Pay TV Is Getting Friendly with Netflix
September 12, 2013
Since it successfully transitioned from a DVD rental service to a content streaming powerhouse, Netflix (click ticker for report: ) is now viewed as a major threat to pay TV. The story goes that consumers will eventually “cut the cord” and abandon pay TV while relying exclusively on Netflix and online video service Hulu for content. Though there are many reasons why we think this trend is overblown, Liberty Global’s (LBTYA) Virgin Media has taken another step toward eliminating this competitive threat: Virgin subscribers will be able to access a Netflix app via TiVo set-top boxes. Liberty Global is controlled by none other than media mogul John Malone. Malone is best known for his bold M&A deals throughout the years
The Mortgage Refinancing Boom Could Be Ending
September 12, 2013
Early Wednesday morning, the Mortgage Banker’s Association (MBA) announced that refinancing activity declined 20% from one week earlier. Adjusted for the Labor Day weekend, total mortgage applications dropped 13.5% from the previous week. Consistent with the dramatic upward movement in interest rates, refinancing activity is down 71% since it peaked during the week of May 3, 2013. Why Do We Monitoring Refinancing Activity? When homeowners refinance, a couple outcomes can occur that pump more dollars into the economy. First, with a refinanced mortgage, owners may choose to take equity out of the home, allowing for large purchases like vehicles or even home remodeling. CoreLogic recently reported that 2.5 million more residential properties have returned to positive equity in the second quarter
Margins Will Drive Apple’s iPhone 5S and 5C Outcome
September 11, 2013
Apple (click ticker for report: ) announced the release of its iPhone 5S and its even longer-awaited “cheap” iPhone 5C Tuesday, both of which we believe will be a big hit with consumers. The firm is also reportedly close to announcing a deal with China’s largest mobile carrier, China Mobile, which will help Apple sell even more units. The 5C Image Source: Apple The iPhone 5C is one of the most anticipated products in Apple’s history, and not because people thought it would be the best product ever, but rather because it is believed to be Apple’s emerging-market solution. The phone will retail (unlocked) for $549, $100 below the price of the 5S. The phone contains an internal steel construction
Market Overreacts to Urban Outfitters’ 10-Q
September 11, 2013
Clothing retailer Urban Outfitters (click ticker for report: ) filed its 10-Q report for its relatively strong second quarter. Shares proceeded to drop heavily on Tuesday after a line from the quarterly regulatory filing revealed that third-quarter comparable store sales growth was decent, but not running at a near double-digit pace. Taken directly from the 10-Q: “Thus far during the third quarter of fiscal 2014, comparable Retail segment net sales are mid-single-digit positive.” This “mid-single-digit” rate compares to the 8.5% growth rate the firm posted during its second quarter, driven largely by Free People and a recovery at Anthropologie, a name tied more directly to housing. Source: Company Filings Assuming the mid-single-digit growth rate is somewhere between 4-7%, Urban will
Is Innovation Back at McDonald’s?
September 10, 2013
Tuesday morning, the world’s largest fast food company, McDonald’s (click ticker for report: ), posted weak August comparable sales results overshadowed by the potential for menu innovation. Aggregate same-store sales grew 1.9% year-over-year on top of a 3.7% gain during the same period during 2012. August Sales August sales at McDonald’s were volatile across geographies. US same-store sales grew just 0.2% year-over-year during August, which CEO Don Thompson blamed on a “challenging environment.” Interestingly, Thompson addressed the challenging environment, which we agree with, rather than blaming a bad economy, which has so often been the case. In fact, we think an improving economy may leave McDonald’s at a disadvantage as consumers trade-up and no longer demand as much value. The
Molex Shareholders Should Be Pleased with Koch’s Bid
September 10, 2013
Monday morning, electronic components maker Molex (click ticker for report: ) announced that it had agreed to be acquired by Koch Industries for $7.2 billion or $38.50 per share in cash. The deal represents a 31% premium to Molex’s Friday closing price. We think Molex shareholders received a fantastic deal. Though the firm sports a solid yield, strong dividend growth potential, and a long history of dividend payments, shares were fairly valued, by our measure. In fact, the price Koch will pay for Molex exceeds the top end of our fair value range—a rare event. Since Koch is a privately-held company with no allegiance to public shareholders, the notion of whether or not Koch made a strong investment matters very
A Walk-Through of Our DataScreener500
September 10, 2013
Can’t view the video walk-through of our DataScreener500 on your mobile device? Download the Puffin Web Browser App from Apple free. Click here. << Order the next edition of our DataScreener500, to be delivered on the first of each calendar quarter Unable to display content. Adobe Flash is required.
Yum! Brands Says the Worst Is Over in China
September 9, 2013
Late Friday afternoon, fast food giant Yum! Brands (click ticker for report: ) once again posted weak same-store sales results in China. Same-store sales in August declined 10% year-over-year driven by a 12% decline at KFC and 5% growth at Pizza Hut. For the third quarter, Yum! estimates that total same-store sales fell 11% with KFC down 14% and Pizza Hut’s same-store sales up 4%. This isn’t the first time Yum!’s same-store sales in China have moderated. After falling 19% year-over-year in May, Chinese same-store sales declined 10% in June, and then fell 13% year-over-year in July. Management noted that it believes same-store sales growth will be positive in the fourth quarter, implying Chinese sales may finally have bottomed. Image
Dollar General Shows Solid Growth
September 9, 2013
Dollar General posted solid second-quarter results that suggest the firm is stealing market share from Wal-Mart.
Finisar Sees Margins Surge on Telecom Demand
September 8, 2013
After posting a strong end to fiscal year 2013, fiber-optics maker Finisar (click ticker for report: ) registered fantastic results for its fiscal 2014 first quarter Thursday. The firm set an all-time quarterly revenue record of $266 million, up 9.3% sequentially and exceeding consensus estimates. Earnings per share on a non-GAAP basis soared 55% year-over-year to $0.31 per share, in-line with consensus expectations. The boom in telecom carriers like AT&T (click ticker for report: ), Sprint (click ticker for report: ), and T-Mobile (TMUS) investing in 4G LTE technology helped lift demand during the first quarter. Telecom had been an area of weakness during the firm’s fourth quarter. CEO Eitan Gertel added some commentary on the products driving first-quarter strength
