On top of this, HCA’s cost cutting initiatives demonstrate its flexibility, in Morgan’s opinion. HCA reported an 11% year-over-year reduction in SWB, supplies and other opex – or a $1.1 billion reduction versus the $1.5 billion drop in revenues, with these cost reductions maintained even as volumes began to improve. What else is noteworthy for Morgan? “With over 33,000 COVID-19 inpatients having come through its doors, HCA has developed increasing capabilities throughout the pandemic. We believe the company is well prepared for a resurgence,” he stated. Summing it all up, Morgan commented, “HCA’s better-than-expected performance amid the pandemic demonstrates an impressive ability to flex the model in response to changes in the operating environment. Results also confirm that the underlying demand in its markets remains strong, despite the likelihood for continued ebb and flow in patient census as reopenings progress and adjust to flare-ups.” All of this prompted Morgan to leave his bullish call and $168 price target unchanged. This target conveys Morgan’s confidence in HCA’s ability to climb 25% higher in the next year. (To watch Morgan’s track record, click here) What does the rest of the Street have to say? 12 Buy ratings and 3 Holds have been issued in the last three months. So, the consensus rating is a Strong Buy. In addition, the $144.47 average price target suggests 8% upside potential. (See HCA Healthcare stock analysis on TipRanks) Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
(Bloomberg) — U.S. stock index futures rose as reports related to coronavirus treatments and corporate acquisitions supported investor sentiment ahead of the Federal Reserve’s policy meeting this week.December contracts on the S&P 500 gained 1.2% as of 6:25 a.m. in London after the University of Oxford and AstraZeneca Plc restarted a U.K. trial of a Covid-19 vaccine, while Pfizer Inc. Chief Executive Officer Albert Bourla said it’s “likely” the U.S. will deploy a treatment to the public before year-end. Separately, Gilead Sciences Inc. agreed to acquire Immunomedics Inc.Futures on the Nasdaq 100 Index climbed 1.4% after Nvidia Corp. said it agreed to buy SoftBank Group Corp.’s chip division Arm Ltd. A report said TikTok’s parent ByteDance has decided it won’t sell or transfer the algorithm behind the video-sharing app in any sale or divestment. Oracle Corp. has been chosen as the winner in a deal for TikTok’s U.S. operations, Dow Jones reported.The gain in futures today is “because of Gilead, AstraZeneca, Pfizer, ByteDance and Nvidia,” and it’s a “very name specific rally,” said Ben Emons, the head of global macro strategy at Medley Global Advisors. “The test of the 50-day moving average is key this week. If not held as support, then that forebodes a correction driven by options that cause an unwind of leverage in tech shares.”With the Fed expected this week to maintain its dovish stance on policy, investors will continue to look out for signs the global economy is recovering from the pandemic. Traders remain on edge as a recent reassessment of valuations and volatility in options markets has raised question marks over the sustainability of the technology-led rally. The S&P 500 Index on Friday capped its second straight weekly loss of more than 2%.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
After weeks of on-and-off speculation, Nvidia this evening confirmed that it intends to buy chip design giant Arm Holdings for a total of up to $40 billion from existing owner SoftBank, which bought the company for $32 billion in 2016. From there, it will receive another $10 billion in cash and $21.5 billion of stock in Nvidia at closing. In addition, SoftBank is slated to earn $5 billion in a mix of cash and stock as a performance-based earn-out.
(Bloomberg) — The recent pullback in U.S. stocks could be close to an end if history is a guide, according to strategists at Goldman Sachs Group Inc. and Deutsche Bank AG.Its magnitude has matched a “typical” selloff in the S&P 500 since the financial crisis, albeit at a faster pace, wrote a team led by Goldman’s David Kostin in a note Friday. And options positioning — at the core of the weakness — has normalized, noted their counterparts at Deutsche including Srineel Jalagani the same day.“Despite the sharp sell-off in the past week, we remain optimistic about the path of the U.S. equity market in coming months,” wrote the Goldman strategists. “Since the financial crisis, the typical S&P 500 pullback of 5% or more has lasted for 20 trading days and extended by 7% from peak to trough, matching the magnitude of the most recent pullback if not the speed.”A reassessment of historically high equity valuations and volatility in options markets has sent the S&P 500 down about 7% from its record close on Sept. 2, though it remains almost 50% above its March low. The Nasdaq 100 is off 11%, after investors questioned whether a rally in the tech-heavy gauge might be too frothy.Meanwhile, the Deutsche team focused on the impact of the options market, using a metric that looks at the number of bearish contracts relative to bullish ones. It had fallen to the bottom of its 10-year range — indicating an extreme level of positive sentiment — but after the correction has already recovered to “about average” levels, the team said.“Historically, corrections in the put-call ratio have tended to have sharp but short-lived market impacts,” the strategists wrote.Still, both teams pointed to the U.S. elections as the key source of uncertainty for markets ahead.“Investors still have to contend with the upcoming macro event of the U.S. presidential elections,” the Deutsche strategists warned. “With a likely unprecedented volume of mail-in ballots, prospects for volatility enduring post-election day are high.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Kentucky’s teachers’ pension reduced positions in Apple, Microsoft, and Intel stock in the second quarter. It also initiated a position in Slack stock.
The deal provides Gilead access to Immunomedics’ breast cancer treatment drug Trodelvy, which was granted an accelerated FDA approval in April for an aggressive and tough to treat type of breast cancer. Gilead said it would issue a tender offer to buy all the outstanding shares of Immunomedics for $88 per share, representing a premium of about 108% over their last closing price of $42.25 on Sept. 11. « This acquisition represents significant progress in Gilead’s work to build a strong and diverse oncology portfolio, » Gilead Chief Executive Officer Daniel O’Day said in a statement.
It’s more evidence that dividend activity is improving for U.S. companies after coming under severe pressure earlier in the pandemic.
September has been anything but kind to tech stocks. After hitting a record high at the beginning of the month, fears that tech valuations had climbed too high crept into investors’ minds. As a result, tech stocks have been feeling the heat, with the NASDAQ down 10% since September 2. The index currently sits at 10,853.55, following its fifth decline in six sessions. While September is traditionally a volatile month for Wall Street, the upcoming presidential election, ongoing pandemic and flaring U.S.-China tensions are also weighing on investors. However, analysts remind investors that beaten-down doesn’t mean out, arguing the weakness presents an opportunity to snap up some compelling names at more affordable price points. To this end, we set out to find beaten-up tech stocks that still represent exciting opportunities, according to Wall Street analysts. Using TipRanks’ database, we pinpointed three such names. While each has dipped at least 15%, the Street sees a comeback on the horizon as they all earn “Strong Buy” consensus ratings. Not to mention substantial upside potential is on the table here. Lam Research (LRCX) Offering innovative wafer fabrication equipment (WFE) and services, Lam Research helps chipmakers build smaller, faster and better performing electronic devices. Even though shares have slumped by 19% since September 2, several members of the Street believe there’s still plenty of fuel left in the tank. B.Riley FBR analyst Craig Ellis tells clients that strong foundry demand, a memory upturn and strength in China were the key drivers of LRCX’s impressive fiscal Q4 2020 performance. Revenue came in at $2.792 billion, reflecting an 11.5% gain and flying past the estimates. Although the company hasn’t fully caught up when it comes to fiscal Q3’s $300 million sales loss, management notes a significant portion has been recovered. In China, the sales mix got a substantial boost, with it up 34% or 200 basis points quarter-over-quarter. “GM over-achieved, falling just 20 basis points to 46.1% on favorable execution and mix so was 120 basis points better despite high freight costs,” Ellis added. The bottom line? “Overall, strong LRCX execution,” Ellis stated. The good news doesn’t end there. Its forward-looking guidance blew expectations out of the water, with its fiscal Q1 2021 revenue forecast of $3.1 billion landing $381 million above the Street’s call. Not to mention GM and implied OM were 130 and 290 basis points ahead of Ellis’ prior predictions, respectively, showing the company is “overcoming crisis headwinds,” in his opinion. “Ahead, LRCX expects continued Memory outperformance as spend rebounds from relatively low CY19&20 levels, driven by an array of secular drivers, while it outpaces F&L revenue growth versus industry and sustains solid Services growth. We sense retained confidence in LT financial targets, aided by new product SAM expansion in high aspect ratio etch and atomic layer deposition tools. Elsewhere GM rise a solid 60 basis points to 46.5%, so are seven-plus quarters ahead of our forecast,” Ellis commented. Even though this guidance is a major positive, Ellis argues there could potentially be even more upside in store. “Despite fiscal Q4/Q1 upside we believe a four-to-six quarter positive estimate revision cycle is possible ahead, led by a compute/server and 5G smartphone-led CY21 Memory capacity cycle, prospects for first in four-year synchronized global growth in CY21 to compliment secular 5G, AI, ADAS, and IoT gains for Foundry/Logic gains… We believe the CY23/24 base case and better case financial targets based on $60 billion and $70 billion of WFE at $15 billion/$31.00 and $17 billion/$34.00 not only remain realistic bogeys, but in our view have picked up demonstrably more pull-in tailwinds than push-out headwinds entering 2H20,” the analyst explained. Based on all of the above, Ellis reiterated his Buy recommendation and $450 price target. Should his thesis play out, a potential twelve-month gain of 53% could be in the cards. (To watch Ellis’ track record, click here) In general, other analysts are on the same page. With 17 Buy ratings and 3 Holds, the word on the Street is that LRCX is a Strong Buy. The $394.79 average price target brings the upside potential to 34%. (See Lam Research stock analysis on TipRanks) Applied Materials (AMAT) Moving on to another semiconductor company, Applied Materials also surprised the Street with its better-than-expected earnings results. With this strength set to continue into 2021, the 15% decline since September 2 presents an attractive entry point, according to the analyst community. Writing for Craig-Hallum, five-star analyst Christian Schwab told clients, “The company is seeing a robust semi capital equipment spending environment continue with expectations for total WFE to grow 10%-15% in 2020 and for strength to continue in 2021.” Adding to the good news, management said it was able to fulfill a significant portion of the $650 million in backlog it was unable to meet in the first half of the year. At the same time, order demand was strong and AMAT exited the quarter with total backlog flat. This demonstrates that the supply environment is improving and the demand outlook is strong, in Schwab’s opinion. During the fiscal third quarter, semiconductor systems revenue was up 28% year-over-year, and at the mid-point of Q4 guidance, could be up 25% for FY20. The strength is coming from the foundry/logic and memory segments. “The company expects 2020 total WFE to be split ~55%/45% foundry/logic vs. memory spending and for WFE to grow in 2021 and see a similar split as 2020,” Schwab added. When it came to applied global services, this area of the business gained 11% year-over-year in the quarter, with the company expecting this figure to keep on expanding. “The company continues to grow its Services business along with its growing install base. 60% of the Services and spare parts business comes from predictable recurring revenue in the form of long-term service agreements. This year these agreements have seen a renewal rate of over 90%,” Schwab mentioned. It should be noted that display growth is slated to remain flat through FY21. That being said, Schwab sees some “encouraging signs in the high end of the market, particularly robust demand for 8K screens and adoption of OLED TVs.” “Despite any macro concerns in this environment, management believes it has also demonstrated that semiconductors and supporting industries are essential. Customers continue to drive their product roadmaps and make investments. We expect the strong semiconductor capital equipment spending environment to continue,” Schwab opined. Everything AMAT has going for it keeps Schwab with the bulls. Along with a Buy rating, the analyst leaves an $83 price target on the stock. This target suggests shares could climb 51% higher in the next year. (To watch Schwab’s track record, click here) Are other analysts in agreement? Most are. 4 Hold ratings are trounced by 15 Buys, and therefore, the message is clear: AMAT is a Strong Buy. Given the $76.22 average price target, shares could surge 39% in the next year. (See Applied Materials stock analysis on TipRanks) PTC Inc. (PTC) Last but not least we have PTC, which is a global 3D design software company, with it boasting Internet of Things (IoT) and augmented reality (AR) offerings. Since September 2, shares have taken a 16% tumble, but several analysts see a turnaround on the horizon. Wolfe Research’s Blake Gendron highlights its recent Onshape acquisition as a major positive for PTC. Onshape is a SaaS platform that combines CAD and IoT/AR apps through cloud data management. Expounding on this, Gendron stated, “Core to our positive view of PTC is a CAD/PLM migration to that cloud that is largely out of the company’s control. Incumbency in design software is rooted in engineer familiarity (built over many years, hence the PTC/Onshape push for free student access), but the pandemic remains an unprecedented disrupting force that could compel customers to transition (even at enterprise level) and foster greater remote collab/efficiency (a key driver of the Onshape deal).” The potential benefits from the Onshape deal go even further. “The other driver of the Onshape acquisition was PTC’s vision for greater IoT/AR adoption, a trend perhaps catalyzed by heightened safety measures post-downturn, but previously identified as an opportunity to leverage 3D design expertise in extracting/delivering greater data value across the manufacturing chain,” Gendron explained. That being said, PTC will need access to facilities to achieve this growth, which could be problematic thanks to COVID-19. Given all of the above, even though PTC has lagged in the design space, specifically when it comes to PLM, Gendron sees it as “poised to capture better-than-expected share of 1) the SaaS PLM migration, and 2) cloud-enabled IoT/AR.” On the valuation front, Gendron noted, “On our valuation and forward ARR, implied EV/ARR of 7.7x is below the average since fiscal Q4 2016, and is consistent with where PTC trades today. That said, execution on IoT/AR growth could see the stock re-rate higher.” All of this prompted Gendron to leave his bullish call and $103 price target unchanged. This target conveys Gendron’s confidence in PTC’s ability to rise 25% in the next year. (To watch Gendron’s track record, click here) What does the rest of the Street have to say? 9 Buy ratings and 2 Holds have been issued in the last three months. So, the consensus rating is a Strong Buy. In addition, the $100.50 average price target suggests 22% upside potential. (See PTC stock analysis on TipRanks) Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
(Bloomberg) — Apple Inc.’s major iPhone assemblers are among the companies expected to win approval to participate in a $6.6 billion stimulus program to bring manufacturing to India, according to people familiar with the matter, a potentially seismic shift as the world’s most valuable company diversifies beyond China.At a cabinet meeting on Wednesday, the Indian government is expected to approve a plan aimed at bringing $150 billion in mobile-phone production over the next five years, said the people, asking not to be identified because the matter is private. Among the dozen phonemakers already cleared by a high-powered government committee are Apple’s primary supplier Foxconn Technology Group, which had submitted two applications, and peers Wistron Corp. and Pegatron Corp., the people said. The three companies make virtually every iPhone sold globally in sprawling factories currently located mainly in China.Under the Production Linked Incentive program, or PLI as it’s called, manufacturing incentives will rise each year in an ongoing effort to entice the world’s biggest smartphone brands to make their products in India and export to the world. Besides the Apple contractors, Samsung Electronics Co. is the only other applicant for the five slots allotted to foreign companies. China’s largest phonemakers Huawei Technologies Co. and BBK Group, which manufactures brands like Oppo and Vivo, are conspicuous by their absence.Amid rising trade and political tensions between the U.S. and China, India is betting that many global brands will be keen to reduce their dependence on China. If successful, the program could set in motion a shift in electronics manufacturing in the next five years.“It’s a thoughtful move by the government aimed at wooing Apple to bring significant iPhone manufacturing to India because, when the iPhone maker shifts, an entire ecosystem follows,” said Hari Om Rai, chairman and founder of Lava International Ltd., India’s largest homegrown phonemaker. “The next five years will be dramatic, and India could become the new China in phone manufacturing.”Lava, based in the New Delhi suburbs, is among the Indian phonemakers applying for manufacturing incentives, along with Karbonn Mobiles and Dixon Technologies India Ltd.To receive the incentives, foreign manufacturers including Foxconn, Wistron and Samsung must commit to specific investment and production targets of devices that sell for at least 15,000 rupees ($200); Indian phonemakers will have no such restrictions. Last month, Ravi Shankar Prasad, India’s minister for electronics and information technology, told reporters that Apple accounts for 37% and Samsung 22% of global sales revenue share from mobile phones. The incentive scheme would “increase their manufacturing base manifold in the country,” the ministry said in a statement.Apple did not respond to requests for comment.Pegatron, the second-largest iPhone assembler after Foxconn with a number of factories in China, said in July that it would set up a plant in India. Apple accounts for more than half of Pegatron’s business. If approved, Pegatron’s first India factory would be eligible for PLI, the people said.In the next five years, India could attract an additional 10% of global handset production, Credit Suisse said in a recent note. And though the country is the world’s second-largest handset market with plenty of room for domestic sales growth, the government’s clear aim is to eventually become a global manufacturing colossus to rival China. Almost two-thirds of the stimulus program is targeted at the export market, the people said.Pankaj Mohindroo, chairman of India Cellular and Electronics Association, a trade group that represents leading phonemakers including Apple, Oppo and Xiaomi, said incoming handset makers will be accompanied by a host of smaller sub-assemblers and component makers, expanding the sector to seven times its current size in the next five or so years.“India’s incentive scheme will be a game-changer that will make the country No. 1 in mobile manufacturing, or at least a close No. 2 by 2025,” Mohindroo said.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Using recent actions and grades from TheStreet’s Quant Ratings and layering on technical analysis of the charts of those stocks, Trifecta Stocks identifies five names each week that look bearish. While we will not be weighing in with fundamental analysis we hope this piece will give investors interested in stocks on the way down a good starting point to do further homework on the names. Arrowhead Pharmaceuticals Inc. recently was downgraded to Sell with a D+ rating by TheStreet’s Quant Ratings.
Shareholders of Tesla Inc. (NASDAQ: TSLA) approved a compensation plan for CEO Elon Musk back in 2018 that may complicate future inclusion in the S&P 500.What Happened: The Wall Street Journal recently reported that Tesla could be disqualified for a long time from S&P 500 inclusion as the accounting of Musk’s payday hurts the company’s profits. Tesla shares have fallen after not being included in the S&P 500. Why It’s Important: The 2018 compensation plan tied Musk’s earnings to the performance of Tesla’s financials and stock performance. Musk is eligible for twelve payments tied to the market capitalization, revenue, and adjusted EBITDA of Tesla.A 2012 compensation plan helped Tesla increase 17-fold in five years after hitting all market cap milestones and nine of ten operational metrics.The 2018 market cap milestones start at $100 billion and go up in $50 billion increments to $650 billion. The operational metric of revenue (TTM) starts at $20 billion and goes up to $175 billion. Adjusted EBITDA (TTM) starts at $1.5 billion and goes up to $14 billion. Payouts are based on milestones met in market cap and operational metrics.Musk received his first payment after boosting the market cap of Tesla past $100 billion. He was closing in on hitting the second part in July, which could hit the next quarter’s earnings report.Tesla reported second quarter GAAP Net Income of $104 million and $451 million in non-GAAP Net Income. « These positive contributions were offset by significant costs related to factory shutdowns, as well as a sequential increase in non-cash SBC (stock based compensation) expense primarily attributable to $101 million related to 2018 CEO award milestones, » the earnings report said.What’s Next: One of the qualifications for S&P 500 inclusion is having four straight quarters of profitability. Tesla could struggle to meet this last requirement depending on how the non-GAAP metrics and compensation factors are weighed.Price Action: Shares of Tesla were down 1% to $367.47 on Friday. Shares hit a split-adjusted 52-week high of $502.49 back in late August. The market capitalization of Tesla is $346 billion.Courtesy image Tesla media kitSee more from Benzinga * Tortoise Acquisition Shareholders To Vote On Hyliion Merger Sept. 28 * What Investors Need To Know About The GM-Nikola Partnership * Tech Wreck: Markets Plunge As Apple Sets Market Cap Loss Record(C) 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
(Bloomberg) — Citigroup Inc. has a message to cheer up despairing oil bulls: prices will get back to $60 a barrel before the end of 2021.“We’re bullish definitely,” Ed Morse, global head of commodities research at Citi, said in an interview during the S&P Global Platts Asia Pacific Petroleum Conference. “In our base case, prices go up because the market balances” and gigantic inventories are drawn down, he said.The rate at which those stockpiles are shrinking appears to have slowed in recent weeks as the coronavirus proved stubbornly persistent and the OPEC+ alliance returned barrels to the market. That’s pushed global benchmark Brent crude down around 12% so far this month.It will take until late 2021 for global oil consumption to return to the 2019 level of 101 million barrels a day due to growth in economy, Morse said. Citi sees global benchmark Brent crude, which is currently trading near $40 a barrel, averaging around $55 in 2021 before getting back to the $60 mark by the end of the year. West Texas Intermediate will recover to $58 by then.Commodity trading giant Trafigura Group, however, expects crude stockpiles to increase through the end of this year on weak demand, with the market to look “worse in a couple of months from now.” That compares with Citi’s prediction for Brent oil to climb and average $48 a barrel during the fourth quarter.For Citi, petrochemical feedstock and gasoline will be the biggest growth drivers for fuels, while the consumption of jet fuel is expected to stage a comeback in 2024-2025, Morse said.Brent’s move back above $60 could be short-lived, however, as higher prices will lead to a rebound in American production, Morse said. There are also several unknown factors — including whether Iranian output will come back in a significant way — that could affect the market, he said.(Updates with more details in fifth, sixth paragraphs.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Benzinga took a look at high profile IPOs coming in the second half of 2020. Six of those 13 companies could price the week of September 14. Here is a look at the 12 companies expected to go public.Amwell: Alphabet Inc. (NASDAQ: GOOG) backed Amwell (NYSE: AMWL) plans to sell 35 million shares in a range of $14 to $16. Amwell is a leading telehealth company that is a rival to Teladoc Health (NYSE: TDOC), a company who has seen its stock rise more than 130% in 2020. As part of the $100 million investment from Google, Amwell will switch its services to Google Cloud from rival Amazon Web Services (NASDAQ: AMZN). Amwell reported a 777% increase in revenue in the first half of 2020 to $122 million.Broadstone Net Lease: As of June 30, Broadstone Net Lease (NYSE: BNL) had 632 properties in 41 states valued at more than $4 billion. The portfolio covers 168 brands across 54 industries. Industrial represents 44% of the portfolio. The top ten brands account for 18.8% of the portfolio, with none representing more than 2.5%. As of June 30, the portfolio was 99.6% leased. The REIT is planning on selling 33.5 million shares at a price point of $17 to $19.Dyne Therapeutics: Pre-clinical Dyne Therapeutics (NASDAQ: DYN) is targeting muscle diseases like DMD. The company uses its proprietary FORCE platform and plans to file drug trial applications starting in the fourth quarter of 2021. Dyne is seeking to sell 10.3 million shares in a range of $16 to $18.JFrog: JFrog LTD (NASDQ: FROG) plans on selling 11.6 million shares in arrange of $33 to $37. The company calls itself a liquid software company and provides end-to-end continuous software release management. JFrog’s customer base of 5,800 customers includes 75% of the Fortune 100. JFrog reported revenue of $104.7 million in 2019, a 65% year over year increase.Metacrine Inc.: Early stage biotechnology company Metacrine Inc. (NASDAQ: MTCR) is seeking to sell 6.5 million shares in arrange of $12 to $14. The company is targeting liver and gastrointestinal diseases and recently had its MET409 fast tracked by the FDA for NASH. The company has raised $125 million to date.Outset Medical: To help with the high costs and infrastructure of kidney dialysis, Outset Medical (NASDAQ: OM) created Tablo. In March 2020, Tablo was approved by the FDA for use in home, after previous approvals to use the technology in hospitals and clinics. Outset Medical is in the early stages of commercialization. Revenue was $18.9 million for the first six months of 2020, beating all of 2019, which saw $15.1 million in revenue. The company believes the home market size is worth $8.9 billion. Outset will sell 7.6 million shares at a price range of $22 to $24.Pactiv Evergreen Inc: Counting customers like Starbucks Corp. (NASDAQ: SBUX), Mcdonald’s Corp. (NYSE: MCD), and Coca-Cola Co. (NYSE: KO), Pactiv Evergreen (NASDAQ:PTVE) is the largest producer of fresh food and beverage packaging in North America. The company’s products in food service, food merchandising, and beverage merchandising are used more than 5 billion times a week in the U.S. Pactiv is seeking to sell 41 million shares at a range of $18 to $21.Snowflake: Amazon.com Inc. (NASDAQ: AMZN) and Microsoft Corp. (NASDAQ: MSFT) are both listed in the Snowflake Inc. (NYSE: SNOW) filing as competitors and platform providers. Snowflake helps mobilize the world’s data. Snowflake is seeking to sell 28 million shares at a range of $75 to $85. Snowflake saw second quarter revenue up 121% to $133 million. The company has over 3,100 customers, with 56 reaching the $1 million revenue mark. Snowflake would raise $2.7 billion at the high end and be valued at more than $20 billion. Berkshire Hathaway (NYSE: BRKA) and Salesforce Ventures LLC (NYSE: CRM) both pledged to invest $250 million each into the data company.StepStone Group: With offices in thirteen countries across 5 continents, StepStone Group Inc (NASDAQ: STEP) has « global scale with local teams. » The private market investment firm is seeking to sell 17.5 million shares at a price range of $15 to $17. The company had $292 billion in assets under management and assets under advisement as of June 30. Revenue was $447 million in fiscal year 2020.Sumo Logic: The pioneer of Continuous Intelligence, Sumo Logic Inc (NASDAQ: SUMO) is selling 14.8 million shares at a price range of $17 to $21. Sumo Logic provides real-time analytics and insights to customers and processes 1.6 quadrillion events a day. Revenue grew 50% year over year in fiscal 2020 hitting $155.1 million. First quarter revenue of $47.2 million was an increase of 45%.Unity Software: Unity Software (NYSE: U) is a rival to Epic Games, a Tencent (OTC: TCEHY) holding. Unity’s gaming platform is used by more than 50% of mobile, PC and console games and also used by movie studios. Unity is planning to sell 25 million shares at a range of $34 to $42. Unity saw revenue hit $541.8 million in fiscal 2019. First half 2020 revenue was $351.3 million. Rival Epic is valued at $17.2 billion and had revenue of $4.2 billion in fiscal 2019.Vitru Limited: Vitru Limited (NASDAQ: VTRU) is the leading pure distance learning education company in postsecondary digital education in Brazil. The company had over 287,000 students as of June 30, a year over year increase of 18%. The company believes its addressable market is 31.4 million students. Vitru will sell 11.2 million shares at price range of $22 to $24.See more from Benzinga * Tortoise Acquisition Corp II SPAC Begins Trading * 7 Peloton Analysts On The Q4 Report: ‘A Bona Fide Growth Company’ * Ninja Comes Back To Twitch With New Multi-Year Exclusive Deal(C) 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
After initial reports emerged on Saturday about a potential acquisition deal, Gilead Sciences Inc (NASDAQ: GILD) confirmed that it’s set to purchase Immunomedics Inc (NASDAQ: IMMU).According to a company statement on Sunday, Gilead is anticipating the close of this definitive agreement sometime in the fourth quarter of the year.What Happened: Gilead announced that the acquisition deal is valued at $21 billion, and it would acquire the biopharma company for $88 per share, that is, at a 108% premium on Immunomedics closing price on Friday.Of the total consideration, approximately $15 billion will be paid in cash and the balance through a new debt issue.The merger will be routed through one of Gilead’s wholly-owned subsidiary by way of a tender offer.Why Does It Matter: The merger deal will give Gilead access to Trodelvy – a drug for breast cancer, which received accelerated approval from the Food and Drug Administration in April.Although additional compliances for Trodelvy are underway, the company expects full approval in the U.S. sometime in the next quarter.According to the statement, Immunomedics would file for approvals with the European regulators in the first half of next year. »We will now continue to explore its potential to treat many other types of cancer, both as a monotherapy and in combination with other treatments, » Gilead CEO Daniel O’Day said.Price Movement: Giliead stock cloesd 2.84% higher at $65.58 per share on Friday, however, it dropped by a marginal 0.12% during the after-market trading hours.Immunomedics shares gained 0.76% to close at $42.25, the same day.See more from Benzinga * Gilead’s Rheumatoid Arthritis Drug Application Is A No-Go In Present Form: FDA(C) 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
(Bloomberg) — Nikola Corp. has left a trail of inconsistent statements and contradictory announcements that are now coming under scrutiny from short sellers eager to poke holes in the electric-vehicle company’s success story.Hindenburg Research, which holds a short position in Nikola stock and stands to gain if the shares fall, released a report Thursday detailing what it called “dozens of lies” about the company’s capabilities, partnerships or products. The firm used internal emails, analyzed photos and even cited an investigator dispatched to rural Utah to test how far a car would roll down a hill. Nikola said Hindenburg’s report was full of falsehoods but hasn’t offered anything specific to rebut the allegations.It doesn’t take a hedge fund or a private eye to determine that Nikola, which struck a partnership this week with General Motors Co., has a pattern of discrepancies. A look at some of its announcements and filings, along with statements and tweets by Executive Chairman Trevor Milton and other management over the past few years, yields other examples that weren’t part of Hindenburg’s report. “It’s a bit confusing trying to follow Trevor on his various social media outlets about the timing and cadence of communication of the different variables that you’re talking about,” Jeff Osborne, a Cowen & Co. analyst, told executives on an Aug. 4 conference call.Nikola’s shares have tumbled 24% since the Hindenburg report, which, among other sources, cited a Bloomberg story from June about the company exaggerating the capabilities of a truck. Its slump over the last three sessions was 36%.“We are committed to doing our best to keep the investing public and all of our stakeholders informed and up to date at all times,” Chief Executive Officer Mark Russell said Friday in an emailed response to questions from Bloomberg about the following items.Under ConstructionAt a press event on July 22, ahead of the groundbreaking of Nikola’s Coolidge, Arizona, factory, Head of Global Manufacturing Mark Duchesne fielded a question on when construction would get underway. “That one is an easy answer,” he said. “Start of construction is tomorrow.”The timeline was repeated by Milton the following day in a tweet. But “construction” turns out to be a broad term.To facilitate the groundbreaking ceremony, the city of Coolidge issued Nikola a temporary use permit on July 13. The document, obtained by Bloomberg, allowed the company to do some limited ground clearing and preparation for holding the event, along with listing a plan for coronavirus safeguards. It didn’t allow further construction to start beyond that. The company also obtained a Pinal County dust permit around the same time, a legal requirement in Arizona.On Aug. 7, the company received its at-risk grading and drainage permit, City Manager Rick Miller said by phone. The permit allows Nikola to clear dirt and do drainage work on the site, but as yet the company doesn’t have the permits required for foundation work, plumbing, electrical or vertical construction, Miller said. The permits are available through public-records requests.On Wednesday, Nikola said in a tweet that Coolidge’s city council had approved the company’s “factory masterplan” and that “construction can now go forward.” This is only partly true, Miller said. It was the planning and zoning commission that approved a “major site plan.” The approval will allow Nikola and its architects and engineers to apply for the next batch of permits.In a statement, Nikola said that by “construction” it meant everything from groundbreaking to seeking permits. Now that its building plan is approved, “the various permits will be obtained in cadence with the steps of the construction. We remain on schedule for Phase 1,” the company said in an email.“The factory will be up in 12 months,” Milton said in a live broadcast on Instagram on Friday night. “The permit was just issued by the city. We are all good to go.”Puzzling PartnershipNikola has a stated ambition of manufacturing hydrogen-powered fuel cell semi trucks by 2023. Since 2017, it has had an agreement for German auto-parts supplier Robert Bosch Gmbh to “develop, build, test and support” various components for Nikola’s prototypes including a fuel-cell system, battery packs, steering pumps and motors, according to a regulatory filing in March.The details of which partner is contributing what to the project has shifted over time, and the future of the deal has gotten hazier.Nikola agreed to pay Bosch around $40 million for the development, according to the filing. In a presentation to investors in April, Nikola described the agreement with Bosch as a “co-development” and strategic supply chain partnership and said the company would jointly own any intellectual property developed with Bosch.However, Nikola executives have regularly stated that Nikola designed, developed and will provide much of the technology for its vehicles — not Bosch. On Friday, Chief Financial Officer Kim Brady said that Nikola will provide only 15% of the parts in battery electric semi trucks due to be built in Ulm, Germany, while partner Iveco provides the rest. However, he added that Nikola’s input represents 90% of the truck’s value.“We are responsible for Nikola Tre — the batteries, e-axle, e-motors, inverters, BMS system, infotainment system,” Brady said. “All the key electric propulsion systems come from Nikola.”As recently as Aug. 25, Bosch has said that it’s “working with the company to make the fuel-cell drive for trucks suitable for mass production.”On Monday, Nikola announced that GM — not Bosch — will mass-supply a fuel cell system for Nikola’s Class 7 and 8 semi trucks, as well as the battery packs for its debut electric pickup, the Badger. On Friday, Nikola clarified that Bosch will supply semi truck fuel cells in Europe, while GM will have exclusivity everywhere else.“Bosch is an investor, board member and supplier to Nikola. They help us in many facets of our business as our partner,” Nikola said.Milton bristled at a claim by a Twitter user that Nikola was jilting Bosch in favor of GM.“Bosch as a company with a dedicated hydrogen strategy welcomes the decision of GM to enter this market as an important player,” Bosch spokesman Tim Wieland said in an email. “Beyond that, Nikola and Bosch have been working together for several years, not only on the fuel cell power train but also on other innovations like the steering system and the Mirror Cam System for the first prototypes of the Nikola trucks. The two companies will continue to cooperate in the future, also on fuel cells.”Game ChangerNikola’s narrative about its battery strategy has also shifted over time.In November 2019, Nikola issued a press release claiming to have “game-changing” battery cell technology that it would unveil at an event in 2020. Nikola also said it had entered into a letter of intent to acquire a “world-class battery engineering team” to help bring the new battery to pre-production.“We are talking about doubling the range of BEVs and hydrogen-electric vehicles around the world,” Milton said in the statement.In July, Milton tweeted that Nikola would “make the entire pack like the top guys do” for its upcoming pickup truck, called the Badger. He said that all internal components, such as batteries, inverters, software and controls, are Nikola’s own intellectual property. “We own it all in house,” he said.Milton clarified in a tweet on Thursday that Nikola’s change of direction — to use GM’s Ultium battery technology for the Badger — was a result of cost analysis and cost savings.Beer TrucksBack in March, Nikola said in a presentation to investors that it has a “signed binding agreement” to provide Anheuser-Busch with as many as 800 hydrogen fuel cell electric semi trucks. What the presentation didn’t say was that Anheuser-Busch committed to buy fewer trucks than that, and doesn’t have to buy any at all.The deal was first announced in May 2018 and stated the trucks were originally expected to be integrated into Anheuser-Busch’s dedicated fleet by the end of 2020, according to a press release.That timeline isn’t going to be met. During the Aug. 4 earnings call, Russell, the CEO, updated investors on the deal, saying, “We do believe that we’ll be able to give them test prototypes before the end of 2021; serial production or mass production of the fuel cell truck will not begin until 2023.”That does corroborate with the timeline for production set out in a July filing — and to be fair, lots of people’s plans have changed this year. But in the same filing, Nikola revealed that Anheuser-Busch retains the right to cancel the truck order, though there’s no indication that will happen. The contract also has lease terms and rental rates that may be hard for Nikola to meet, according to the filing, “depending on our ability to develop our trucks and hydrogen network according to current design parameters and cost estimates.”The agreement between the two companies states that Anheuser-Busch gets priority of delivery for as much as 20% of Nikola’s initial “production line of Class 8 vehicles.” To get production going by 2023, Nikola must work to have dedicated equipment in Anheuser Busch’s breweries and distribution centers by the end of 2021, according to the deal terms. Anheuser-Busch only agreed to use at least 600 trucks — the 800 figure, according to the document, is an estimate of what the brewer will need.“They have been, and continue to be, a great long-term partner in our shared vision of a zero-emission future (a Nikola Two prototype hauled our first load over public roads for them in St. Louis not too long ago),” Russell said in the statement Friday, referring to Anheuser-Busch. “Our original agreement with them has been modified over time. The current agreement terms are as we set forth in our earnings call.”Anheuser-Busch didn’t respond to a request for comment. The partnership with Nikola will help the brewer transition its entire long-haul fleet to zero-emission vehicles, Anheuser-Busch said last November.Prototype ProductionOn July 13, Milton said European partner Iveco was already producing vehicle prototypes.“We have a truck coming in to production right now with 720KwH, the largest battery we know of anywhere in the world coming in to production,” Milton said on the TC’s Chartcast Podcast. “We have five of them coming off the assembly line right now in Ulm, Germany.”On Aug. 4, during the company’s debut earnings call, Russell echoed the sentiment, saying that the first five prototypes were “coming off the end of the facility at this point.”Those statements were a mischaracterization of Nikola and Iveco’s progress in Ulm, according to two people familiar with the matter. The assembly line is still under construction and not yet operational or building prototypes, the people said. There are prototypes being built by hand in a workshop, one of the people said.“As stated previously, the first five production prototypes of the Nikola Tre are being completed, by an assembly team at the Ulm facility. Also as stated previously, the Nikola/IVECO JV mass production line facility in Ulm is still under construction, and is on track for the start of regular serial production in 2021,” Russell said Friday. “We anticipate that a number of current IVECO personnel will join the Nikola/IVECO JV production team in Ulm.”On July 8, Nikola tweeted a reply to a question on a previous post about the Nikola Tre’s battery packs, stating that there are 9 battery packs — amounting to 720 kWh — for one truck. In photos shared on twitter by Milton on Friday, two images of the Nikola Tre prototypes being made in Germany had only 5 packs installed, or the equivalent of 400kWh.Nikola said in a response to Bloomberg News on Saturday that the prototypes do hold nine battery packs, and the system is designed to integrate them discreetly into the vehicle’s chassis. The pictures shared by Milton on Friday show “assembly work in progress,” it said in the email.Nikola’s GuidanceHere’s when Nikola has said it will hit its big milestones, based on filings, statements and interviews:(Adds Nikola’s comments on batteries in last two paragraphs.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Andrew Bary and Avi Salzman’s « Retail Investors Are Fueling the Nasdaq’s Wild Ride » points out how heavy buying of call options on stocks like Apple Inc (NASDAQ: AAPL) and Tesla Inc (NASDAQ: TSLA) are having a big impact.In « The Pandemic Helped Crocs Kickstart Growth. Why the Stock Could Double, » Teresa Rivas shows how Crocs, Inc. (NASDAQ: CROX) is capitalizing on its renewed popularity with more styles, clever marketing and a growing e-commerce effort.See why Barron’s believes Elanco Animal Health Inc (NYSE: ELAN) has a good opportunity to change the trajectory of its stock performance in « Animal Spirits for Elanco? Pet-Care Company’s Stock Is Well Positioned for Gains » by Lawrence C. Strauss.In Debbie Carlson’s « This B Fund Is Holding On to Disney and Alphabet Stock, » see why these mutual fund managers who buy stocks with attractive valuations and hold them for at least five years like Alphabet Inc (NASDAQ: GOOGL) and Walt Disney Co (NYSE: DIS) now.See also: Munster Says Tesla Is Worth 0B-Plus In The Long Run »Microsoft’s Latest Xbox Could Be a Game Changer » by Max A. Cherney points out the ways that Microsoft Corporation (NASDAQ: MSFT) is hoping to spread some of its subscription magic across videogames.It was clear what Nikola Corporation (NASDAQ: NKLA) got by partnering with General Motors Company (NYSE: GM), but the Detroit automaker got something even more important. So says Al Root’s « General Motors’ Deal With Nikola Could Double Its Stock Price. »In « It’s a Good Time to Trade Amazon Options, » Steven M. Sears discusses why long-term investors should look at the recent market weakness as a chance to retool their portfolios, starting with Amazon.com, Inc. (NASDAQ: AMZN).Also in this week’s Barron’s: * Why Treasuries have lost some safe haven luster * The market outlook from six strategists * Barron’s 2020 top independent advisors * How new SEC rules may be good for business but not for investors * How inflation is popping up in the strangest places * Why next year looks rocky no matter who wins the election * Whether the United States ought to cut its reliance on China See more from Benzinga * Benzinga’s Bulls And Bears Of The Week: Exxon, Peloton, Uber And More * Barron’s Picks And Pans: Boeing, Citigroup, Zoom Video And More * Notable Insider Buys Last Week: Avis Budget, SmileDirectClub And More(C) 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
President Donald Trump describes Democratic challenger Joe Biden as a “tool” of “radical socialists” who are bent on taxing every American business and household into bankruptcy. In reality, Biden has taken a relatively consistent approach over five decades in politics and during his latest White House bid. The former senator and vice president backs an active federal government that he says should support but not constrict private enterprise, and he believes the highest federal tax burden should fall on the wealthiest.
According to Jim Cramer, Applied Materials, Inc. (NASDAQ: AMAT) is a really great company and its business is okay, but he likes Lam Research Corporation (NASDAQ: LRCX) better.On CNBC’s « Mad Money Lightning Round » this past Friday, Cramer said he would rather be in the semiconductor stocks — like Advanced Micro Devices Inc. (NASDAQ: AMD), NVIDIA Corp. (NASDAQ: NVDA) and Broadcom Inc. (NASDAQ: AVGO) — instead of the semiconductor equipment stocks.Nu Skin Enterprises Inc. (NYSE: NUS) is a direct seller and Cramer doesn’t comment on the direct seller companies.Cramer likes GoodRX, which is coming public soon. He is not a buyer of OptimizeRx Corp. (NASDAQ: OPRX).It’s the right time to be in Blackstone Group Inc. (NYSE: BX). He likes the stock and he thinks the company has terrific managers.Horizon Therapeutics PLC (NASDAQ: HZNP) had too big of a run so Cramer has to say no at these levels.Cramer has never made money in the mattress and bedding business so he is not a buyer of Purple Innovation Inc. (NASDAQ: PRPL).Investing in Walt Disney Co. (NYSE: DIS) stock is a great thing, said Cramer. See more from Benzinga * Mike Khouw Sees Unusual Options Activity In Applied Materials(C) 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
(Bloomberg) — Nvidia Corp. agreed to buy SoftBank Group Corp.’s chip division Arm Ltd. for $40 billion, taking control of some of the most widely used electronics technology in the semiconductor industry’s largest-ever deal.Nvidia will pay $21.5 billion in stock and $12 billion in cash for the U.K.-based chip designer, including a $2 billion payment at signing. SoftBank may receive an additional $5 billion in cash or stock if Arm’s performance meets certain targets, the companies said Sunday in a statement. An additional $1.5 billion will be paid to Arm employees in Nvidia stock.SoftBank shares surged as much as 10% on news of the deal and renewed talks for the company going private.Read more: SoftBank Soars After Arm Deal, Renewed Talks to Go PrivateArm’s importance far outweighs its revenue, which comes from licensing chip fundamentals and selling processor designs. Its technology is at the heart of the more than 1 billion smartphones sold annually. Chips that use its code and its layouts are in everything from factory equipment to home electronics.“It’s a company with reach that’s just unlike any company in the history of technology,” Nvidia Chief Executive Officer Jensen Huang said in an interview. “We’re uniting Nvidia’s leading AI computing with Arm’s vast ecosystem.”The acquisition is fueled by the drive to bring artificial intelligence to everything that has an on-switch, the CEO said. Having succeeded in selling Nvidia’s graphics chips to owners of data centers to speed up image recognition and language processing, Huang is looking to make sure his technology helps spread that to everything from self-driving vehicles to smart meters.The initial payment from Nvidia marks a small premium over the $31.4 billion that SoftBank paid to acquire Arm in 2016, previously the semiconductor industry’s biggest deal. The Japanese company is expected to own less than 10% of Nvidia following the transaction, according to the statement.Regulatory approvals may well prove challenging. The companies said sign-offs are needed from China, U.K., European Union and U.S. authorities and may take as long as 18 months. China’s approval may be particularly difficult given rising tensions with the U.S.“Now Arm will become a U.S. firm, and the conflict over semiconductors between the U.S. and China is becoming fierce as China still controls Arm China,” said Koji Hirai, head of M&A advisory firm Kachitas Corp. in Tokyo.In comments after the deal announcement, Huang said his team “fully expect to spend time with the regulatory bodies in China,” but have every confidence in getting approval for the takeover.Another major concern is whether the acquisition will upset Arm’s relationships with customers like Apple Inc. and Intel Corp. The chip designer has been able to work with a broad range of partners in part because it didn’t compete with them.“We would imagine the bulk of Arm’s current licensees will be (no pun intended) up in arms,” Sanford C. Bernstein analysts including Stacy Rasgon wrote in reaction to the news.Huang said he will preserve Arm’s neutrality and wants to expand its client list. He argued Nvidia is spending a lot of money for the acquisition and has no incentive to do anything that would cause clients to walk away.Nvidia said the U.K. company will “continue to operate its open-licensing model while maintaining the global customer neutrality that has been foundational to its success.” Nvidia will add its technology to the offerings licensed by Arm, the Santa Clara, California-based company said.Under Huang, Nvidia has risen rapidly up the ranks of technology companies in market value and influence. Already the dominant force in graphics chips that make video games more realistic, Nvidia has carved out a slice of the market for data center chips and is moving into self-driving vehicles.Cambridge, U.K.-based Arm has created a successful niche for itself by being independent. Fierce rivals such as Apple, Intel, Samsung Electronics Co., Qualcomm Inc., Broadcom Inc. and Huawei Technologies Co. are all licensees. They either use Arm’s designs as the basis of their own chips or license its instruction set, the fundamental code used by processors to communicate with software, for proprietary efforts.Read more: Nvidia-Arm $40 Billion Deal Will Upend Chip Industry: Tae KimThe acquisition by Nvidia, also a licensee, is a challenge to that neutrality. SoftBank’s purchase four years ago went ahead largely uncontested because the Japanese company wasn’t a competitor to any of Arm’s customers.One client that will be directly challenged is Intel. Huang said a priority will be investing in Arm’s efforts to design chips for data-center computing. While he’s carved out a $3 billion niche in the business of supplying Alphabet Inc.’s Google and Facebook Inc. with graphics processors that help with their artificial intelligence workloads, Huang said he wants to speed up the adoption of Arm-based central processors, or CPUs. That’s a lucrative market dominated by Intel, which has about 90% share.Nvidia announced it will keep Arm’s headquarters in the U.K. and will invest in a new facility there to push forward AI research, educate customers and provide a place for experimentation in robotics and automation. Huang said that commitment demonstrates how the acquisition will add to the U.K.’s technology footprint rather than detracting from it.SoftBank’s sale of Arm unwinds another strategic investment in favor of boosting liquidity and enabling founder Masayoshi Son to focus on the more tactical investing he has said he wants to pursue.Nvidia’s Huang runs a company that’s captured the attention of investors like few others in the past decade. Like Son, he’s a charismatic leader espousing a long-term vision of where technology is headed. The Taiwan-born entrepreneur is more engineering-focused than his Japanese counterpart, though, and often publicly delves into the minutiae of semiconductor and computer science.His latest successful recasting of Nvidia’s technology involves the processing of AI work done in data centers. The company’s chips are among the best at breaking up the manipulation of data into small pieces and then executing that in parallel at high speed.Huang will also get a large footprint in the mobile industry and smartphones. A previous attempt by Nvidia to break Qualcomm’s dominance of that business failed. The biggest rival to Qualcomm in smartphone processors is Apple’s internal effort. Those two companies are among Arm’s biggest customers.Even without a presence in mobile, Nvidia’s value has soared in the past decade. The stock, which ended 2010 at $15.42 a share, closed Friday at $486.58. That’s given it a market value of just over $300 billion, almost $100 billion more than Intel, the world’s largest chipmaker with seven times the revenue of Nvidia.(Updates with analyst comment in tenth paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Legendary Wall Street investor Warren Buffett has long been skeptical of big-name IPOs. That’s why some Buffett followers were surprised to see Buffett’s Berkshire Hathaway Inc (NYSE: BRK-A) (NYSE: BRK-B) invest $550 million in the upcoming Snowflake IPO.However, experts familiar with Buffett’s investing philosophy say the Snowflake investment may not be what it seems.New filings this week revealed that Berkshire is taking a $250 million stake in Snowflake at the IPO price in a secondary offering and is also buying another 4.04 million shares of Snowflake from a current investor in a secondary deal. At the midpoint of the expected IPO price range of $80 per share, Berkshire’s stake will be worth roughly $550 million.Passing On Uber: Buffett has famously shied away from both tech stocks and IPOs. When asked about the high-profile Uber Technologies Inc. (NYSE: UBER) IPO last year, Buffett said he hasn’t ever invested in an IPO in his 54 years on Wall Street. »The idea of saying the best place in the world I could put my money is something where all the selling incentives are there, commissions are higher, the animal spirits are rising, that that’s going to better than 1,000 other things I could buy where there is no similar enthusiasm… just doesn’t make any sense, » Buffett said.Despite the headlines surrounding Berkshire’s Snowflake investment, Whitney Tilson said this week that Berkshire’s relatively modest position is likely not a sign that he has changed his philosophy on IPOs. »Rather, it was likely initiated by executives Todd Combs or Ted Weschler (I’d guess Combs), who will eventually replace Buffett in managing Berkshire’s enormous investment portfolio, » Tilson said.Berkshire Evolving: In fact, Buffett also said last year that « one of the fellows in the office » was responsible for Berkshire’s first ever investment in Amazon.com, Inc. (NASDAQ: AMZN), likely referring to either Combs or Weschler. »Both are more comfortable investing in the tech sector – and Buffett certainly isn’t going to second guess them, especially for such a small investment. $600 million is a drop in the ocean of Berkshire’s stock holdings, which were valued at $207 billion at the end of the second quarter, » Tilson said.Benzinga’s Take: Buffett’s value investing approach has often led to him missing out on trendy stocks on Wall Street, but his long-term success is proof that slow and steady wins the race. In fact, 16 months after Uber’s massive IPO, the stock is still down 18.4% from its IPO price.Related Links: The So-Called ‘Buffett Indicator’ Hits All-Time High Is Buffett Selling Banks, Buying Gold A Warning Sign For Investors?Latest Ratings for BRK.A DateFirmActionFromTo Oct 2017UBSMaintainsBuy Aug 2015BarclaysMaintainsOverweight Jan 2015BarclaysMaintainsOverweight View More Analyst Ratings for BRK.A View the Latest Analyst RatingsSee more from Benzinga * Why Warren Buffett May Have Changed His Tune On Berkshire Buybacks(C) 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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