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November 2018

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You’ll Soon Be Able to Get Netflix Inc.’s (NFLX) Services On Your Comcast Corporation (CMCSA) X1 Set Top Box

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Comcast and Netflix have made a deal to let the former’s users get Netflix on their X1 set top box

Netflix Inc. (NASDAQ:NFLX) and Comcast Corporation (NASDAQ:CMCSA) have had their issues in the past but it seems that both have buried the hatchet. In a deal that allows Netflix to be accessed through the set top box, X1, Comcast and Netflix have partnered up; now, the largest cable company by revenue offers the most acclaimed and popular web streaming service making original content today. You can just smell the money.

Comcast already offers over 85000 TV shows and movies via Xfinity on demand as well as hundreds of channels. And the X1 set top box was in the hands of 22 million consumer homes by the end of 2015 (USA Today). Combine that with binge worthy shows like Orange is the new Black, The Unbreakable Kimmy Schmidt, House of Cards and my absolute favourite, Marvel’s Daredevil as well as 46 million US subscribers and you’ve got a recipe for success. It’ll not only make binging easier but put Netflix in the hands of all those consumers who just couldn’t be bothered to make an online account.

The financials of the deal are still hush hush, as neither company would comment on who would handle the billings or what bounty might be paid, but there are a few things we know, thanks to a report by Morgan Stanley. First of all, Comcast would get a big chunk due to its large subscriber base and Netflix would have a deal with it similar to the ones it has with cable operators around the globe. Chances are that Netflix would have to give up some financials like it does to Apple and TiVo but there is no sign that profits would be impacted in the long run towards the company. And of course, the deal will give both companies a competitive advantage over other services like Verizon, Dish and Roku.

Netflix and Comcast have had their problems in the past so you can be sure there are safeguards to ensure that none of that ever happens again. In 2010, Comcast launched a competitor to Netflix’s DVD rental business that set off the first spark. Then again, Netflix had accused Comcast of violating net neutrality by favoring its own video services over the former as well as Hulu and HBO Now in 2012. They had another scuffle in 2014 when they struck a deal to clear the bottleneck for broadband customers and both companies said they regretted the deal. And it was clear why all this was happening. People love Netflix. It is the self-proclaimed future of entertainment. And this doesn’t go down well with competitors specially when it turns out to be a prophecy that’s actually coming true.

In the long run, cable companies will fizzle out and online streaming services will become the norm but for now, they’ve slowed down the speeding train enough to try to get off the tracks. Netflix’s shares rose 1.3% to $97.91 on Tuesday when the deal was announced.

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FINANCIALS

Barclays PLC (ADR) (BCS): Stops Accepting ‘Stop Loss’ Orders

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Brexit concerns have forced banks to implement temporary rule on trading currencies

Barclays Plc (ADR) (NYSE:BCS) has stopped accepting ‘stop loss’ orders ahead of the UK referendum on EU membership to prevent any exposure on currency risk, according to Reuters reports. Huge fluctuations are expected especially in the pound sterling as the results of Brexit are disclosed.

Barclays looks to clamp on the foreign exchange market fluctuations in order to limit exposure of the bank and potential client losses in case of substantial gaps. The problem arises when too much of selling trickles in and buyers are not found which substantiates a gap leading to losses.

The reports are provided by the clients according to the sources, stating that Barclays told the clients on Monday, that it will not take any orders on such trades. The exit positons taken by clients will be closed at a pre-established price by the system algorithms. The orders were stopped being taken at 0600 GMT, whether the orders were over the phone, dealing systems, or online platforms. This situation is very rare when such implications are applied as there is a high risk of a chaos in the markets.

Earlier this year, a similar chaos erupted where a cap on Swiss Francs created havoc in the Swiss markets and foreign exchange markets. Therefore, arguments rose whether banks could have done more in terms of providing better prices for stop loss orders. The surge in the Swiss franc caused loss to billions of dollars as legal fights continued amongst financial institutions.

Bank of America Merrill Lynch and UBS warned their clients of potential gaps in the charts which they usually provide to the major institutional clients. Several other brokerage houses have informed their clients over potential fluctuations in the relative markets they are trading in. For instance, UBS being amongst the top six lenders who trade $5 trillion in currency markets in a day, warned its clients that they may fail to execute some of their orders on the online platform, as the referendum may cause extreme volatility. GBP/USD is amongst the pairs to have a close eye on, as suggested by many technical analysts to stay away from trading on this event.

On Thursday Morning in Europe, GBP/USD rose 1.5% as it touched $1.49 mark since December 2015.

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Consumer discretionary

Amazon.com, Inc., Facebook Inc Favored Over Netflix, Inc. At Wedbush

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Wedbush’s Michael Pachter suggests which FANG stocks to choose and which ones to ignore

Wedbush Securities published a research note on the tech giant, widely known as FANG, Facebook Inc (NASDAQ:FB), Amazon.com, Inc. (NASDAQ:AMZN), Netflix, Inc. (NASDAQ:NFLX), and Google Inc., subsidiary of Alphabet Inc (NASDAQ:GOOGL). The research firm has highlighted which FANG stocks to pick and which ones to avoid.

Facebook

Michael Pachter, analyst at Wedbush, maintained an Outperform rating on Facebook stock along with price target of $162, representing potential upside of more than 26% from current price level. By 9:58 AM EDT, the stock was trading down 0.04% at $128.71.

The analyst noted that the social media giant has unique user engagement which provides opportunity for more monetization. He believes that persistent spending on advertising for its key platforms, Instagram, Messenger, and WhatsApp, should give substantial return over the long term and bump up the contrition margin of the company.

The company’s Oculus Rift VR platform that makes Oculus virtual reality headset, can massively change the communication way for consumers, the firm noted, adding that it could be a really useful application for services, gaming, and education in the future.

Amazon

The investment firm also gave a thumbs up to Amazon, as it maintained its Outperform rating on the stock along with price target of $900, implying 7.4% potential upside. By 10:05 AM, Amazon shares were trading up 0.22% at $838.61.

Wedbush marks Amazon as a strong buy because of “its position at the top and bottom ends of the purchase funnel,” along with Amazon Web Services, its cloud computing services division, and optionality in video streaming. Mr. Pachter believes that Amazon Workspace Application Amazon (WAM) and AWS Marketplace are about to produce large number of software as a service (SaaS) sales in the future along with “very high” margin.

Netflix

The analyst, however, downplayed Netflix as he maintained an Underperform rating on the shares with price target of just $50, representing potential downside of over 50%. Netflix stock was trading up 0.62% at $103.27 as of 10:12 AM EDT on Tuesday.

The research firm defended its downside risk to the stock by highlighting overspending on programming and other attractive alternatives in the markets, such as Amazon Prime Instant Video and Hulu. Mr. Pachter held a conference call with two Netflix former executives for content acquisition that confirmed that the programming will “inexorably” grow while compromising quality, on the back of increasing competition from cable and online rivals.

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Technology

RBC Capital Sees Growth Returning To Broadcom Ltd Wired Segment

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The analyst suspects that wired connection customers could grow in the next few quarters despite flattish expectations

RBC Capital analyst, Amit Daryanani, has commented in his latest report that Broadcom Ltd (NASDAQ:AVGO) could have a delightful surprise in store for investors and analysts that expect the numbers for its Wired business to remain flattish for the next few quarters. According to Mr. Daryanani, there is a realistic chance that the number of Broadcom Ltd’s wired customers could grow despite most investors and analysts expected the business to remain flattish for the next few quarters.

Mr. Daryanani believes that the Wired Segment of Broadcom Limited is very likely to post growth of low to mid-single digits and will easily outdo the flattish expectations. According to the analyst, the churn rate of wired connections observed during the quarter has been far lower than that of expectations. For one reason or another, few consumers still find wired connections useful and more reliable over their wireless connections.

Mr. Daryanani’s model for Broadcom forecasts low-to-middle single digits growth in the number of wired connections for the fiscal year 2017 and even beyond it. He believes that the wired segment is very likely to sustain 50% ratio of all sales for the near future and has no immediate downside risks or threats.

Apart from Wired segment, the analyst sees growth of around 20% y/y in the company’s datacenter revenue and believes that the stock continues to command a dominant position in the market. The recent news of STM exiting the market has created about $200 million opportunity, which is to be proportionated over the period of next few years.

The analyst has reiterated Outperform rating on Broadcom shares and has given a price target of $190 to the stock. The analyst ratings for the stock consist of 12 Buy and 20 Outperform ratings with a very impressive mean rating of 1.62. The stock currently trades at a price of $166.31 after losing 0.21% of its value in the current session.

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Technology

Apple Inc. (AAPL) Watch 2 To Overcome Its Predecessor Model’s Biggest Fault

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The Apple Watch 2 is rumored to incorporate a significantly larger battery than its predecessor model

Apple Inc. (NASDAQ:AAPL) has done a brilliant job with its original Apple Watch, which slowly went on to dominate the smartwatch market. The current-gen Apple Watch successfully managed to beat its competition by combining powerful processing capabilities with high-end hardware.

However, the only downside of the Apple Watch, which kept the device from being the perfect smartwatch, is its relatively poor battery life. Fortunately, the latest reports are strongly suggesting that the next generation Apple Watch is all set to incorporate a significantly larger battery, as compared to the current generation Apple Watch, and overcome its predecessor’s biggest downfall.

Earlier this year, reputable tech analysts suggested that Apple is likely to sport a larger battery in its next generation Apple Watch model but this was only labeled as a prediction. Recently, a unverified photo was posted to Chinese social website Weibo regarding a significantly larger battery destined for the upcoming Apple Watch 2.  

The leaked image shows a 334mAh lithium-ion battery, which is highly tipped to be incorporated in the next generation Apple Watch. If this is true, then this would represent a 35% increase in the battery life for the upcoming Apple Watch 2, as compared to the 246mAh battery found in the original Apple Watch.

However, the leaked image also suggests that this larger battery will only be incorporated in the larger 42mm model of the upcoming Apple Watch 2 and not the slightly upgraded upcoming model of the original Apple Watch. Reliable sites have predicted that the Cupertino based tech giant will officially announce its next generation Apple Watch models during its September Event, scheduled to take place on September 9.

The latest leak regarding the Apple Watch 2 has all but confirmed that the upcoming smartwatch is set to incorporate a larger battery life and take a giant leap towards becoming the perfect smartwatch that its predecessor got so close to achieving. With an improved battery life, the upcoming Apple Watch 2 will only build on the dominance that the current generation Apple Watch has already established in the smartwatch market.

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Healthcare

Credit Suisse Downgrades AbbVie Inc (ABBV) Following Q3 Earnings

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The firm believes that there is no upside potential in the company

AbbVie Inc. (NYSE:ABBV) reported earnings for the third quarter of the fiscal year 2016 before the opening of the market session on Friday. The quarterly earnings for AbbVie was in-line to slightly ahead of the consensus but was viewed as a negative among investor circles, despite the fact that the guidance for the next quarter was also raised. Credit Suisse has also downgraded the stock to Neutral following the Q3 print and has commented that the upside potential of the company is practically zero.

AbbVie Inc. reported quarterly revenue of $6.43 billion, slightly lower than the $6.56 billion consensus estimate. The Earnings per Share for the quarter amounted to $1.21 and was in-line with the consensus estimate of $1.20. The revenue growth-rate of the company was quite healthy and was observed to be 30.1% y/y, while the EPS growth-rate was far lower at 7.1%.

Credit Suisse analyst, Vamil Divan did not just stop at a downgrade but also reduced the price target on AbbVie Inc. The analyst explained that the short-term prospects of AbbVie are quite bright with an impressive dividend yield of 4.4%, but there are questions about the company’s long-term plan. Humira, one of the most significant franchises of ABBV, is very likely to struggle and has forced the analyst to reduce estimates.

The analyst’s bull scenario for AbbVie suggests a price of $77, while the bear scenario of the company provides a price of $43. The risk/reward profile of ABBV appears to be quite balanced. Credit Suisse analyst has downgraded AbbVie Inc. to Neutral from Outperform and has also cut the price target down to $60 from $70. The analyst ratings for the company are 5 Buy, 6 Outperform, 10 Hold, and 1 Underperform. The stock currently trades at a price of $56.65 and has lost 1.67% since the open.

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Energy

Royal Dutch Shell: SPDC Sued by Nigerian Communities

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The Shell-owned subsidiary sued over damage to environment by the pipeline outages leading to oil spills

Having posted smashing results for the third quarter of fiscal 2016 (3QFY16), Royal Dutch Shell plc (ADR) (NYSE:RDS.A) enjoyed quite a celebratory phase until a High Court battle in Nigeria struck the company.

According to court filings, the company is in a test case over environmental damage being caused as a result of its operations in the country. The move marks the possibility that other foreign oil giants operating in Niger Delta could also be sued in London courts.

Shell Petroleum Development Company of Nigeria, subsidiary of Shell has been sued by a couple of local groups. The Bille and Ogale communities seek around £100 million in damages. According to the filings, Shell Petroleum Development Company pipeline outages and dysfunctional issues led to severe oil spills hampering residents of Niger Delta.

A four-day hearing is scheduled for this week that will decide whether the case would heard where the Anglo-Dutch company is headquartered, the UK. However, Shell retorted by stating: “Allegations concerning Nigerian plaintiffs in dispute with a Nigerian company, over issues which took place in Nigeria, should be heard in Nigeria.”

It is quite known that the energy giant has faced severe opposition over its history in the Niger Delta. Shell; on the flip side, it has blamed the bombings and attacks on the militant groups that have been long trying to shut down operations of foreign energy giants in the region. The militant group, Niger Delta Avengers claim that companies such as Shell, Chevron Corporation (CVX), and Exxon Mobil Corporation (XOM) have failed to fairly share the oil wealth with locals and kept larger profit to themselves.

On the other hand, Leigh Day maintains that Shell controls a substantial share of interest in Standard Performance Evaluation Corporation and thus, has an obligation to make sure that its operations do not result in pollution or oil spills. The community also signaled that the country’s legal system is too fraught with tough conditions to execute justice. It is likely that the final verdict may take next few months.

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Technology

Improved Privacy On Microsoft Windows 10

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Microsoft addresses privacy concerns for Windows 10 and rolls out an update which will give users more control

Microsoft Corporation (MSFT) has managed to make Windows 10 privacy better in an attempt to regain the broken trust of users. It has launched a web privacy dashboard through which users will be able to monitor information that the company should and should not receive. Electronic Frontier Foundation accused the company for the usage of data with Windows 10.

The Windows maker has now changed its privacy control with the Windows 10 Creators Update, as a response to the allegation made by EFF. The company has made a promise that this update will bring a reliable privacy experience. A new setup process will be witnessed which will explain privacy policies to users. The information will be provided to old and new users with two options, Basic and Full. Less data will be collected if users select ‘Basic.’

Terry Myerson, the Windows chief published a blog post that said, “We’ve further reduced the data collected at the Basic level. This includes data that is vital t the operation of Windows.” The new options look clearer, with basic data only sending error reports and nothing more. Users can even go to the privacy dashboard and erase locations data or search history which means they will have more control over what the company should know about them and what it shouldn’t.

There have been concerns for Windows 10 from the start; the company claims that this information is taken up so that it can make user experience better.  Previously, text input, voice input, websites accessed and all other information was given to the company. Many users did not appreciate this and considered it as a privacy breach.

Microsoft has finally managed to address these concerns and changed its ways so that users feel safe when they are using Windows 10 in the future. Sadly this update will come in April; till then, users will have to simply give their information.

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FINANCIALS

BHP Billiton Limited (ADR) Ramps Oil Output: Here’s Why

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The Country Caller takes a look at why BHP Billiton is ramping oil output

A revival of oil prices has brought in a glimmer of hope for crude oil producing companies. At the start of the year, oil touched its 12-year lows and stooped as low as $28 per barrel. Back then, analysts including those at Goldman Sachs were betting oil to touch to as low as $10 per barrel. But oil has recently made a sharp recovery.

During Asian trading on Wednesday, the US benchmark for crude oil, West Texas Intermediate (WTI) was up 1.08% at $50.39 per barrel, while the global benchmark for crude oil, Brent Crude was up 0.89% at $51.07 per barrel.

Wildfires in Canada led to around one million barrels of oil to be eradicated from the market. Moreover, troubles in the Organization Petroleum Exporting Countries (OPEC) including Nigeria, Venezuela and Libya have ensured a robust recovery.

The Melbourne based global resource company, BHP Billiton Limited (ADR) (NYSE:BHP) hopes to take advantage of the recovery and revamp its oil operations. The CEO of BHP Andrew Mackenzie believes that if prices stay at $50 per barrel, the company could tap into its backlog of oil wells in Texas.

Mr. Mackenzie in an interview to the Wall Street Journal mentioned that BHP is bringing online “some” of its drilled but uncompleted wells in the Black Hawk field in South Texas. The recent rally in the oil markets and the Energy Information Administration’s (EIA) recent oil report suggests that in the long-run oil prices can go over $60 per barrel. BHP has earlier indicated that it could operate around 1400 of its wells profitability at a price of $60 per barrel.

BHP’s recent appetite for oil comes after Mr. Mackenzie comments that the iron ore market would be the longest to recover from the recent depression. As reported by Bloomberg, Mr. Mackenzie regarding the issue said that “There are some commodities, like oil and copper, where there is a natural decline because pressure drops off, grade drops off,” He added that “One of the markets that will take longest to come back into balance is the iron ore market.”

The company now looks to again ramp up its oil production and start off where it left from when the shale revolution started way back in 2011. The CEO has also dropped the ideas of any acquisitions and highlighted that it would develop its own asset base.

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FINANCIALS

Earnings Whispers: PepsiCo, Inc. (PEP) And Accenture Plc (ACN)

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The Country Caller evaluates the earnings whispers ahead of the earnings conference calls scheduled by the two multinational companies

The two businesses, PepsiCo, Inc. (NYSE:PEP) and Accenture Plc (NYSE:ACN) have organized their earnings conference call on Thursday, September 29. The two companies would release their earnings before the opening bell, leading to increase share momentum before the market opens.

Pepsi would provide its financial results for 3QFY16 while Accenture would provide its earnings results for 4QFY16. Both the businesses have shown exceptional trends in the past and have been able to maintain the expectations atleast on the top line. On the other hand, only the beverage producer has been successful in surpassing expectations on bottom line including the results of previous quarter. Thus, the Street analysts anticipate great things from both businesses and expect them to outperform on top and bottom levels.

PepsiCo, Inc.

The Street believes that the New York-based business would provide earnings per share of $1.32 in its upcoming conference call when it releases its earnings. On the other hand, earningswhispers.com projects the earnings to be slightly higher amounting to $1.35, leading to bottom line beat over Street estimate by three cents.

The earningswhispers.com figure is line with its earnings released in the previous quarter as well as 3QFY15. This is because it reported EPS of $1.35 in both the periods. However, this estimate means Street would be disappointed as the EPS would decline by 2.22% on both sequential and year-over-year basis.

On the other hand, the Street predicts that the $154.01 billion enterprise would produce revenues amounting to $15.887 in 3QFY16. This is slightly lower than estimize.com’s prediction, which believes Pepsi would report revenues of $15.89 billion.

However, if Street estimates are actualized on the top line, the revenues would observe 3.16% sequential growth as it produced net sales amounting to $15.4 in the previous season. Nonetheless, Pepsi would also note 2.53% decline in net sales as it produced higher revenues amounting to $16.3 billion in 3QFY15.

Accenture Plc

The $75.18 billion organization has received consensus estimate for EPS of the season amounting to $1.3. The Street estimates lead to earnings miss over earningswhispers.com estimate stated at $1.32. Regardless of that, the Street estimates also mean that the earnings would observe sequential decrement of 7.8%, as it published $1.41 in earnings in the previous quarter.

However, the same estimates would mean that the EPS growth of 13.04% is factored in as it declared EPS of $1.15 for the same period of FY15. In addition to this, the Chicago-based business is anticipated to provide $8.39 billion net sales in this season, as per consensus estimate.

This is about 100 million lower than estimize.com estimate, which expects the consulting services provider to announce net sales amounting to $8.41 billion. The estimize.com estimate is in-line with its previous quarter’s performance, meaning the revenues are expected by the Street analysts to decline slightly by 0.11% on sequential basis. Nonetheless, the global professional services provider would observe sales growth of 6.22% YoY as it published net sales of $7.9 billion in 4QFY15.

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