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November 2017

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Free Basics blew up in Facebook’s face in Egypt and India, but how will it fare in the US?

Facebook Inc. (NASDAQ: FB) is reportedly looking into launching its Free Basics internet service in the US of all places, as Washington Post reported that the social media giants are in talks with government officials and carriers about the service.

Facebook introduced its internet service that was initially targeted at regions where internet connectivity is scarce or limited, called Free Basics, but it swiftly attracted controversy in two of the regions where it was launched. First in Egypt, the service was banned due to a clash with the Egyptian government when it couldn’t prove to be an adequate tool for surveillance.

Then in India, net neutrality, which also reared its head in Egypt, popped up once again, and this time it took Free Basics down with itself. Now, in the United States, Facebook is again targeting users that do not have access to high-speed internet, especially in under-developed areas. But after the difficulties that it has faced in two major countries previously, Facebook is now treading lightly in the US.

Free Basics is running in 49 countries with varying degrees of success, but after the idea of Free Basics is floated in the country, it is almost certain that that debate will come up once again. This is why Facebook is already in conversation with the authorities to allow users to connect to various services through its network and not incur data charges.

It seems Facebook has learnt its lesson from the experiences in Egypt and India and it is looking to avoid the mistakes it previously made. That is why talks are already underway between the two parties, and we will surely know more about it not too long from now.

Tesla will build only the 75kWh and 90kWh battery packs for the Model S and Model X, while offering an update for owners of the 70kWh models

Last month, Tesla Motors Inc. (NASDAQ:TSLA) gave its premium sedan, the Model S, its greatest update. From the front end to the HEPA air filter, the $27 billion company added almost all the advanced features which were only available in the vehicle’s younger sibling, the Model X. Earlier this week, the California-based company also confirmed that it will introduce a new 75kWh battery pack for the sedan.

Although the battery option has not been offered yet, Electrek reported that Tesla will release the new version by the end of this week, and the 75kWh pack would be installed in all the new Model S having 70kWh batteries and produced after the recent nosecone change. The car maker will continue to offer updates to the 70kWh battery options.

Electrek even quoted a Tesla’s spokesperson: “All 70 kWh Model S with updated styling have been built with a 75 kWh battery pack and the additional energy can be unlocked at anytime through an over-the-air software update,” he further added: “We will no longer produce the packs; a decision that is the most efficient for Tesla and the most beneficial for our customers.” This would imply that all the of Model S 70 and 70D versions built since last month will include the option to increase energy capacity by 7%, providing a range of roughly 19 miles, via an over-the-air software update priced at $3,000.

The electric vehicle maker will continue to offer the 70kWh battery option to maintain the Model S base-price at $71,500. Meanwhile, it will streamline its production of battery packs with just two options for both the Model S and the Model X: 75kWh and 90kWh.

Tesla played a similar move during 2012 and 2013, when it installed a 60kWh battery packs in 40kWh Model S versions and gave owners the option to increase the sedan’s performance through an update for a price. We believe that the company has made a wise decision to improve its production efficiency. During 1QFY16, the company reduced its operating expenses for the first time in three years “with a careful eye on spending.”

General Electric completes Heat Recovery Steam Generators business segment acquisition from Doosan Engineering & Construction

Today, General Electric Company (NYSE:GE) stated that it had acquired Heat Recovery Steam Generator (HRSG) business from South Korea-based Doosan Engineering & Construction. The deal worth $250 million was initiated in May 2016.

With this acquisition, General Electric’s Power Business is anticipated to meet the increased demand for its combined-cycle power plant solutions in an effective manner, while meeting customers’ expectations. The company’s Gas Power Systems President and CEO, Joe Mastrangelo welcomed the new business into the GE Power family. The family also contains Alstom that joined it last year.

He further added: “As we expand demand for our HA gas turbines and efficient combined-cycle solutions, a critical part of having the best integrated offering includes Heat Recovery Steam Generators that enable better plant performance and cost. This acquisition brings expanded leadership in engineering, equipment and infrastructure to our portfolio and positions us to be a global leader in HRSG.”

It is pertinent to note that prior to this acquisition, Doosan Engineering was involved in providing supplies for both General Electric’s power business and Alstom. With this business acquisition, the HRSG engineering and manufacturing capacity will get enhanced.

Furthermore, being an old supplier, Doosan Engineering contains an efficient pool of subcontractors that have the capability to easily adjust with General Electric’s capacity, based on the customer requirement. Besides, the acquired company comprises high synergies that would drive value across General Electric’s network.

The company projected further increment from Doosan Engineering’s HSRG, where Alstom’s HSRG merger already provided boost to General Electric’s revenues. Prior to this acquisition, the company’s sales touched $175 per kilowatt of capacity, which now surged to above $300 per kilowatt. For Alstom, Mr. Mastrangelo stated that General Electric now has the capability to grow due to Alstom, even if the market remains flat.

Xilinx to benefit from several growth drivers and share gains, despite investors considering buyout options

Xilinx, Inc. (NASDAQ:XLNX) was recently reiterated as a Neutral by MKM Partners. However, the firm raised the price target from $52 to $55. This move came in after MKM Partners co-hosted a non-deal road show with the Californian business in Minneapolis, along with the CFO Lorenzo Flores. The show also had presence of Senior IR Director, Rick Muscha. Following this, analyst Ian Ing commented that investors are focusing on a buyout whereas the company has focused all its efforts in winning new business for itself.

Furthermore, the analyst highlighted that the company recently announced its target of increasing its revenues by $750 million in the next 5-year period. This would be done with the help of four growth drivers amounting to $500 million increase in revenues whereas the rest $250 million would result from share gains. The share gains are to be a result of its leadership in the manufacturing. Due to this, the $13.75 billion enterprise predicts its EPS to improve in the near term, as a result of its investments which would lead to a rise in its revenues. Furthermore, he commented that the increased research and development investments should be viewed separately, even though they would increase the operating expenses by 7-9%.

Moreover, in case of merger and acquisitions, the analyst noted that Xilinx might be aiming to acquire several mid-sized and light asset companies in semi consolidation segment. However, investors are looking for quick results, as they are less patient now, despite future acquisition opportunities available to the company over the next couple of years.

Despite buyout offers, the semi conductor developer continues to believe that it will not be sold any time soon and continues to operate under this assumption. However, the management is well aware of dynamic challenges aimed at mid-sized businesses. Additionally, the company remains strategic to giants such as Broadcom Inc. (NASDAQ:AVGO) and QUALCOMM, Inc. (NASDAQ:QCOM), despite absence of positive insights from the meetings. This lead to positive sentiments from analysts and investors as the tie ups with these companies just makes sense to them.

Following this, investors remain to be bullish despite considering takeout options. FactSet Fundamentals analysts have presented with five Buy, one Overweight, 14 Hold, and one Underweight evaluations for Xilinx. The 12 month price target is $50.82, reflecting downside potential of 6.25%, due to buyout options.

Since Apple’s latest products are not technological marvels

During Apple Inc.’s (NADAQ: AAPL) March 21 event, the new iPhone SE was finally revealed. However, people were not exactly sure how to react to the latest iPhone. The iPhone SE looks the same as the iPhone 5S, but it comes with the hardware equivalent of the iPhone 6S. It does make one wonder whether or not Apple is on the right path. Additionally, it might also make one wonder whether the rumored iPhone 7, which is supposed to be released this September, will make much of a difference.

Apart from the iPhone SE, the new 9.7-inch iPad Pro was revealed as well. Even though both devices are great improvements over their predecessors, they aren’t technological marvels. Apple it seems has, for the very first time, failed to ‘wow’ its target audience. But then again, Apple may have been facing this dilemma for quite some time now, or to be more specific, after the passing of Steve Jobs.

The only real way Apple can ensure its hold on the market it leads, is by making sure its next iPhone takes a leap forward. Since Apple’s lead is gradually thinning and because it is mostly dependent on its iPhone sales, it needs to impress, like big time.

Apple will, like always, have a spectacular event to reveal its next flagship but that alone does not guarantee a hit. At this stage, it is extremely important for the iPhone manufacturer to ensure its iPhone 7 is a hit, as failing to do so could not only affect the company’s sales, but its credibility as well.

Morgan Stanley’s Adam Jonas shows enthusiasm over 3Q deliveries but remains bearish on the long-term thesis

Tesla Motors Inc (NASDAQ:TSLA) recent quarterly performance in terms of deliveries surprised even its most bullish analysts like Trip Chowdhry of Global Equities. While the “naysayers” are blown away by the record-breaking deliveries, they are coming up with other factors to support their bearish thesis.

Morgan Stanley analyst, Adam Jonas, who rates Tesla stock as Equal Weight with price target of $245, said in a note that the third quarter sales were far ahead of Street’s expectations, boosted by both the Model S and Model X. He expects the strong deliveries to continue till the end of the year. Tesla sold 24,500 units in the quarter, compared to Morgan Stanley’s estimate of 19,140 units and the Street’s forecast of 22,200, according to Mr. Jonas. The analyst believes that the SUV contributes two-thirds to the overall beat. He noted that Model S accounted for a third of the beat with 15,800 deliveries.

He explained: “The tilt towards Model X should be particularly positive for average transaction price in the quarter,” implying that the SUV could positively impact the overall gross margin due to higher selling price. The research firm expects Tesla to deliver slightly higher cars in this quarter to end the year with over 78,000 deliveries, compared to full-year guidance of 80,000-90,000 units. The analyst also highlighted that the annualized third quarter delivery volume of 98,000 units is more than Morgan Stanley’s FY17 deliveries expectation of 83,790, as well as more than FY18 deliveries of the Model S and Model X. This clearly shows how pessimistic Mr. Jonas is over Tesla’s automobile division.

Taking into account the quarterly figures, he said that the market will likely “apply a reasonable discount to the level of commercial momentum demonstrated in 3Q.”

The investment firm thinks that the investors are mainly focusing on more information related to SolarCity merger, Gigafactory construction and production, Model 3 development and spending, as well as the overall cash burn rate, instead of 3Q deliveries.

The Country Caller discusses whether the positive rally in Exxon shares sustainable or notEfficient Upstream SegmentOil Prices: Set to Recover?Conclusion

In 2015, Exxon Mobil Corporation (NYSE:XOM) shares declined 16.37%. This decline was attributed to a severe downtuin oil price, which had hampered several oil and gas companies’ financials. However, on the back of recovering oil prices, the stock has regained 8.19% of its worth year-to-date (YTD). The Country Caller explains whether this recent positive rally in the stock is sustainable or not.

The company’s overall performance remained troubled last year, with fourth quarter earnings being the worst, as they declined 84% year-over-year (YoY). This was because of lower oil prices.

Efficient Upstream Segment

In a low crude price environment, Exxon is bound to make its upstream segment more efficient. The company has already announced cuts in its capex guidance for this year and 2017. This would enable it to invest capital in selective projects which would reap better returns on investment rather than investing in every opportunity aggressively.

In addition to lowering its capex guidance, Exxon has also sought to cut costs in order to remain resilient in a low crude price environment. The company is tapping on unconventional plays, and has successfully reduce its to completion and drilling costs.

As a result, its operating and development costs are also declining, enabling Exxon to enjoy the lowest per barrel production cost in the industry as illustrated.

Oil Prices: Set to Recover?

Energy companies’ upstream segment performance is driven largely by oil prices. When oil prices improve, the segments’ profitability and margins improve. After oil prices kept declining for around two years, the International Energy Agency (IEA) announced recently that oil prices might have bottomed.

The statement came on the back of high production cuts from companies in the US as well as from non-members of the Organization of Petroleum Exporting Countries (OPEC). Moreover, several OPEC and Non-OPEC producers are set to meet in Qatar next month to discuss on launching a production freeze. Such a deal, if successful, would further aid the low prices, ultimately helping companies’ upstream segments.

Conclusion

Due to lower costs, efficiency of upstream segment, and anticipated positive momentum in oil prices, Exxon shares present a good investment opportunity these days. All these factors would enable the oil giant to improve performance over the coming years and reward a good retuon investment to shareholders.

 

Both GPU winners are expected to outperform in the near term due to increased demand, resulting in higher revenues and earnings, analysts recommended to buy both

Both, Advanced Micro Devices, Inc. (NASDAQ:AMD) and NVIDIA Corporation (NASDAQ:NVDA) were recently named as the winners of Graphic Processing Units. This is because both the companies are enjoying their success from the recent GPU launches. They have a huge customer base and can charge premium prices due to attractive price-for-performance indicator. In this regard, the Sunnyvale-based enterprise has observed greater profitability as it completed its offerings worth $1.3 billion. This enabled it to retire its straight debt which was a major concern, especially for its long term investors.

The two semiconductor producers have benefitted from favorable GPU landscape. They saw healthy increments on the supply-side, and yet were able to preserve the premium pricing across their GPU refreshes, Pascal for Nvidia and Polaris for Advanced Micro Devices. Both the organizations are succeeding in their markets.

Furthermore, the firm evaluated both on the prices of their latest GPU cards and their availability. The checks were not on quarterly basis as it considers them being less meaningful. Under its analysis, the Sunnyvale-based business could be seen shipping huge volumes while charging a premium, despite a price conscious market. The analyst, Ian Ing sees tailwinds for the company in discrete GPUs. This is why the semiconductor developer has maintained at Buy with a price target of $8. This price target implies a multiple of 1.74x enterprise value to FY17 sales. Ian Ing has also raised the estimates for the earnings of the semiconductor maker because of higher growth rates prediction.

On the other hand, the Nvidia cards are easily accessible and are being priced at premiums, especially the founders’ edition models. This is because of improvements in the gaming market which contributes to 55% of the sales in July. Furthermore, MKM Partners have also reiterated a Buy rating for this Santa Clara-based business. The price target has been raised by 5.71% from $70 to $74. The price target implies a multiple of 37x the EPS estimate give at $1.85 with addition of $5.47 net cash in each share. This increase in price target is due to increase in revenue expectations driven by successful launch of its Pascal GPU.

An underdevelopment project in the suburbs near Melbourne comes with the standard Tesla Powerwall, solar panel, and EV charging system

With its latest effort to acquire SolarCity Corp. (NASDAQ:SCTY), Tesla Motors Inc. (NASDAQ:TSLA) plans to offer electric vehicles, storage batteries, and solar panels under the same roof to customers. The move could result in the development of many Tesla towns across the globe.

Ahead of approval of the deal, the automaker has started a project at a suburban area near Melbourne, Australia. While the official name of the project is YarraBend, it has widely been called “Tesla Town,” as all the houses in the community will include a Powerwall residential battery system, rooftop solar panels, as well as an EV charging system.

While the project, started by Glenvill Group, is currently home to 60 households, it will eventually have about 2,500 homes, comprising of 3-5 bedroom apartments, homes, and townhouses. Prices of the homes will range within AUD $1.48-2.1 million ($1.12-1.6 million).

Sales and marketing manager of the project at Glenvill, Nick Marinakis, believes that it will receive “the highest possible ESD rating under UDIA (Urban Development Institute of Australia) Envirodevelopment scheme, a first for an infill development site in Melbourne.” UDIA CEO Danni Addison believes that it will achieve the highest rating because it is the one of the Australia’s “most environmentally sustainable developments,” including water reduction of 43%, landfill lowered by 80%, and capability of reducing electricity usage by 34%.

Given the households come standard with the Powerwall systems, along with solar panels, the electricity bills of the residents will be significantly less; most of their electricity consumption will be sourced via clean energy sources. Although these houses are very expensive and out of reach for majority of the people, the project lays foundation for sustainable communities in the future. With improvements in hyrdo, solar, and wind technology, fast development in the Gigafactory, and potential economies of scales in the future, the prices of such renewable energy homes will gradually become affordable for consumers in middle-to-low standard of living. By that time, these technologies will be widespread and essential part of our daily lives.

If Mr. Musk is successful in combining operations of both of the companies, we could likely see more such Tesla towns in the future. Tesla Energy and SolarCity could also work on such projects together.

PlayStation 4, on the other hand, will continue its domination

Wargaming, a renowned studio behind the popular military saga – World of Tanks, World of Warplanes, and World of Warships, has offered new data during a presentation at the recent Game Developers Conference (GDC 2016) that forecasts sales of PlayStation 4 and Xbox One consoles.

According to the developer, Sony Corp.’s (SNE) PlayStation 4 console is going to continue its dominating run and easily cross at least 69 million units sold by 2019. Microsoft Corporation (MSFT) will, however, manage to only touch the 39 million mark, which is still a sizable figure. Hence, in total, Wargaming expects the current-generation consoles to sell a combined 108 million units in three years.   

The presentation was conducted by the studio’s creative director and executive producer TJ Wagner and was based on figures collected by various research firms such as Superdata and HIS. Elsewhere, Wagner revealed that as of now, there are 36 million active PlayStation 4 and 19 million active Xbox One consoles in the world.

That does coincide with official numbers announced by Sony in January, though, as of now, they should be much higher. At the start of the year, the Japanese firm confirmed that it had sold 36 million systems across the globe. Microsoft, on the other hand, has stopped revealing Xbox One sales figures to the public. However, the closest accurate figure obtained has been 18 million Xbox One active units around the same time.

Sony should be marching ahead of the 40 million mark about now, and with Uncharted 4: A Thief’s End right around the corner, as well as other big titles in the year such as Ratchet & Clank 2016, it is going to be a profitable year for the company. Not to mention that PlayStation VR is scheduled for release in October.

Last year, Head of Xbox Phil Spencer admitted how massive Sony’s current lead in the console sales race is. He further stated that Microsoft’s “motivation” is not to beat Sony but instead “gain as many customers” as possible. Microsoft will probably have to be content with second-place in this generation. That being said, even that is not necessarily bad for the firm.