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AUTOMAKERS COSTS ARE RISING
FORECAST FOR NATURAL GAS PRICES IS DOWN
ALPHABET TO RELEASE NEW PHONE
At the end of December, Apple Inc. (NASDAQ: AAPL) counted about 20 million paid subscribers to its Apple Music streaming service. On Thursday, privately held Spotify announced that it had now reached 50 million paid subscribers to its own streaming service.
Spotify, which launched in Europe in 2008 and in the United States in 2011, had a serious head start on Apple Music, which did not launch until 2015. So it’s no wonder that the Swedish company’s numbers are much bigger.
But what really matters is growth, and in that department Apple is falling further behind. Last October Apple said it had about 17 million paid subscribers, a total that rose by 3 million over the next three months.
Last September Spotify announced that it had 40 million paid subscribers, a number that rose by 10 million in five months. Not exactly an apples-to-apples comparison, but the difference in growth rates is abundantly clear.
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For Apple, being number two in multi-horse race is fine. For Spotify, being number one is important because the company is almost certain to file for an initial public offering (IPO) this year, if for no other reason than to keep from having to pay a higher coupon on the $1 billion investors pumped into the company a year ago.
The wildly successful Snap Inc. (NYSE: SNAP) IPO is sure to sharpen Spotify investors’ appetites for an IPO of their own.
Also pushing a Spotify IPO is the growth of global revenue in the recorded music business. Revenues rose by $1.1 billion in 2016 to $16.1 billion, the largest growth rate in 15 years. The contribution of streaming music to that total rose by 49% to $5.4 billion. Of the 106.3 million paid subscribers to all music services at the end of 2016, Spotify accounted for 43%.
Spotify is also rumored to be considering a high-quality, lossless premium streaming service for $15 to $20 a month to match an offering from smaller competitors like Deezer.
Amazon.com Inc. (NASDAQ: AMZN) entered the music streaming subscription business last fall and offers a $3.99 monthly subscription to U.S. owners of the company’s Amazon Echo device. Amazon is a formidable competitor that always and everywhere competes hard for market share. It’s impact on Apple and Spotify isn’t clear yet, but underestimating the company’s challenge would be a big mistake for either Apple or Spotify.
Spotify hasn’t won — yet — and Apple certainly hasn’t lost. But barring any major change in the dynamics of the market, in a two-horse race Spotify remains in the lead and the lead is widening.
Earlier this month, the market value of Facebook Inc. (NASDAQ: FB) surged past that of Exxon Mobil Corp. (NYSE: XOM) to push the social media giant to sixth in the rankings of the most valuable companies on U.S. stock exchanges. Of the top six most valuable companies, five are technology companies while just one — Berkshire Hathaway Inc. (NYSE: BRK-A) — is not, and Buffet’s company probably maintained its ranking on the strength of its latest investment in Apple Inc. (NASDAQ: AAPL).
Facebook beat fourth-quarter estimates for both revenues and earnings primarily on the strength of its mobile advertising dominance. Some 84% of the company’s ad revenues were generated by mobile ads.
Exxon was less successful, turning in a report that missed on both revenues and earnings. The energy giant took a $2 billion impairment charge in the fourth quarter, but even factoring that out its fourth-quarter results were not impressive.Facebook’s rise has not only been impressive, it is expected to continue. Here’s an assessment from Merrill Lynch which raised its price target on the stock from $150 to $165 and reiterated its Buy rating:Facebook is an investment in increasing social and mobile Internet usage, and also offers exposure to growing Internet usage in emerging markets. Driven by user growth, new product offerings, and new ad formats, we expect Facebook to gain share in advertising markets and grow close to 30% over the next three years, which warrants a premium P/E valuation and in-line P/E/G valuation versus its Internet peers.
In Exxon’s case, the company has already said it is going to have to write down the carrying value of its assets — the only question is by how much. Last week Exxon indicated that up to 3.6 billion barrels of its Canadian oil sands reserves are no longer profitable to extract.Diminishing value for Exxon’s proved reserves could be temporary and the recent production cuts undertaken by OPEC and a few other large producers may boost prices for crude back to where the unprofitable barrels of reserves once again become profitable.Alternatively, there is also the possibility that the world has reached (or is about to reach) “peak demand” for oil and barrels in the ground will stay there indefinitely.
As for Facebook, demand for its social media services and the company’s determination to branch out into new products designed to engage more fully its massive base of1.74 billion monthly active users could continue to drive growth at the company.Facebook shares closed down about 0.2% on Friday at $133.53 in a 52-week range of $102.74 to $135.49. The stock’s 12-month consensus price target is $159.72 and shares have added 16% for the year to date.
Exxon’s stock closed down about 0.7% on Friday at $81.76 in a 52-week range of $79.76 to $95.55. The 12-month price target is $88.57 and the stock has dropped about 9.5% for the year to date and is the worst performer among the 30 stocks that comprise the Dow Jones Industrial Average
JUSTICE DEPARTMENT SUPPORTS POLICE
Individual investors are buying low cost exchange traded funds at a record breaking pace, adding fuel to the US stock rally. Investors poured $124 billion into ETFs in 2017, the most aggressive start since the industry was founded 24 years ago. Retail investors accounted for as much as 85% of the inflows at Blackrock Inc's iShares ETFs in the first two months of the year, far higher than the usual 50% to 60%. The rush into ETFs signals that the rally entering its ninth year is finally grabbing the imagination of the individual investor , after having been the province of large institutional and hedge funds.
The voguish theme of reflation has driven a rally in car stocks over the past three months. Reflation has a dark side, rising raw material prices. The Trump jump in share prices could be an exit opportunity for investors before the squeeze on profits becomes more apparent. The extra costs necessary to research, design, and equip cars with new gizmos including electric powertrains, self-driving features, and connections to the digital cloud have understandable garnered attention in recent months. a step-up in investments in autonomous technology was the key reason why General Motors missed analysts forecasts for the fourth quarter. A more traditional form of inflation will weigh on car makers margins this year, highter input costs. An index of automotive commodity prices such as steel and rubber compiled by UBS is currently 38% above its level a year ago.
In the world of smartphones, the Apple Inc. (NASDAQ: AAPL) iPhone is king, but it does have some healthy competition from Samsung and Alphabet Inc. (NASDAQ: GOOGL). Although, Google has gained ground against both of these competitors recently. This also gives Google the opportunity to solidify Android’s reputation as a premium platform.
Sales of the Pixel have been steady, but it has been somewhat hard to get a hold of one due to component shortages. But this hasn’t dampened the company’s plans to continue investing in its own smartphones.
As the iPhone 8 is planned for a release later this year, there will also be a successor to the Pixel that will continue to carry a high price tag. Google intends to keep the Pixel at a premium price, so we might not expect anything cheap coming from this tech giant.
Rick Osterloh, Vice President of Hardware at Google, told Android Pit in a briefing at Mobile World Congress:
There is an annual rhythm in the industry. So, you can count on us to follow it. You can count on a successor this year, even if you don’t hear a date from me now.
According to Engadget:
Although Google is keeping information to a premium, its typical development cycle suggests a Pixel 2 will go on sale in the fourth quarter. The current Pixel launched in October 2016 and Google has held launch events at around the same time for Nexus phones in the past.
Shares of Alphabet were last seen down 0.5% at $845.67 on Friday, with a consensus analyst price target of $988.95 and a 52-week trading range of $672.66 to $867.00.
Apple traded at $139.00 a share, with a consensus price target of $142.48 and a 52-week range of $89.47 to $140.28
SMALL INVESTORS RUN TO ETS
APPLE LOSING STREAMING WAR
MARCH NEWSLETTER 2
FACEBOOK SURPASSES EXXON IN MARKET VALUE
Just as a rising tide lifts all boats, an ebb tide, while it doesn’t sink them, makes the going a bit tougher. For natural gas producers, a relatively mild winter so far has left storage caverns at elevated levels and weighed on the commodity price of the fuel.From a high of around $3.80 per million BTUs at the beginning of the year, natural gas for April delivery closed Friday at $2.83, but gas has traded as low as $2.45 in the first two months of the year.Analysts at Jefferies have lowered their 2017 natural gas price forecast from an average of $3.50 per million BTUs to $3.15, even though the firm said it believes that prices will improve over the long term due to a tighter supply/demand balance, excluding the effects of weather on demand.
Costs for well completions are expected to rise more than drilling costs, and overall costs are projected to increase by about 10% to 15%. The analysts stuck with their long-term natural gas price of $3.50 per million BTUs.Jefferies reviewed the 14 stocks in their oil and gas exploration and production universe and made several changes to ratings, targets and earnings per share (EPS) estimates. Because most also produce liquids, rising prices for crude also figure into the Jefferies calculations. Here’s the rundown.
Cabot Oil & Gas Corp. (NYSE: COG) is rated as a Hold with a new price target of $24. The EPS estimate has been cut from $0.60 to $0.47 for 2017, and the 2018 estimate has been increased from $0.70 to $1.19. Shares closed at $22.36 on Friday in a 52-week range of $19.77 to $25.74. The consensus 12-month price target is $28.72.
Carrizo Oil & Gas Inc. (NASDAQ: CRZO) is rated a Buy with a lowered price target of $48. The EPS estimate for 2017 has been lowered from $1.65 to $1.41, and the 2018 estimate was raised from $3.90 to $4.02. Shares closed Friday at $31.18, in a 52-week range of $24.18 to $43.96, and the consensus 12-month estimate is $46.52.
Cimarex Energy Co. (NYSE: XEC) is rated Hold with a raised price target of $134. The 2017 EPS estimate has been raised from $4.10 to $4.69, and the 2018 estimate was raised from $7.76 to $8.97. The stock closed Friday at $125.61, in a 52-week range of $124.99 to $146.96. The consensus price target is $159.68.
Concho Resources Inc. (NYSE: CXO) is also rated a Hold with a higher price target of $150. For 2017, Jefferies raised its EPS estimate from $0.33 to $1.32, and for 2018 the estimate was lifted from $2.91 to $3.50. The stock closed at $132.41 on Friday, in a 52-week range of $94.26 to $147.55, and the consensus 12-month target is $167.46.
CONSOL Energy Inc. (NYSE: CNX) was raised to Buy but the price target dropped to $22. The EPS estimate for 2017 was cut from $0.70 to $0.48, and the estimate for 2018 was raised from $1.09 to $1.20. Shares closed Friday at $15.45. The 52-week range is $9.66 to $22.34, and the consensus price target is $21.92.
Devon Energy Corp. (NYSE: DVN) is rated Hold and the price target was raised to $49. The 2017 EPS estimate was increased from $1.39 to $2.00, and the 2018 estimate increased from $3.06 to $3.83. Shares closed at $43.35 on Friday, in a 52-week range of $21.15 to $50.69. No consensus price target was available.
Encana Corp. (NYSE: ECA) is rated Buy with an unchanged price target of $16. The EPS estimate for 2017 was lowered from $0.42 to $0.34, and the 2018 estimate was also lowered, from $1.47 to $1.28. The shares ended the week at $11.44, in a 52-week range of $4.90 to $13.85. The consensus 12-month price target is $14.95.
EQT Corp. (NYSE: EQT) is rated Hold and the price target was lowered to $69. The 2017 EPS estimate was also lowered, from $1.54 to $0.68, and the 2018 estimate was raised from $1.26 to $1.65. Shares closed at $59.29 on Friday, in a 52-week range of $56.38 to $80.61. The consensus 12-month price target is $83.00.
Noble Energy Inc. (NYSE: NBL) is rated a Buy and Jefferies raised the price target to $47. The 2017 net loss estimate was lowered from $0.40 per share to $0.22 per share. The 2018 EPS estimate was raised from $0.94 to $1.34. Shares closed at $36.71 on Friday, in a 52-week range of $28.82 to $42.03, and the consensus price target is $48.22.
Oasis Petroleum Inc. (NYSE: OAS) is rated a Buy and the price target was lifted to $24. For 2017, the net loss estimate improved from a prior $0.27 per share to $0.23 per share. The 2018 EPS estimate rose from $0.62 to $0.64. Shares closed at $14.13 on Friday. The 52-week range is $5.93 to $14.35, and the consensus 12-month target is $17.87.
Pioneer Natural Resources Co. (NYSE: PXD) is rated a Buy with an unchanged price target of $245. The 2017 EPS estimate was lowered from $3.08 to $2.92, and the 2018 estimate was lowered by a penny to $9.82. The stock closed Friday at $194.18, in a 52-week range of $122.08 to $199.83. The consensus 12-month target is $227.37.
Range Resources Corp. (NYSE: RRC) is rated Buy with a lowered price target of $43. The 2017 EPS estimate has been lowered from $0.85 to $0.68, and the 2018 estimate was lowered from $1.60 to $1.52. Shares closed at $27.34 on Friday, in a 52-week range of $27.07 to $46.96, and the consensus price target is $46.42. Range Resources is a Jefferies Franchise Pick.
Rice Energy Inc. (NYSE: RICE) is also rated Buy with an unchanged price target of $26. The 2017 EPS estimate was raised from $0.47 to $1.49, and the 2018 estimate was lifted from $0.63 to $1.32. Shares closed Friday at $19.98, in a 52-week range of $9.20 to $29.36, and with a consensus 12-month target of $30.52.
Southwestern Energy Co. (NYSE: SWN) is the only stock in this group to get a rating boost. The Jefferies analysts lifted the rating from Underperform to Hold. The 12-month price target was unchanged at $8. The 2017 EPS estimate was lowered from $0.81 to $0.52, and the 2018 estimate was lowered from $0.99 to $0.94. Shares closed Friday at $7.71, in a 52-week range of $6.62 to $15.59, and the consensus price target on the stock is $12.59.
The Justice Department will "pull back" from investigations into alleged civil rights and other abuses by local police departments. Attorney General Sessions said Tuesday in addressing what had been a hallmark of the Obama Administration. In his first major speech as the nations top law enforcement officer. Mr Sessions told a gathering of state attorneys general that the intervention had made police less aggressive and said he intended to crack down on violent crime as a central part of his tenure. Mr Sessions used more measured language that did President Donald Trump who iin hi s inauguratioon speech vowed to end this American carnage and the attorney general did not give many specifics outside of plans to sep up prosecution of drug and gun crimes and increase border security The Justice department has an absolute duty too ensure that police operate within the law.but we need to help police departments get bettere not dimish their effectiveness and I am afraid we have done just that