Vtrade Proposes to Sell Nike Inc. (NYSE: NKE)

Nike Inc

NYSE: NKE

COMPANY DESCRIPTION

Founded in –1977 | Current Market Cap – 107.21 Billion USD

NIKE, Inc., together with its subsidiaries, designs, develops, markets, and sells athletic footwear, apparel, equipment, and accessories worldwide. The company offers NIKE brand products in six categories: running, NIKE basketball, the Jordan brand, football, training, and sportswear. It also markets products designed for kids, as well as for other athletic and recreational uses, such as American football, baseball, cricket, lacrosse, skateboarding, tennis, volleyball, wrestling, walking, and outdoor activities; and apparel with licensed college and professional team and league logos, as well as sells sports apparel. In addition, the company sells a line of performance equipment and accessories, including bags, socks, sport balls, eyewear, timepieces, digital devices, bats, gloves, protective equipment, and other equipment under the NIKE brand for sports activities. NIKE, Inc. is headquartered in Beaverton, Oregon.

RECOMMENDATION

We rate Nike Inc. a Sell at USD 85.17 for a target of USD 72.19 in one months.

Below are the basic reasons to recommend this stock as a Sell.

·         Stock Appears Overvalued: Considering price-to-earnings (P/E) ratio, NIKE looks overvalued when compared with the industry and the S&P 500. The stock has a trailing 12-month P/E ratio of 33.1x, which is above the median level of 30.6x but below the high level of 34.6x, scaled in the past year. On the contrary, the trailing 12-month P/E ratio for the industry is 29.5x and the S&P 500 is 17.5x. Given these factors, we believe that the stock is quite stretched from the P/E aspect.

·         FX Headwinds Hurt Outlook: Despite a strong quarter, adverse impacts of FX headwinds somewhat hurt guidance for fiscal 2019 and the third quarter. Notably, the currency environment has turned unfavorable lately due to the global trade and geopolitical dynamics, which has led to strengthening of the U.S. dollar. This is likely to weigh on the company’s sales, on a reported basis.

·         Based on the existing foreign exchange rates, reported revenue growth is anticipated to be more than 3 points lower than, or at the lower-end of the company’s projected currency-neutral revenue growth of high single-digits. For third-quarter fiscal 2019, management expects reported revenues to be about 4 points lower than the anticipated currency-neutral revenue growth of high-single-digits.

·         Nike weakening balance sheet, which offers it the financial flexibility to drive future growth. Further, the company has time and again testified its commitment to enhancing its shareholder value, aided by its weak financial position. Over the past 14 years, the company has distributed regular dividends and made share repurchases to improve shareholder returns. Nike repurchased 16.1 million shares for $1.3 billion in the fiscal second quarter under its $12-billion share repurchase program, approved in November 2015. With this, it has repurchased about 183.3 million shares for roughly $11.3 billion as of Nov 30, 2018. Additionally, the company has authorized a new four-year $15-billion share repurchase program in June 2018, which will start when the existing program is completed which is not going to work in its favor because of the growth concerns.

EARNINGS & REVENUES

The company’s earnings of 52 cents per share rose 13% year over year and surpassed the Consensus Estimate of 45 cents. With this, the company reported its 26th straight earnings beat. Solid sales growth improved gross margin and reduced average share count aided the bottom line. However, the metric was somewhat offset by higher selling and administrative expenses, and tax rate.

Revenues increased 10% to $9,374 million, which exceeded the Consensus Estimate of $9,158 million. This outperformance was primarily driven by the company’s solid execution of the Consumer Direct Offense globally along with revenue growth (in constant currency) of 20% at international locations and 9% in North America. Additionally, continued strength in NIKE Digital, which delivered 41% growth, provided a boost to the top line. The metric grew 14% on a currency-neutral basis.

BALANCE SHEET

NIKE ended the fiscal second quarter with cash and short-term investments of $4,041 million, long-term debt (excluding current maturities) of $3,466 million and shareholders’ equity of $8,729 million. As of Nov 30, 2018, inventories inched up 1% to $5,388 million.

In the fiscal second quarter, NIKE bought back 16.1 million shares for $1.3 billion under its four-year $12-billion program that was approved in November 2015. As of Nov 30, the company’s total repurchases under the program amounted to 183.3 million shares for roughly $11.3 billion.

The company also authorized a new four-year $15-billion share-repurchase program in June this year, which will commence when the existing program is completed. NIKE expects the current program to be completed within fiscal 2019.

Disclaimer:

Views are strictly personal. This Interim Financial Results & News posts or updates includes forecasts, projections and other predictive statements that represent Vtrade's assumptions and expectations in light of currently available information. These forecasts, etc., are based on industry trends, circumstances involving companies and other factors, and they involve risks, variables and uncertainties. The Group’s actual performance results may differ from those projected in these Interim Financial Results. Consequently, no guarantee is presented or implied as to the accuracy of specific forecasts, projections or predictive statements contained herein.

Vtrade Proposes to Sell Oracle Corporation (NYSE: ORCL)

Oracle Corporation

NYSE: ORCL

COMPANY DESCRIPTION

Founded in –1977 | Current Market Cap – 188.63 Billion USD

Oracle Corporation develops, manufactures, markets, sells, hosts, and supports application, platform, and infrastructure solutions for information technology (IT) environments worldwide. The company provides services in three primary layers of the cloud: Software as a Service, Platform as a Service, and Infrastructure as a Service. It offers human capital and talent management, enterprise resource planning, customer experience and relationship management, procurement, supply chain management, project portfolio management, business analytics and enterprise performance management, and industry-specific application software, as well as financial management and governance, and risk and compliance applications. The company also licenses its Oracle Database for storage, retrieval, and manipulation of data; and Oracle Fusion Middleware software to build, deploy, secure, access, extend, and integrate business applications, as well as automate business processes. Oracle Corporation headquartered in Redwood City, California.

RECOMMENDATION

We rate Oracle Corp. a Sell at USD 52.56 for a target of USD 44.35 in one months.

Below are the basic reasons to recommend this stock as a Sell.

·         Although Oracle’s growing cloud business is a significant positive, we believe that the business model transition will hurt revenue growth over the next couple of years. The company expects to gain a significant part of its revenues from SaaS compared with legacy on-premise licensing business. However, SaaS revenues will not be recognized upfront as in the case of license business, which will hurt top-line growth in the near term. Moreover, although engineered systems are expected to drive growth, we believe that lower hardware volumes will continue to hurt top-line growth over the next couple of years. Moreover, hardware is significantly lower margin business that will keep margins under pressure, going forward.

·         Acquisitions have played an important part in Oracle’s growth trajectory over the years. Being a late entrant in the cloud computing space, the company is trying to build its position through aggressive acquisitions. The company is making significant investment in these acquisitions in order to catch up with AWS, Salesforce and IBM. As the SaaS market is getting overcrowded, we believe that all acquisitions may not perform as per company expectations, which will eventually hurt profitability. Moreover, large acquisitions can negatively impact the company’s balance sheet in the form of a high level of goodwill and intangible assets.

·         Oracle faces significant competition in most of its operational markets (database, applications, storage, cloud computing) from the likes of Dell-EMC, IBM, Hewlett-Packard, Microsoft, Sybase, SAP, Salesforce.com, Workday and Teradata. The trend toward consolidation is increasing competition for the company in most of these markets. To differentiate products here, large vendors are entering into alliances or partnerships to offer integrated and differentiating solutions. As a result, Oracle continues to face severe pricing pressure and lengthy sales cycles in its core business, which is hurting profitability. Moreover, stiff competition in the cloud is expected to hurt margins and will make revenue growth difficult to come by over the long run.

·         Oracle has been embroiled in various legal tangles. In 2016, Oracle faced defeat in two of its most high-profile lawsuits. In May 2016, a 10-member jury found no violations of JAVA APIs by Alphabet thus dismissing Oracle’s $9 billion claim. Moreover, a California Court held Oracle liable of paying Hewlett Packard Enterprise $3 billion in damages for withdrawing support to itanium software. The company is hell bent on re-appealing against these verdicts. In December 2017, the company renewed the legal fight over Android against Alphabet. In the recent filing Oracle challenged the idea of “fair use,” and alleged that Google lied when it said Android didn’t compete directly with Oracle’s ability to license its own products to customers. We believe such high legal risks, if materialized, might wreak havoc on the company’s financials.

EARNINGS

Oracle Corporation reported modest second-quarter fiscal 2019 results. Non-GAAP earnings of 80 cents per share surpassed the Consensus Estimate of 78 cents. Revenues of $9.562 billion were almost in line with the Consensus Estimate of $9.535 billion.

Earnings increased approximately 16% from the year-ago quarter (up 19% in cc). Further, revenues were almost flat year over year and increased 2% in cc. This was towards the higher range of management’s guidance of 0-2%.

BALANCE SHEET & CASH FLOW

As of Nov 30, 2018, Oracle had cash & cash equivalents and marketable securities of $49.39 billion, down from $60.1 billion sequentially. Operating cash flow for the trailing four quarters was $15.2 billion, while free cash flow was $13.8 billion.

Disclaimer:

Views are strictly personal. This Interim Financial Results & News posts or updates includes forecasts, projections and other predictive statements that represent Vtrade's assumptions and expectations in light of currently available information. These forecasts, etc., are based on industry trends, circumstances involving companies and other factors, and they involve risks, variables and uncertainties. The Group’s actual performance results may differ from those projected in these Interim Financial Results. Consequently, no guarantee is presented or implied as to the accuracy of specific forecasts, projections or predictive statements contained herein.

Vtrade Proposes to BUY Amazon.com (NASDAQ: AMZN)

Amazon.com, Inc.

NASDAQ: AMZN

COMPANY DESCRIPTION

Founded in –1994 | Current Market Cap – 797.05 Billion USD

Amazon.com, Inc. engages in the provision of online retail shopping services. It operates through the following segments: North America, International, and Amazon Web Services (AWS). The North America segment includes retail sales of consumer products and subscriptions through North America-focused websites such as www.amazon.com and www.amazon.ca. The International segment offers retail sales of consumer products and subscriptions through internationally-focused websites. The Amazon Web Services segment involves in the global sales of compute, storage, database, and AWS service offerings for start-ups, enterprises, government agencies, and academic institutions. The company was founded by Jeffrey P. Bezos in July 1994 and is headquartered in Seattle, WA. Number of employees are 566 000 people.

RECOMMENDATION

We rate Amazon.com, Inc a Buy at USD 1610 for a target of USD 1770 in one month. The stop loss level is USD 1580 .

Below are the basic reasons to recommend this stock as a Buy.

·         Amazon.com is one of the largest e-commerce companies in the world. Although the primary product line was books at first, the company rapidly diversified into a host of other product categories. The current focus is on building video content, primarily for Prime subscribers because the growth prospects in that market are considerable. Product selection, a superior user experience, bargains and customer feedback have helped the company build a strong position for itself in the fast-growing ecommerce market. The growth of the e-commerce industry with consumers increasingly buying things online has proved to be favorable for the company. While the big brands may build their own online stores over time, a platform like Amazon allows discovery by new buyers. Smaller players are far more dependent on Amazon as they don’t have the resources that Amazon has to invest in technology and fulfilment to generate the kind of reach that Amazon can deliver. Moreover, considering opportunities in international markets, the company’s high growth rates are likely to be sustained over the next few years.

·         Amazon keeps its retail business very hard to beat on price, choice, and convenience with the help of a solid loyalty system in Prime and its FBA strategy. The company continues to push advantages exclusively to Prime members, thus encouraging them to spend more on Amazon. The current focus is on building video content, primarily for Prime subscribers because the growth prospects in the market are considerable. Prime members are much more loyal and spend double the amount spent by non-Prime members.

·         Amazon’s strategy of gradually merging online and offline retail looks promising. It will not only reshape the retail landscape but also help it fend off competition, if it could manage a first mover advantage. It has added online and offline features to its bookstores and is going the same way with innovations such as drive-in-grocery delivery service (AmazonFresh Pickup - order groceries online and collect them from a store nearby) and “cashier-less” stores (Amazon Go – the company’s first brick-and mortar grocery store). We expect online retail sales to decelerate while the overall retail market still holds a lot of potential. So, moves like these will help Amazon tap many customers who prefer to shop offline, while not doing away with the online business.

·         Amazon is the leading provider of cloud infrastructure as a service to enterprise customers. The expanding customer base of Amazon Web Services (AWS) driven by its strengthening cloud offerings will continue to aid Amazon's dominance in the global cloud space. Even more encouraging is the fact that AWS generates much stronger margins than the traditional retail business, which should remain a positive for the company’s profitability as it continues to grow in the mix. AWS is gaining momentum with customers including Adobe, GE Oil & Gas, Kellogg’s, Airbnb, Hilips, Pinterest, Spotify, Tata Motors, Unilever, McDonalds, BMW, British Gas, Capital One, US Department of State and USDA Food and Nutrition Service.

·         Amazon is pushing well with its device’s strategy. Alexa powered Echo devices are going great guns and help the company sell products and services. Artificial intelligence (AI) driven Alexa has already been integrated into a host of everyday devices for the digital home, which has converted the nascent smart home market into a potential area of growth in a very short time. Currently, Alexa is equipped with more than 25,000 of skills and can connect to any stream of business. It’s an important method of collecting householder information, since Alexa is used to listen to commands and store everything that it hears in the cloud the company is racing to build an ecosystem around Alexa and it’s safe to say that it has taken an early lead over Google's smart assistant and Microsoft's Cortana.

·         Amazon is gradually choosing the buy option over build, which, along with the other positives, ensures that the company generates revenues right way without wasting any time in building its own infrastructure. In Jul 2017, the company completed the acquisition of a Dubai-based e-commerce giant, Souq.com. The deal will help Amazon to establish a presence in countries like Egypt, Saudi Arabia, and the UAE markets like Egypt, Saudi Arabia, and the UAE. Amazon’s retail market share is still relatively small in these markets, but there is a good possibility of an increase in the next few years. If this happens, the company will see additional several billion dollars a year in revenues. In August, the company closed acquisition of natural and organic foods supermarket, Whole Foods Market for $13.7 billion. Through this acquisition, the company is targeting the considerably large customer base that still prefers to shop at physical stores. This is Amazon’s way of tackling mounting competition and slow growth in the e-commerce space. This year, Amazon has also acquired Body Labs, a startup that develops AI, computer vision and body-modelling based 3D body shapes and motion for various industries. It also acquired GameSparks to spruce up its gaming capabilities.

·         The International segment balances out the domestic business. It has been generating double-digit year-over-year growth right through the recession and thereafter. Amazon has been introducing several new products for international markets that are expected to drive demand. It is also building fulfillment centers to cater to the increase in demand. The company has been expanding Prime internationally to strengthen its foothold in international markets and create a launch pad for its other business. We expect the growing international market to continue to drive sales over the long term, as opportunities abound.

·         Amazon has accelerated its push in the logistics business. The company is reportedly working on a new delivery service called “Seller Flex”, where it itself will pick up packages from third-party merchant warehouses and deliver them to customers, a function currently handled by its long-time partners United Parcel Service and FedEx. The company is increasing its own control and reducing reliance on courier partners and third-party merchants in the process of delivering products. Earlier the company announced that it will build its first air cargo hub at Cincinnati/Northern Kentucky International Airport. Moves like these underscore Amazon’s accelerated push toward building its own in-house shipping and logistics service to support the complex network of fulfillment, logistics and delivery systems that it has been building. Amazon has been investing heavily in fulfillment centers, trucks and containers and its Fulfillment by Amazon (FBA) service has been doing well. It has bought some planes and has self-designed drones in the works.

·         Amazon.com generates strong cash flows. The nature of the retail business does not leave too much room for differentiation, so price competition is intense. However, despite the seasonality in its business and the resultant fluctuation in gross margins, operating margins do not move around that much. This is because of a relatively flexible operating cost structure, which allows the company to curtail technology and content expenses when margins are impacted by discounts and promotions to boost sales during the holiday season. Given these factors, revenue growth and the expansion of business are the primary drivers of cash flows. However, management has been investing in the business aggressively mostly transferring gross profit gains into fulfillment, technology, content and acquisitions. We consider these investments essential in driving the next growth phase. Moreover, these investments have increased automation in the fulfillment centers and led to huge volumes of quality content, which along with strong growth in third party units are positives for gross margins. The increased investment on the AWS side, despite being a drag on profits initially, has paid off big time.

EARNINGS

Amazon reported fourth-quarter 2018 earnings of $6.04 per share, beating the Consensus Estimate by 49 cents. The figure surged 61.5% year over year.

Further, net sales of $72.38 billion comfortably surpassed the Consensus Estimate of $71.93 billion and were within management’s guided range of $66.5-$72.5 billion. The figure increased 19.7% year over year.

North America revenues (61% of sales) increased 18.3% from the year-ago quarter to $37.30 billion. International revenues (28.8% of sales) increased 15.5% year over year to $18.04 billion. Amazon Web Services (AWS) revenues (10.3% of sales) surged 45.3% year over year to $7.43 billion.

2018 HOLIDAY SEASON

The 2018 holiday season was the biggest ever for Amazon, with customers purchasing millions more devices compared with the 2017 holiday shopping season. Echo Dot was the #1 selling product on Amazon globally, from any manufacturer, in any category last holiday season.

Amazon stated that during the holiday season alone, tens of millions of customers worldwide started Prime free trials or became paid members.

Further, more than 50% of units sold in Amazon’s stores in 2018 holiday season came from small and medium-sized businesses. Third-party sales grew faster than first-party sales, and nearly 200,000 small and medium-sized businesses surpassed $100,000 in sales in Amazon’s stores last year.

Amazon launched Amazon Pop-Up stores for customers in six countries across Europe during the holiday season. For the first time, the company presented a curated selection of more than 2,000 products and carried out 136 events and workshops for its customers in Amsterdam, London, Madrid, Milan, Berlin and Paris.

Disclaimer:

Views are strictly personal. This Interim Financial Results & News posts or updates includes forecasts, projections and other predictive statements that represent Vtrade's assumptions and expectations in light of currently available information. These forecasts, etc., are based on industry trends, circumstances involving companies and other factors, and they involve risks, variables and uncertainties. The Group’s actual performance results may differ from those projected in these Interim Financial Results. Consequently, no guarantee is presented or implied as to the accuracy of specific forecasts, projections or predictive statements contained herein.

Vtrade Proposes to SELL Vertex Pharmaceuticals Incorporated (NASDAQ: VRTX)

Vertex Pharmaceuticals Incorporated

NASDAQ: VRTX

COMPANY DESCRIPTION

Founded in –1989 | Current Market Cap – 48.04 Billion USD

Vertex Pharmaceuticals Incorporated is focused on the discovery, development, and commercialization of small molecule drugs targeting serious diseases. The company’s main area of focus is cystic fibrosis (CF). The company’s lead product is Kalydeco (ivacaftor), which is approved for the treatment of patients with CF who have the G551D mutation or other specified mutations in their cystic fibrosis transmembrane conductance regulator (CFTR) gene. In 2015, Vertex gained approval for another CF treatment, Orkambi (lumacaftor-ivacaftor combination), for the treatment of the underlying cause of CF in patients with two copies of the F508del mutation in their CFTR gene, also referred to as F508del homozygous patients. Symdeko, which is a combination of tezacaftor (VX-661) and ivacaftor (Kalydeco) gained FDA approval in February 2018 for the treatment of patients with CF twelve years of age and older who are F508del homozygous or who have at least one mutation that is responsive to tezacaftor/ivacaftor. The company headquartered in Boston, Massachusetts.

RECOMMENDATION

We rate Vertex Pharma. a Sell at USD 188 for a target of USD 165 in one months.

Below are the basic reasons to recommend this stock as a Sell.

·         Orkambi Sales Growth Dependent on Reimbursement Approvals: Vertex has faced some challenges with respect to commercialization of Orkambi in ex-U.S. markets due to re-imbursement hurdles. Though Vertex has reached reimbursement agreements for Orkambi in several European countries, including Germany, Ireland, Sweden and Italy, it is still in negotiations with several European countries that represent significant potential markets including the United Kingdom and France. It has recorded limited revenues of Orkambi in these countries due to ongoing pricing discussions regarding the reimbursement rate for Orkambi.

·         Competing Therapies in Development: The CF market has been attracting the interest of several companies like Novartis, Pfizer and Sanofi. These companies are pursuing the development of CFTR potentiators, CFTR correctors and candidates with other mechanisms of action that can address the underlying cause of CF.

·         Meanwhile, many other companies like AbbVie and Proteostasis Therapeutics are developing triple CFTR combinations for CF, which can pose competition to Vertex’s triple combos. Even though Vertex enjoys a strong position in this market, the entry of additional competition would cut into revenues.

·         Banking on CF Franchise: Although we are positive on Vertex’s decision to focus on the CF franchise, we remain concerned about the company’s dependence on just this franchise for growth. While the company does have other pipeline candidates targeting other therapeutic areas, it is too early to get excited about them.

·         Pipeline/Regulatory Setbacks: Vertex has several studies ongoing with its CF product candidates and any negative development on the pipeline/regulatory front would have an adverse impact on the shares. In Aug 2016, Vertex announced that it will be stopping one of the phase III studies being conducted on the VX-661 - ivacaftor combination following a planned interim futility analysis. The study was being conducted in patients with one copy of the F508del mutation and a second mutation that results in minimal CFTR function.

·         In October 2018, Vertex discontinued development of VX-210 (acute cervical spinal cord injuries) due to futility. In October 2017, Vertex announced that it will not file regulatory applications for VX-661 - ivacaftor combination in CF patients with one copy of the F508del mutation and one copy of a gating mutation, as a phase III study evaluating VX-661 — ivacaftor use in such patients failed to meet the primary endpoint.

EARNINGS

Vertex reported third-quarter 2018 earnings per share of $1.09, which beat the Consensus Estimate of $1.00. Moreover, the figure came ahead of the year-ago earnings of 53 cents. Strong product revenues led to higher profits in the reported quarter.

Vertex reported revenues of $784.5 million in the third quarter, surpassing Consensus Estimate of $783 million.

Disclaimer:

Views are strictly personal. This Interim Financial Results & News posts or updates includes forecasts, projections and other predictive statements that represent Vtrade's assumptions and expectations in light of currently available information. These forecasts, etc., are based on industry trends, circumstances involving companies and other factors, and they involve risks, variables and uncertainties. The Group’s actual performance results may differ from those projected in these Interim Financial Results. Consequently, no guarantee is presented or implied as to the accuracy of specific forecasts, projections or predictive statements contained herein.