Netflix NFLX Earnings, Analyst Opinion, iPhone Demand and much more is covered in this digest.
Netflix reported earnings of $1.30 thrashing the Zacks Consensus Estimate of 52 cents on sales of $5.47 billion that was more or less in line. International paid subscribers totaled 99.43 million, with EMEA, Latin America and Asia/Pac growing by 4.42 million, 2.04 million and 1.75 million, respectively. Paid subscribers in the U.S. and Canada totaled 67.66 million, up 550,000 in the quarter.
The launch of Apple’s TV+ and Disney+ in November impacted subscriber additions in the quarter and Netflix attributed its lower membership growth in the U.S. and Canada “to our recent price changes and to U.S. competitive launches.” But while the churn is “elevated” at the moment, it may be expected to stabilize as we move through the year. These services will launch in various international markets this year, so there may be added pressure in those markets as well.
An added concern that may have also contributed to the pressure on share prices is the change in the way Netflix will report viewership of Netflix originals. Until now, household viewership was counted if at least 70% of a show or TV episode was watched. Going forward, a watch will be counted as long as it’s at least for 2 minutes. Netflix says it was done because its episodes have widely varying lengths although admittedly, it increases viewership count by 35% on average.
Jeff Bezos Phone Hack
Global business advisory firm FTI Consulting found that the theft of data from Amazon AMZN CEO Jeff Bezos’s phone in 2018 started with an infected video file sent from Saudi crown prince Mohammed bin Salman’s personal WhatsApp account. While Saudi Foreign Minister Prince Faisal bin Farhan Al Saud called the claim “absurd,” U.N. special rapporteurs Agnes Callamard and David Kaye said there was “possible involvement.” Digital evidence suggesting that the video file contained code that ultimately led to the transfer of large amounts of data reportedly inspired “moderately high confidence.”
Facebook Price Target Raised
Enthused by the fact that Facebook’s FB “runway for online ad growth is long and expanding,” Morgan Stanley analyst Brian Nowak raised his price target on Facebook shares from $250 to $270, while maintaining his equivalent of a Buy rating. He estimates that Instagram stories alone will account for $6 billion, or 10% of total ad revenue this year.
Analysts Weigh In on AMD Ahead of Earnings
Cowen analyst Matthew Ramsay reiterated his Outperform rating while bumping up his price target from $47 to $60. His optimism is fueled by certain share gains “across server/DT/NB markets and an under-model console cycle” and earnings-per-share/free-cash-flow growth “as investors largely no longer question whether or not Advanced Micro Devices AMD will gain material x86 share or deliver upon its road maps." He also thinks that Intel’s 14-nanometer supply constraints and road-map changes will help AMD.
Deutsche Bank analyst Ross Seymore reiterated his Hold rating while raising his price target from $29 to $40 as AMD maintains its execution through 2021 despite increased competitive pressures from Intel and NVIDIA.
Both analysts are concerned about valuation.
Oppenheimer analyst Rick Schafer raised questions about long-term profitability in a declining PC market and some turf regain by Intel and NVIDIA in both CPUs and GPUs as concerns while reiterating his equivalent of a Hold rating.
Apple Raising TSM Orders
Apple AAPL has reportedly asked Taiwan Semiconductor (TSM) to increase its A-series processor output to meet higher-than-expected demand. Not only were the new iPhone 11 and 11 Pro models well-received, but demand out of China, especially for the most reasonably-priced model with the LCD screen, has been stronger than expected.
The next generation of the iPhone SE and will also contribute to increased demand. It will be followed by new high-end iPhones later in 2020 that will include 5G connectivity, faster processors and new 3D cameras on the back.
New Cheaper iPhone on the Horizon
News has been leaked about a new low-end iPhone, a likely successor to the SE for price-competitive mass markets like India where the company is scouting for store locations. It will be assembled by Hon Hai Precision Industry, Pegatron and Wistron.
Bloomberg says its sources confirm that the device will enter mass production and assembly as early as next month and will be officially launched by the company in March. It will look like the iPhone 8 from 2017, complete with 4.7-inch touch screen, the touch ID will be built into the home button but will run on the latest processor being used in the iPhone 11. One missing feature mentioned Face ID biometric authentication.
Apple analyst Ming-Chi Kuo with his history of successful guesses/hunches/channel checks says the device might use a ToF system to create 3D maps and an LCD polymer antenna design to improve wireless transmission. It will likely come in space grey, silver and red colors and sell for $399.
Foxconn Serious About Wisconsin Plant
Foxconn founder Terry Gou has said that its Wisconsin factory will be functional this year and will be used for 5G and AI applications. The original plan was to make LCD screens for TVs in considerably large volumes. He has since scaled back both the factory and hiring and now intends to bring manufacturing experts from Taiwan to help with U.S. production and supply chain builds.
Apple on Encryption
Apple had originally planned to encrypt iCloud backups by iPhone users, but it’s now being reported that it has dropped these plans. There could be a couple of reasons for this, as Reuters reported.
The first is that the FBI complained that it would obstruct justice and protect criminals. Since Apple didn’t want to help criminals or bring on retaliatory stronger anti-encryption laws from the government, it decided to play ball.
Another theory is that users would be locked out of their own data more often.
Jefferies analyst Mark Lipacis had a change of heart on Intel INTC, upgrading the shares from Underperform to Hold and raising the price target from $40 to $64. "Share loss, a transistor transition disaster, changing of the management guard, and a CEO bonus that inflects with the stock in the low $60s tell us the table is set for change at Intel," basically boiling down to a fair valuation with the negatives priced in.
Separately, Intel has appointed former Medtronic CEO Omar Ishrak as its new CFO. Ishrak also replaces board member Alyssa Henry to operate as its independent Chairman. He is replacing Andy Bryant, the former CFO and chairman since 2012.
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