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July 2017

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UBS Asia Tech highlights that demand for iPhone 7 remains disappointing in China

Apple Inc. (NASDAQ:AAPL) iPhone 7 continues to perform below expectations in the international markets, especially in China. UBS analyst, Steven Milunovich, has become tad more cautious on the stock following the recent channel checks. UBS Asia Tech and Hardware analyst, Arthus Hsieh, has commented that iPhone volumes are expected settle below expectations as compared to that of its predecessor last year; he estimates a total of around 74 million units to be sold during the first quarter of fiscal 2017 (1QFY17).

According to Mr. Milunovich the new estimates imply some yearly deceleration. The previous estimate was 75 million units during the quarter, but the recent channel checks suggest that Apple might not meet that check point. The estimate of 74 million units during first quarter (1Q) implied 1% deceleration from the past year. The analyst also provided initial estimates for the 2Q and believes that the tech giant could ship around 42 million units during the three-month period. This also represents a significant deceleration from 43 million units last year. Despite reduction in estimates UBS is of the opinion that there are certain positives that will keep Apple’s shares afloat.

The iPhone 7 plus has surprisingly been more popular than the stock version and the analyst believes the volumes could accelerate in near-term pushing the ASPs higher. He expects Apple to ship around 26 million units of iPhone 7 Plus during 1Q.

To conclude his remarks regarding the iPhone volumes, the analyst suggested that it would too early to project volumes for 2Q; however, it is expected that Apple might be taking a conservative stance.

The analyst reaffirmed Buy rating with a price target of $127 for AAPL stock. Of the total analysts covering the stock, 16 suggest a Buy, six a Hold, and one recommend Sell rating. Apple’s shares currently trade at $111.68, as of 12:37PM EST.

Drexel Hamilton believes that Netflix’s price hikes would favorably impact its growth in the long-term

The best S&P 500 stock of 2015, Netflix, Inc. (NASDAQ:NFLX), has been underperforming this year on the back of two price hikes for its subscription packages this year. Despite its recent strong run, the stock is still trading down more than 11% year-to-date (YTD).

On Thursday, Netflix shares jumped as much as 3.79% and hit an intraday high of $104, after closing the market above the $100 bar yesterday. By 11:45 AM EDT, the stock was trading higher 1.64% at $101.84, after an Apple Inc. (NASDAQ:AAPL) chatter regarding the company’s consideration of targeting several media company, including Netflix, for acquisition.

Before the company revealed about its price increases, Netflix subscription packages had been considered affordable and some analysts had expected this as a good opportunity to increase its price to support its launches and development costs.

Drexler Hamilton analyst Tony Wible issued a report on Netflix maintaining a Buy rating with price target of $150. While most of the investors are worried about the price hike’s effect on the streaming giant’s profitability and subscriber addition growth, the analysts believes that “price elasticity is Netflix’s biggest long term growth driver.”

The analysts must be implying that Netflix’s subscription packages are price inelastic, which means that a price increase has little or no effect on subscriber growth.

Mr. Wible also highlighted that Amazon is seen as Netflix’s closest rival and as an impediment to increasing prices. He disagreed with that and said that Netflix is “far more popular, is used much more frequently, invests at a faster pace, sees a better ROI on content spend, and has better core demo adoption.”

He added, “It is uneconomical for AMZN to be an OTT network and we strongly believe its best move is to switch to being a VMVPD, which would turn it from being a competitor to being a NFLX distributor with disruptive potential.”

Stronger dollar is inversely related to emerging market assets, as investors reconsider their strategy in case of rate hike

Lower interest rates and uncertainty in the developed markets have pushed investment funds to reach out for emerging market Exchange Traded Funds (ETF) such as iShares MSCI Emerging Markets Index (NYSEARCA:EEM) and Vanguard FTSE Emerging Markets Stock Index (NYSEARCA:VWO). The two largest emerging market ETFs by assets have performed after years of disappointing returns.

For traders in hedge fund and mutual funds, both the ETFs have shown solid performances in recent months with stabilizing commodity prices. As the oil prices have rebounded and the demand in emerging economies, such as Russia, Brazil and other South American countries has picked up, the exposure to these ETFs are showing promise. Many analysts also believe that the emerging market ETFs are still undervalued and still have a bullish trend left in them.

However, history has shown that emerging markets ETFs for investment funds have declined due to a stronger dollar. The stronger dollar has weighed on the commodity prices, giving back meager returns as they pressurize the equity market in the emerging economies. Latest, hawkish comments in the FOMC meeting will worry several investment funds with higher exposure to emerging markets. Federal Reserve is expected to implement a rate hike for the year.

In a recent note, BlackRock Inc, the largest asset manager, has been keen on the emerging market debt due to lower interest rates in the developed market. The note also said: “Emerging market (EM) assets are typically vulnerable to Fed rate hikes. We expect the Fed to raise rates just once this year — likely in December — and to proceed cautiously given the unevenness of the domestic economic recovery, as highlighted by weak retail sales data released last week, and global growth uncertainties.”

The weaker dollar makes the emerging market assets more attractive. The dollar has been in a downward trend year-to-date (YTD), whereas iShares MSCI Emerging Market Index and Vanguard Emerging Market Index have both increased almost 17% YTD.

Currency exchange rates and lower fuel surcharges slowed down revenue growth for United Parcel Services

The Country Caller takes a closer look at United Parcel Service, Inc. (NYSE:UPS) stock following its second quarter results for fiscal year 2016. United Parcel reported its Q2FY16 financial results last Thursday, July 29. The company met the Street’s expectations on its bottom line and was able to beat the Street on its top line by a small margin. Oppenheimer restated an Outperform rating on the stock. It also raised the price target by 3.57% to $116 following the company’s Q2 results.

United Parcel Services reported stronger earnings for the second quarter by announcing earnings per share of $1.43 in Q2FY16. It met the Street’s expectations on its bottom line. Analyst Scoot Schneeberger also noted that the company was able to beat his estimate of $1.41 in EPS. The company experienced a 6% year-over-year growth in its EPS. Furthermore, the world’s largest package delivery company posted $14.63 billion in revenues. It managed to surpass the Street expectations by a total of $24 million. The revenues posted by the company led to witness 3.8% YoY increase in its top line. Mr. Schneeberger believes that this revenue growth was in line with his expectations and the estimate issued by him and his team at Oppenheimer.

Not only this, the international operating profits of the company increased by 11% YoY to $613 million. This marked the sixth consecutive quarter to experience double-digit growth in international market. The company’s net income also rose by 3.2% YoY to $1.27 billion in this season. To quote more figures, its operating profits were raised by 4% YoY for the same period and the US Domestic Package segment saw a rise of 2.7% YoY in its operating profits.

However, the Supply Chain and Freight segment saw a decline of 7.2% in its operating profit this season. Despite this decline, the division reported impressive growth in revenues of more than 13% YoY to $2.5 billion. The company credits this increment to recent acquisition of Coyote Logistics during 3QFY15. UPS earnings were impressive in LTL and Air Freight Forwarding markets.

The $94.78 billion company blames its hampered revenue growth to currency exchange rates and lower fuel surcharges. According to the company officials, revenue increased by 4% if currency-neutral basis was assumed. Also, the lower fuel surcharges had harmed the revenue growth and cut it by approximately 120 basis points.

Despite this hampered revenue growth, the company was able to post strong results. The company credits this to e-commerce growth marked by growth in their B2C segment.

Furthermore, the company also experienced healthy export volumes along Europe-to-US trade lane market by double digits growth. Due to this, the international package division was able to expand its operating margin on YoY basis through pricing, network efficiencies and overall growth in volume.

Also, the domestic package segment showed improvements in its margins. This was mainly driven by improvements in productivity due to better technology. These improvements were translated into lower costs per unit.

However, the Supply Chain and Freight department is a bit of concern for the company and remains to be challenging. Despite this, UPS restated its EPS FY16 guidance with the range of $5.70-5.90 compared to the Street’s expectations of $5.80. This would lead to 5-9% growth in its EPS YoY.

While Oppenheimer maintains its Outperform rating on the stock, other analysts also continue with their bullish stance over the stock of supply chain management solutions provider. According to FactSet Fundamentals, analysts uphold seven Buy, two Overweight, 15 Hold, and one Sell ratings on the stock. The 12-month average target price is set at $109.53, an increase of 1.41% over the last close.

The demand for Microsoft’s premium controller has been crazy since launch

Last year, Microsoft Corporation (NASDAQ:MSFT) announced Elite controller for Xbox One. The controller was meant as a premium product designed exclusively for gamers who demand the best precision, comfort and durability. The price-tag of $149 caught everyone’s attention with many people calling out on Microsoft’s absurdly high price for a controller. But despite the initial reception of some fans, the Elite controller went on to become a hot new product. It turned out to be a bigger success than Microsoft anticipated. Retailers were finding it difficult to keep the controller in stock. Fast forward to today; Microsoft has successfully sold 1 million Xbox One Elite controllers to gamers.

 

The announcement was made by the Head of Xbox, Phil Spencer who showed the 1 millionth Elite controller and thanked fans for their support.

It is a tremendous achievement for Microsoft. General perception of gamers regarding the Elite controller reveals a happy install base. Many have deemed it to be the best controller they have used. Xbox One Elite controller was also made part of the Xbox One Elite bundle that offers a premium package for gamers.

At this year’s E3 2016, Microsoft showcased a Gears of War 4 themed Elite controller that will go on sale for $199. The controller features a blood red theme with claw mark engraved on the front, the weapon wheel icons from the game are displayed on the D-pad and the Crimson Omen marks itself on the left handle. Preorders for the controller are open and it will be available at retailers for purchase on October 4.

 

The Country Caller takes a look at why EOG Resources was up on Friday

EOG Resources Inc. (NYSE:EOG) skyrocketed on Friday after numerous sell-side firms commended the recently released results of the company. The stock for the company closed down a massive 7.03% at $90.16.

Losses now are quite common in the oil and gas industry. Oil prices since the start of 2016 have continued to worry oil and gas companies and have heavily weighed in on the second quarter results of the entire oil and gas industry. EOG in this regard was no different as it reported a loss in the latest quarter. But what was liked by the investors was its ability to beat the consensus estimates and deliver robust production figures.

EOG, in its latest earnings disclosure, revealed an adjusted net loss of $0.20 billion translating into a loss per share of $0.38. The company’s loss was able to come on top of the analysts’ expectations who had predicted the company to post a loss of $0.48 per share.

EOG managed to decrease its expenses and at the same time managed to surpass the consensus expectations for production. EOG’s production in the latest quarter came in at 551 million barrels of oil equivalent per day (MBOED) topping the Street’s expectations of $512-$547.7 MBOED.

What motivated investors most was the company’s forecast for its compound annual crude oil production growth (CAGR). The CAGR was estimated to come around 10% through 2020 based on a West Texas Intermediate (WTI) price of $50 per barrel. The CAGR would also come despite EOG consistently trimming its capital expenditure. This year, the budget is expected to decline by 45% when compared to last year.

Bank of America Merrill Lynch was also satisfied with the earnings and was bullish on the company’s future production outlook. Due to the company’s ability of cost cuts and increasing production, Bank of America also raised its 12 month target price for the stock from $95 to $100.

Microsoft Corporation’s foray into the wearable tech market has finally ended

Microsoft Corporation (NASDAQ:MSFT) finally seems to be pulling out of the wearable tech market as a recent report by ZDNet claims that the company will no longer make the Microsoft Band fitness tracker. According to the update, the Microsoft Band 2 will be the last smart fitness tracker, as the company does not plan on building a third fitness device.

The Microsoft Band was first released back in 2014, however, the device failed to make an impact in the wearable tech market. The second-generation Microsoft Band was released the following year and even though the new device was redesigned and had new features, it still failed to impress users. The Band 2 also received a price cut but even that did not help it do better than its predecessor. However, Microsoft recently brought the price down to $175 in an effort to clear out the product.

The report from ZDNet also stated that Microsoft plans to pull out of the hardware segment of the fitness tracker market but will continue to work on the software. In its statement, Microsoft said: “We continue to invest and innovate in the Microsoft Health platform, which is open to all hardware and apps partners across Windows, iOS, and Android devices. We also continue to sell Microsoft Band 2 and remain deeply committed to supporting our customers and exploring the wearables space.”

With the demise of the Microsoft Band lineup, the company looks to further improve and enhance its Health service platform. By focusing on both Apple Inc. (NASDAQ:AAPL) iOS and Alphabet Inc. (NASDAQ:GOOGL) Android and incorporating an extensive variety of third-party applications, Microsoft trusts that its cross-platform procedure which it has effectively grasped on in different regions will pay off here. However, the company might face an uphill task as larger rivals such as Apple are already heavily investing in their respective health platforms.

There is a new heavy ammo glitch is game breaking

Activision Blizzard Inc.’s (NASDAQ:ATVI) Destiny might not have many glitches in the game but out of very few bugs and glitches that are swiftly taken care of by Bungie, most of them are game-breaking and end up giving unusually unfair advantage to players. One recent glitch is also along the same line that is allowing players to have heavy ammo whenever required.

According to reports floating around on Reddit, this new glitch involves having one weapon with the Cocoon perk (which is found on all of the King’s Fall raid weapons by default) and another Sniper Rifle or Rocket Launcher with the Clown Cartridge perk. When a player switches to a secondary or heavy weapon with the Clown Cartridge perk from another weapon that has the Cocoon perk, the Clown Cartridge perk procs in the process, basically giving players a chance to stack up on their secondary or heavy ammo.

Since the Clown Cartridge perk does not take ammo from the weapon’s reserves, it is completely possible for players to generate ammo for their secondary or heavy ammo even when there is zero ammo in the reserves. The glitch might not sound major enough but this works in PvE and PvP both, which essentially gives heavy ammo to players off the bat in a PvP match without having to wait for Heavy Ammo crates to spawn. Since there is a 25% chance for the extra ammo in Clown Cartridge, it might take a bit of switching to acquire ammo but it works in the end.

Thankfully, the developers have taken notice of the glitch and Cozmo has issued a statement mentioning that the live team is alerted about the issue. It is now actively working to fix it as soon as possible.

Destiny: The Taken King is now available for Sony Corp.’s (NYSE:SNE) PlayStation 4 and PlayStation 3, Microsoft Corporation’s (NASDAQ:MSFT) Xbox One and Xbox 360.

The Swindle, Devil May Cry 4 and Resident Evil Revelations 2 are on sale this week

Microsoft Corporation (NASDAQ:MSFT) Xbox Live Deals with Gold for the week between November 8–15 have been announced today. Fans would be delighted to know that Devil May Cry 4 and Resident Evil Revelations 2 are included in this week’s discounts for Live Gold members.

Exclusive discounts for Xbox Live Gold membership are introduced every Tuesday. Fans with Gold memberships are able to buy some of the biggest titles available after huge discounts. The discounts are available on both Xbox 360 and the Xbox One, but the juiciest deals are exclusive for Gold members.

Games available this week on Xbox One are Devil May Cry 4 Special Edition and Definite Edition with 50% and 67% off, respectively, while Resident Evil Revelations 2 Deluxe Edition and Season Pass are also on 60% sale. Other games on sale this week include The Swindle with a 75% discount, The Technomancer is off 50% and Reus is off 25%

For the Xbox 360, you can get your hands on Counter Strike: GO, which is off 50%, and DiRT 3 will be sporting a 75% discount. That’s not all; Dark Siders 2 and Zombie Driver HD are also up on sale.