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January 2018

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The analyst also bumped the price target on Lockheed Martin

Lockheed Martin Corporation (NYSE:LMT) has been upgraded at Stifel following the conclusion of presidential elections. Stifel analyst Joseph W. DeNardi believes that Trump’s victory in the elections will prove to be a big positive for the company. It is widely believed that Trump’s reign will result in a steep incline in the country’s defense spending which would ultimately benefit Lockheed Martin, as it is one of the most reliable military aircraft producers in the country.

The analyst added that the upgrade on Lockheed Martin was coming all along and Trump winning the presidential election has dramatically raised the prospects in favor of the company. The commentary provided by the management for FCF during the year 2018 is extremely positive and implies some major acceleration in the company’s core business. Trump’s government is very likely to introduce policies that would lead to significant increase in the defense spending, making Lockheed Martin the ultimate beneficiary.

The company’s F-35 aircraft continues to perform ahead of expectations and the demand for it has not budged the slightest. There might have been some pricing concerns related to F-35 but the analyst believes that they will not hinder stock’s performance, as most of the headwinds will be negated by higher than expected volumes. Furthermore, the gross margins of the company are now very likely to accelerate towards the end of the year 2018.

The analyst raised his estimates and the price target. The price target is now $290 from $260, which is around 18.5x the average DCF between 2016 to 2018. The analyst’s DCF analysis also supports the new price target. The rating for Lockheed Martin was also upgraded. The ratings for the stock are 7 Buy, 1 Outperform, and 11 Hold. The stock traded at a price of $267.41 after gaining 3.17% since the opening.

The bank is said to have been downgraded a record two-Notches in a single review

The year 2016 can be termed as one of the worst for Wells Fargo & Co. (NYSE:WFC) as challenges for the bank keep on increasing. The financial giant was first affected by the accounting scandal which has become a major problem for the bank. This scandal has led to a decline in the bank’s deposits and has hampered the trust of its customers. In recent news, the banking giant is said to have failed on a national scorecard by regulators for community lending.

Wells Fargo is said to be awarded the “needs to improve” rating under the Community Reinvestment Act. This would be a two-notch downgrade from its previous rating of “outstanding.” The change in rating would give the regulators a greater say in its daily matters such as the decision to open up a new branch. The said ruling is due to be issued by the national regulator, The Comptroller of Currency, in January, according to sources exclusive to Reuters.

This downgrade would affect the San Francisco-based financial giant negatively as its reputation would be tarnished. The $294 billion bank is currently working to restore the trust people had in the bank before the scandal, which would be affected again now.

There has been criticism from various people such as head of the California Reinvestment Coalition, Paulina Gonzalez, who stated: “Regulators could have downgraded Wells Fargo years ago and maybe that would have stopped some of this wrongdoing.”

In previous years, after the financial crisis, other leading banks have also been downgraded by the regulator. Bank of America was downgraded in 2011 and JP Morgan Chase was downgraded in 2013. Sources within the industry and regulators have said that there has been no other case in which a bank has been downgraded two notches in a single review, according to Reuters.

We might continue to see normal console cycles after PlayStation 4

Sony Corp.’s (ADR) (NYSE:SNE) PlayStation 4 Neo is the company’s approach to extend the console’s capabilities to support new technologies like 4K TVs and virtual reality. It was confirmed after various rumors and leaks that an upgraded PlayStation 4 model is indeed coming, but Sony did not say when it would arrive.

The console’s announcement breaks the traditional lifecycle where we used to see one console being carried on throughout its tenure until it was replaced by a successor. Talks of a mid-generation console refresh emerged earlier this year with Sony and Microsoft Corporation (NASDAQ:MSFT) both using this strategy. Both console manufacturers are officially working on new systems, and while the move strongly suggests that traditional console lifecycle will now be replaced, Sony believes it to be otherwise.

In an interview, Sony President of Worldwide Studio Shuhei Yoshida commented on whether PlayStation 4 Neo spells a shorter lifecycle for the console, to which Yoshida San clearly said we should not expect as such. He added that “PS4 is PS4” and “high-end PS4 is still PS4,” suggesting that both consoles will be phased out together at their appointed time.

Previously, Sony Interactive Entertainment President Andrew House expressed in an interview with The Guardian that Sony is not moving away from the traditional console lifecycle: “I’m certainly not making that statement” he said.

PlayStation 4 Neo is a high-end model of the existing console meant to deliver better resolution and higher visual fidelity. For all we know thus far, with the rise of 4K TV fervor in the market, Sony saw an opportunity to cater to that segment which wants more performance. One of the reasons Andrew House explained during the interview was potential customers eventually moving to PCs, due to console hardware which grows outdated over time.

The rumored Microsoft Surface Phone is tipped to provide strong competition to the Apple iPhone 8

Apple Inc. (NASADQ:AAPL) has been lining up a host of important upgrades in its next-gen smartphone device, dubbed as the iPhone 8. Recently, Microsoft Corporation (NASDAQ:MSFT) has already put it across that it is already working on its upcoming smartphone models which will be released sometime in 2017.

Judging by recent speculation, 2017 could possibly the year when Microsoft finally makes its mark on the smartphone market. Although the tech giant has had a torrid time with its previous-generation Windows Phone but the company is tipped to make a strong comeback in the market with the help of its speculated Surface Phone. Here is a quick review of everything you need to know regarding Microsoft’s next-generation smartphone device:

According to recent rumors, Microsoft is tipped to incorporate a 5.5-inch Quad-HD AMOLED display in its next flagship smartphone device. For those who don’t know, Apple is also rumored to be looking to implement OLED technology in its next-gen iPhone, so it will be interesting to see which tech giant actually sports such a desirable display for its upcoming device.

Also, the entry-level variant of the rumored Surface Phone is tipped to incorporate a 4GB RAM, which could be powered by a 64-bit Intel processor. Recent speculation has hinted that the Redmond company could incorporate up to a whopping 128GB of internal storage in its next flagship smartphone device.

Furthermore, the rumored Surface Phone could sport a 21MP back camera and a substantial 8MP front selfies camera. It is quite possible that the Redmond company incudes a Surface Pen and a USB Type-C port in its next Windows-powered smartphone device.

Although Microsoft has remained tight-lipped regarding its upcoming projects, the software giant is tipped to hold its next big event in early-2017, where it could officially reveal details regarding its upcoming Surface phone, including the excessively talked about Surface Pro 5. Tell us if you are excited about the possibility of an early-2017 launch for the rumored Surface Phone or not. Do you think this is going to change things for Microsoft?

Last year, Apple contributed to 31.2% of Advanced Semiconductor’s $8.73 billion revenue

It is no secret that Apple Inc. (NASDAQ:AAPL) has been playing it safe on iPhone orders this year. According to an earlier report, Advanced Semiconductor Engineering (ADR) (NYSE:ASX) is the company’s latest supply partner who has cautioned over Apple being conservative in its chip orders compared to the same period last year. Meanwhile, its competitors, particularly in China, have been more aggressive than ever in their chip orders despite the global decline in the smartphone market.

“The big client in the U.S. is a little more conservative when placing orders this year,” said Tien Wu, ASE’s chief operating officer in an interview with Nikkei. Surely, the big client in the United States is none other than the iPhone maker. With Apple being on the back foot, Advanced Semiconductor could potentially lose out a lot in terms of topline numbers, considering that the former is the latter’s largest consumers. Last year, around 31.2% of Advanced Semiconductor’s entire $8.73 billion revenue came from Apple.

Mr. Wu further noted that meanwhile, Apple’s competitors in the smartphone business have ramped up their respective orders. At the same time, however, the COO assures that none of the companies have been ‘pverly aggressive’ and most likely would not face any inventory related issues.

The COO assured shareholders that despite the slowdown from Apple, sequential sales would witness great improvement this year. Advanced Semi Conductor earlier on cautioned in its annual report that upcoming growth catalysts, such as wearables along with certain other smart devices, have yet to prove accretive to the company’s revenue. Among other reasons that he listed for slow revenue growth, sluggish demand for consumer electronics was also included.

Advanced Semi Conductor Engineering shares were up by 2.53% in mid-day trading today. The stock has declined by more than 7% during the past six months compared to the S&P 500, which has only dipped by 1.92% during the same timeframe.

The Country Caller takes a look at the latest development of the SolarCity-Tesla deal

SolarCity Corp (NASDAQ:SCTY) is edging closer and closer in being acquired by Tesla Motors Inc. (NASDAQ:TSLA). Elon Musk following its decision to purchase SolarCity has faced immense criticism. SolarCity currently is in a financial turmoil and has a very disappointing profitability position.

Many are raising questions as to why Tesla would want to acquire an unprofitable solar company. But we believe this could mainly be due to Mr. Musk’s efforts to save the company from bankruptcy. Sunedison, a major solar company in the US, declared bankruptcy earlier this year. Mr. Musk who is also the chairman of SolarCity would thus through the merger would be supporting the company financially.

Earlier in August, Tesla indicated that it has managed to renegotiate purchase terms with SolarCity. Now according to the latest reports, the share price was now reduced from $26.50-$28.50 to $25.83. Shareholders of SolarCity would be receiving 0.11 Tesla shares for every SolarCity shares they own.

Generally, we see that the higher the risk, the higher the chance of return. Mr. Musk is mainly placing his bet on this concept and believes that the deal, if approved by shareholders of SolarCity, can bring in huge benefits. As reported by the Wall Street Journal, Mr. Musk indicates that the deal would bring together two loss making entities and while it may seem risky it also opens doors to new opportunities.

The demand for solar and other renewables has a bright future ahead as conventional forms of fossil fuel lay harm to the environment. SolarCity being the largest residential solar provider in the US could clearly be very helpful in tapping this upcoming potential.

Both Mr. Musk and Lyndon Rive, the CEO of SolarCity, are extremely bullish on the deal. The deal is expected to bring in cost synergies of over $150 billion. In addition, the combined entity would likely be selling Tesla batteries with rooftop solar panels.

As reported by the Wall Street Journal, there are reports that the special committee that is analyzing the offer has considered this offer as the best for SolarCity’s shareholders. Looking at the current scenario, its seems that the deal is just around the corner to be finalized and is edging more and more close towards completion.

‘Someone will get hurt in auto lending,’ JPMorgan CEO said two months ago

JPMorgan Chase & Co. (NYSE:JPM) partners with TrueCar to make the car purchase process through financing much simpler. Banks are lending more than ever as the US economic growth is moderate. Recently, chief executive of JPMorgan, Jamie Dimon, stated that the growing trend of auto loan would hurt someone.

TrueCar, is a digital car buying service that partners with Chase’s commercial and consumer banking to auto-approve customers for buying cars. Customers can look through the list of cars online and choose the dealership. Once they choose a vehicle, they can enter the dealership and find their auto loan documents ready.

Bruce Jackson, head of retail lending at JPMorgan Chase said, “The reality is that customers are shopping for everything online, even cars. By pairing online financing with the car buying experience, we can deliver pre-approved customers to our dealers, and dramatically simplify the car buying process.”

Auto loan competition amongst commercial banks is growing as other sectors, such as investment banking and wealth management, are in a pit. Customers and banks are trying to benefit from the low interest rates as the Federal Reserve has set an expansionary policy. Last year’s last quarter had the highest amount of loan issued since the financial crisis in 2008.

Two months ago, Mr. Dimon warned ‘someone will get hurt in auto lending’. We believe it is not the banks or the auto dealers, but the debt bearers who will get hurt the most, as overall public debt is rising in the US. Giving Mr. Dimon’s statement benefit of the doubt, he has emphasis on the subprime loans issued. The statement is quite broad, as auto-lending industry seems to be heating and the only party holding risk is the debt holder.

Millennials are the prime target for the auto-lending partnership, as they are more inclined towards shopping online. Online shopping mostly uses credit and the US consumers are in debt more than ever.

The company needs to work on measures that boost investors’ confidence and encourage them to buy Fitbit stock

Analyst Erinn Murphy at Piper Jaffray had a fireside chat with Fitbit’s Inc (NYSE:FIT) Chief Financial Officer (CFO), Mr. Bill Zerella. The sell side mentioned that Fitbit continues to remain the leader in world of wearables and also occupies market share of above 80% in fitness tracker space. As per company’s expectations, the growth in US would be complimented by linear footage expansion of existing stores, as compared to new doors.

Looking at the international arena, there’s still much space available for the company to tap, especially in Asia. While talking about new product lines, management continues to bring new products to the market, resulting in higher gross margins. Moreover, the sell side firm also expects higher gross margins for the year.

In addition, the management is also laying more of its focus towards products which have biometric sensors. While presenting company’s guidance, the 3Q revenues should be expected to lower, on a sequential basis as the channel is destocked. However, the 4Q revenues should be expected to accelerate again when new products are brought to the market.

The sell side firm brought no change to its Neutral stance for the company and kept a price target of $16.00 for the Fitbit stock, representing a 28.31% rise from stock’s current value of $12.47 as of 11:57 AM EDT. The average price target for the stock by analysts on the Street is of $22.29.

Stock’s performance for the year has been a mere free fall, as stock has lost 58% of its value Year-to-Date (YTD). Even in the past month of trading, stock has declined by substantial 13.33%, which reflects investors are shying away from investing in the stock and their confidence in the stock is on a decline. The management needs to take some strategic measures to re-boost investor confidence and put it again on path of growth.

MKM Partners’ Ad tracking data supports acceleration in ad spending trends with Facebook and Alphabet being the main beneficiaries while Twitter still holds potential to improve

Alphabet Inc (NASDAQ:GOOGL) and Facebook Inc (NASDAQ:FB), as the foremost digital advertising platforms will experience growing ad revenue as ad spending on the internet accelerates by a significant margin. The data collected by MKM partners also shows that Twitter Inc (NYSE:TWTR) could also attract ad dollars if it could bring wider appeal to its stagnant platform.

The research shows that for the March quarter, ad spending met with MKM’s own projections. The firm has identified numerous drivers impacting spending in tech and media which constitute 70% of all ad spend.  Based on their data, which they claim tracks 76% of internet advertising, the sell side covered the most prominent advertising platforms on the internet, Alphabet, Facebook and Twitter.

Alphabet was rated a buy with its core Google search dominating the search market where it has a near complete hegemony with mobile search being the primary driver for accelerating ad spend. The company has a $75 billion run rate for its ad business. Due to its market dominant position, Google currently faces no threat of disruption and has numerous opportunities to grow its attractive ad business. Meanwhile, Facebook has also received a Buy rating thanks to its continued growth and its ramp on Instagram. Facebook’s drive to turn its Messenger into a services platform is a powerful monetization opportunity if executed well. Twitter received a Neutral rating. The company continues the struggle to increase engagement on its platform with its stagnant user base and number of signed out users. If Twitter can return to a user growth model through its initiatives, it could be a powerful ad platform but currently the company faces decelerating growth in revenue and risk of network collapse.

Google and Facebook continue to remain the dominant new media platforms and make 85% of the market cap of the top new media companies identified by MKM. These companies have concentrated ad spending on themselves through their superior innovative platforms and will continue to exceed expectations.

Citron analyst criticizes the deal, while many believe that SolarCity can be the next Sunedison

SolarCity Corp (NASDAQ:SCTY) stock was down in the pre-market today after reaping gains yesterday. Its performance recently hasn’t been strong. The company has a massive debt load with high debt to equity ratios, due to which, it faces difficulties in accessing the debt markets to raise finance. In addition, in the latest earnings disclosure, it has lowered its installation guidance for this year despite reporting year-over-year (YoY) increases.

On Wednesday, when Tesla made an all-stock offer to the SolarCity, the solar company’s stock sky rocketed. On Wednesday, the stock for SolarCity closed up 3.26% at $21.88. Most of the analysts felt that the deal had most of the benefits for solar company rather than he automaker. The acquisition would help to create financial stability in the solar company.

On the other hand, many research firms criticized the deal from Tesla’s perspective. The acquisition of SolarCity will go against Tesla’s long term vision and prove to be detrimental for the shareholders who would have to share the losses in SolarCity’s balance sheet.

Today things were quite different as SolarCity stock came under fire in a surprising event from short seller, Andrew Left. Citron’s Left highly criticized the deal in an interview to CNBC. He said that he sees SolarCity going down to zero and also raised the possibility for it to be the next Sunedison.

Mr. Left further said in his interview that the bid seems like a “lifeline” from Elon Musk, who didn’t exhibit his typical “swagger” when discussing the deal. This is a huge sign of worry for both – Tesla and SolarCity. The deal has received a lot of criticism and the management up till now hasn’t given any solid response. While Elon Musk terms the deal as ‘no brainer’, it is consistently coming in fire from the various research firm and analysts.