January 2017


The analyst increased EPS estimate for FY16 and FY17/18 following updated guidance issued ahead of the company’s investor meeting

Stifel reiterated a Hold rating on Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ:ULTA) along with a $277 price target on the stock, which reflects an upside potential of 4.08% over the closing price of $266.14. On Thursday, the firm weighed in on the beauty retailer soon after it issued an updated guidance ahead of the investor meeting.

Mark Astrachan, Stifel analyst, highlighted that the most notable aspect is the increased third quarter guidance of comp store, which indicates significant growth. It implies about 100 basis points of acceleration in the two year compound annual growth rate compared to previous quarter where comp growth decelerated approximately 100 basis points from Q1 comps.

He noted further that other metrics are approximately inline with the his and consensus expectations. Accordingly, the firm has raised FY2016 EPS estimate by two cents to $6.25, and FY2017/FY2018 EPS estimate by three cents to $7.79 and $9.01, respectively.

“We attribute the stronger comp to the accelerating shift in beauty sales from traditional sales channels such as department stores to specialty retailers, online, and mobile, and to Ulta’s increasing focus on its loyalty program, targeted promotions, and on-trend product offerings, mainly mass and prestige cosmetics,” said Mr. Astrachan. He anticipates the company to disclose additional details about many of such growth drivers at the next investors meeting. However, the analyst is more interested about how Ulta plans to stay ahead of emerging trends in beauty category. This includes the acceleration in cosmetics sales at the cost of skin care contributions over the past 18 months and the continued growth of prestige offerings due to relatively more favorable growth compared to mass.

Stifel analyst noted the long term store opportunity forecast is in line with his analysis that suggests up to 1,700 doors, based on two analyses on average that utilizes the examination of current Ulta stores to total US Sephora stores.

The Country Caller takes a look at BP’s latest cost cutting techniques

Cost reductions in the third quarter of the fiscal year 2016 are expected to pick up pace as oil prices continue to remain at depressed levels. In June, oil prices made a robust recovery going up as much as $50 per barrel. However, bearish sentiments continued to taint the market as Canadian and Nigerian supply came back online.

According to an exclusive article of the London based integrated oil and gas company, BP plc. (ADR) (NYSE:BP) is now looking for buyers in order to sell a 50% stake in its Joint venture SECCO. As mentioned above, the deal comes amid a price turmoil prevailing in the oil market.

BP in the second quarter saw its earnings tumble by half. Moreover, the company’s costs associated with the Gulf of Mexico oil spill also came ballooned to $61 billion. In such circumstances, it becomes almost imperative to sell assets or engage in cost reductions in order to maintain liquidity. The joint venture is considered BP’s largest investment in China and could fetch in about $2-$3 billion. BP, since the Gulf of Mexico oil spill in 2010, has managed to sell some $50 billion in assets.

Reuters further reports that BP is collaborating with Morgan Stanley for the deal. Through the deal, the company wants to move away from its non-core operations and focus mainly at its strengths. During a time of crude oil price decline, exploration and production activities became less attractive and refining segments show improvement.

The SECCO is focused primarily in the downstream segment and is expected to bring about a lot of interest from the oil and gas industry. According to some sources of Reuters, the assets might attract investors from Japan, Europe, Taiwan and South Korea.

Although prices have recovered since Monday, we believe this is temporary as talks for a production freeze are in the process. However, the OPEC in the past has failed to come to a compromise and this is expected to continue in the long-run.

The Country Caller takes a look at the release of Motorola’s latest revolutionary flagship devices

Lenovo-backed Motorola Solutions (NYSE:MSI) released the company’s latest flagship smartphones today at the Lenovo TechWorld in the form of Moto Z and Moto Z Force. The new devices replace Moto X Play and Moto X Style smartphones that were released last year.

Moto Z and Moto Z Force, are completely different devices than their predecessors in terms of design and functionality. Both are very similar in terms of hardware as they are powered by the latest Snapdragon 820 chipset coupled with 4GB RAM. Both devices are also available in two storage variants of 32GB and 64GB, with the ability to expand storage via a MicroSD card slot.

Moto Z and Moto Z Force are the devices by Motorola that sport AMOLED displays, rather than the IPS LCD display found on the previous generation Moto X. Both devices have a 5.5-inch display with 2560 x 1440 QHD screen resolution, and house a fingerprint scanner on the front. They are also equipped with Motorola’s TurboPower fast charging technology.

The new devices are constructed with an aluminum chassis and are covered with glass from edge-to-edge. The Moto Z is protected with the latest Corning Gorilla Glass, whereas the Moto Z Force uses the second generation Shatter Shield Technologythat protects the screen from shattering or cracking when dropped.

Motorola’s both latest phones come equipped with front-facing 5MP cameras and a dedicated front-facing flash. The Moto Z houses a 13MP rear camera with laser assisted auto focus and OIS which helps in taking pictures in low-light conditions. The Moto Z Force comes with a much powerful 21MP rear camera that comes with phase detect auto focus, laser auto focus, and OIS for stunning pictures.

Motorola has also opted to remove the 3.5mm headphone jack on both devices, and there is only one USB-C port that will be utilized for charging and audio output. Both devices are also extremely thin; Moto Z measures only 5.19mm in thickness, while the Moto Z force comes in at 7mm. The former comes with 2600 mAh battery, whereas the latter comes equipped with 3500 mAh battery.

The most interesting feature of the new devices is the addition of the new modular accessories, called MotoMods. The said modular accessories snap on the back of the phone using strong magnets, and only need to be setup only once after they are installed. There are a variety of different Mods, such as a JBL SoundBoost speaker, Moto Insta-Share Projector, and an additional 1000 mAh battery. The devices do not need to be restarted after installing modular accessories, unlike LG’s G5.

Moto Z and Moto Z Force will be available in the US later this summer and will be sold exclusively through Verizon. Their prices have not been provided yet.

The analyst believes formulation 1 of colonic release Linzess will help add a “tail” to Linzess franchise

Evercore ISI sees a forthcoming Allergan plc Ordinary Shares (NYSE:AGN)/Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) catalyst which he said is way under the Allergan investors’ radar. The firm weighed in second phase trial of colonic-release, Linzess, that is due before 2016 ends. Linzess is a gastrointestinal drug, developed by Allergan/Ironwood collaboratively, to treat chronic idiopathic constipation in adults.

Umer Raffat, Evercore ISI analyst, commented that Linzess is one of the finest launch stories at US based Allergan. He noted that the drug generates nearly $700 million annually, which is split with Ironwood.

The analyst highlighted four possible scenarios, from the least to most serious, regarding phase 2B trial of colonic-release Linzess. The first could be the failure of the study but this implies no downside to the stock as Allergan investors are not aware of this program and estimate a Linzess overhang in late 2020s.

Moreover, the analyst believes formulation one of colonic-release has efficacy similar to that of Linzess and will have a tail to Linzess franchise. Current patents of Linzess will expire in late 2020s and patents of this formulation would go out to mid 2030s. Mr. Raffat hinted of pricing-related erosion after late 2020s but it could still be a tail to a big franchise like Linzess. “The incremental NPV to Allergan from scenario #2 is perhaps ~$2/share from additional years … however, NPV often under-estimates the impact to PE multiple hit from patent expiries,” he added.

Another impactful scenario highlighted by Mr. Raffat is that colonic-release formulation one has improved pain-relief compared to Linzess. It subsequently strengthens the franchise and adds multiple years to life of patent i.e. 2030s. In this scenario, Ironwood management has estimated annual Linzess sales to surpass $2 billion versus $1 billion peak in Street’s expectations.

“Formulation 2 of colonic release (which is meant to be for pain relief only) shows good abdominal pain relief that opens up several new indications for this drug – including IBS-mix, ulcerative colitis, diverticulitis (i.e., other GI disorders with pain but no constipation),” said Mr. Raffat.

Tesla Model S can drive through various geographic terrains, including swimming while being submerged in water

When electric transport was initially introduced to the market, many people were concerned what would happen to an electric vehicle (EV) swapped under water during a flood or after a storm. There has been a misconception that a battery-driven vehicle (EV) could be damaged much more than a fuel-driven vehicle in such situations.

Tesla Motors Inc (NASDAQ:TSLA) vehicles can drive across various geographical terrains but not many had an idea how it would perform if flooded with water. There is a video in which the automaker’s all-electric sedan, the Model S, is driving (more like swimming) past internal combustion engine (ICE) cars in a flooded tunnel in Russia. This would alleviate that misconception that EVs may underperform in such situation.

Here’s the video of a Russian Model S owner swerving right and left like the top-selling European luxury vehicle is a wet dog coming out of the water:

Certainly, water is bad for any kind of car or electronics and mechanical device. A driver would never want the entire undercarriage of their automobile to be submerged; no matter if it includes an exhaust line or large number of battery cells in a pack.

The battery pack of the Model S is completely sealed that shields it against variety of things including water’ though, there can be a lot of complications from submerging the sedan. Additionally, vehicle warranties, including that of Teslas, or insurance usually do not cover any damages due to driving a vehicle through a flooded street.

It is advisable that a driver should avoid submerging their vehicle under water if it is possible and if they are while the vehicle is operating, it would be better not to require any air intake.

In 2012, Fisker Automotive lost $30 million worth of luxury vehicles due to Hurricane Sandy at Port Newark. Over 3,000 Fisker Karmas, plug-in hybrid worth about $10,000, were destroyed during the disaster. Although the automaker advertised the vehicle as an EV, it was more of a fuel-powered vehicle than a zero emission vehicle.

We reported last week that 11 teams of owners of EV, including the Model S, are on a “80eDays” challenge to tour around the world in 80 days. The campaign started by EV enthusiasts is aimed to increase EV awareness and show the technology could cover different geographic terrain, from Alps mountain ranges in Europe to the Gobi Desert in Central Asia.

Activision Blizzard sees strong growth in numbers due to Overwatch’s success

Activision Blizzard, Inc. (NASDAQ:ATVI) is clearly running ahead of estimates this quarter as the company’s newly released flagship game Overwatch continues to grow at an accelerating pace. The strong performance of Overwatch has taken the analysts across the globe by a surprise as the number continues to grow. The game’s strong debut performance has prompted revision of estimates at Wedbush as the analyst sees clear upside to the current estimates.

According to the recent statistics posted by Wedbush analyst, Michael Pachter, 8 million copies of the game have been sold during the second quarter crushing the analyst’s initial estimate of 4 million copies. The analyst initially expected 6.5 million units to be sold during the year 2016, but stronger than expected sales have driven the analyst to raise estimate to 10 million.

Mr. Pachter revised his revenue and EPS estimate for Q2. The analyst’s revenue estimate now goes to $1.475 billion from a previous estimate of $1.4 billion, while the EPS estimate is now $0.46, up from a prior estimate of $0.40. Currently, the consensus estimate for Q2 is $1.437 billion with an EPS of $0.41. The guidance provided by the company has a midpoint of $1.375 billion and an EPS of $0.38.

Overwatch has been a huge success and has started to replace League of Legends in a large number of competitive gaming circles. The game is still in its early days and a balancing patch might bring increased popularity for it. The analyst reaffirmed Outperform rating with a price target of $43. The analyst opinion for ATVI has 21 ratings out of which 5 analysts rate the stock as Strong Buy, 14 rate it as Buy and only 2 rate Hold. The stock now trades at a price of $39.79 relatively flat from its opening price.

Given Toyota’s stable position and extensive research, it can be said that the company may give a tough time to its 12-year-old rival

Palo Alto based EV maker Tesla Motors Inc (NASDAQ:TSLA) may currently be unprecedented in the electric vehicle space, yet its legacy has been challenged by Japanese rival Toyota Motor Corp (ADR)(NYSE:TM). The Aichi based company has recently reached a breakthrough in its EV battery technology, as it claims that the lithium ion batteries can now increase the cruising range by 10% to 15%. Engineer Hisao Yamashige demonstrated his recent findings, as he added that lithium ion particles are detrimental to the efficiency of a battery.

It is important to note that electric vehicles have not yet been able to suffice themselves, due to lack of proper infrastructure and less charging stations. Therefore, cruising ranges are going to be a decisive factor to lure customers in the future.

Given Toyota’s stable position and extensive research, it can be said that the company may give a tough time to its 12-year-old rival. That being said, Elon Musk’s company is on the verge of improvement and there have been a few positive developments that were covered by The Country Caller in recent articles.

However, the street holds conflicting views about the Luxury EV makers, as a few brokerages slashed down their ratings, while Baird considers the SolarCity acquisition as a positive. World Renowned firm Morgan Stanley recently discussed its views, as it continued that the renewable energy company has zero value for Tesla.

Nonetheless, Mr. Musk sticks to his vision and has successfully lured investors to give a vote of confidence to the acquisition. That being said, it will still be difficult to say anything about the automaker’s future. Yet, if Toyota does come up with a disruption in the industry, it may go against the $28 billion company. The Country Caller maintains a “neutral” stance on the electric car maker.

Machine Learning open windows to large potential opportunity beyond FY17 for Xilinx, according to Morgan Stanley analyst

In a note issued to investors recently, Morgan Stanley analyst Joseph Moore upgraded Xilinx, Inc. (NASDAQ:XLNX) from Equalweight to Overweight and also raised the price target by about 45.65% from $46 to $67. The firm is anticipating revenue share gains as investors shift their focus to machine learning. Consequently, XLNX shares gained more than 6% yesterday.

Mr. Moore believes that the stock may have underperformed past semiconductor rallies; however, he observed improvements in the California-based company’s fundamental outlook. He explained that the improvements were in-part driven by modest improvements in overall FPGAs growth.

He also sees enhanced potential for share gains as the company topped Intel/Altera in manufacturing nodes. The analyst is also optimistic over the evolution in Artificial intelligence. He believes that as machine learning evolves, the market moves toward specialty solutions, driving demand for XLNX’s FPGAs.

Mr. Moore further added that graphic leaders, such as Advanced Micro Devices (AMD) and NVIDIA Corporation (NVDA), benefitted from machine learning training in calendar year 2016 (CY16).

He further added: “In 2017, we should see the beginnings of specialized hardware for “inference” – using those graphics-trained neural networks in a real time environment. Somewhat to our surprise, our checks show that Xilinx is emerging as a leader in this segment.”

He also believes that recent Amazon Web Services win indicates that the company can compete head-to-head with Altera over Intel’s most important customers. Mr. Moore thinks that while this represents a small revenue driver in CY17, it has the potential to go big going forward.

Street analysts have maintained a PT of $52.39, which implies about 12.9% downside potential over the last closing price. Furthermore, analysts’ ratings include six Buy, 15 Hold, and one Underweight.

It is difficult for OPEC to curb supply

Shares of oil giant, Chesapeake Energy Corporation (NYSE:CHK), followed a down trend on Friday, as international oil prices were down. The downward trend might continue today as well, as the oil prices are still down. The Country Caller has discussed the developments in the oil market in our previous articles, as it is difficult for Organization of Petroleum and Exporting Countries (OPEC) to curb supply. Recently, there has been a positive correlation between the international oil prices and oil company stocks. analyst, Gregor Horvat, discussed the weakness that has emerged in the oil price trends, as the new support level may be $39.50. moreover, the recent international developments are also not favorable for the oil industry, as the newly elected U.S president does not have any plans to cut oil production. Instead, he is in favor of an increase in oil production, as he believes that it would lead to job creation in the country.

The implications of an increase in supply might not be good from an overall perspective, as oil companies may continue to post losses. OPEC has already given a very weak outlook for oil, as it does not view oil prices going beyond the $60 level until 2020. Therefore, oil companies are not lucrative investments for the next two to three years, as share prices may remain depressed. However, oil stocks can only be beneficial to day traders, who have a good understanding of the oil price dynamics.

The street remains skeptical about the company’s future, as a few sell side firms, such as Jefferies Group and FBR & Co., have set lower price targets with “Hold” and “Underperform” ratings. Meanwhile, a few equity research firms, such as Bank of America and Credit Suisse, remain bullish with higher price target (PT) with Neutral ratings. The consensus PT of $7.34 implies an upside of over 35% from Friday’s close.

Apple is set to incorporate MacOS Sierra in its next-gen MacBook Pro

Apple Inc. (NASDAQ:AAPL) moved a step closer to finalizing the operating system that the tech giant intends to power its next generation MacBook Pro with. According to reliable rumors, the original MacBook Pro is finally set for an update, after four years since the device was originally launched. It is heavily predicted that Apple will announce its next generation MacBook Pro model during its upcoming September event, with the device officially rolling out before the end of the year. The latest beta update for MacOS Sierra is designed to fix a couple of minor issues found on the previous beta update of the operating system. Also, the update polishes a few important features which indicate that the OS is very near to being perfected, ahead of the launch of the next-gen MacBook Pro.

Even though Apple has not specifically mentioned what the latest beta update of MacOS Sierra intends to offer but it is certain that this is an effort by the tech giant to perfect the final version of the operating system powering the next generation MacBook Pro. The past beta releases of the MacOS Sierra have clearly indicated that the upcoming OS will bring new features to next iteration of the MacBook Pro. Probably the biggest change that MacOS Sierra will bring on the next-gen MacBook Pro is the incorporation of the Cupertino based tech giant’s voice activated virtual assistant Siri. The implementation of Siri on the upcoming MacBook Pro will allow users to execute basic tasks, like searching for something on Google, by asking the voice activated digital assistant and not physically encoding the device. Another neat feature that MacOS Sierra will bring on the next generation MacBook Pro is the ability to get locked or unlocked with the help of a compatible Apple Watch. Also, the upcoming operating system will automatically disable Flash content on Safari which will not only lead to faster browsing but it will also improve the battery life on the next generation MacBook Pro.

The new features and improvements offered on the seventh beta update of MacOS Sierra indicate that the upcoming software will significantly improve the functionality of the next generation MacBook Pro. If you are registered in the beta Apple software program then you should definitely go ahead and give the latest beta update of MacOS Sierra a try.