Oracle and FedEx tipped for Wednesday releases

Wednesday – Oracle

Last quarter Oracle’s (ORCL) long serving frontman Larry Ellison stepped down from his role as CEO and appointed 2 co-CEO successors. Heading into Oracle’s first quarter in the post-Ellison era Estimize community members are expecting the technology company to continue growing steadily and slightly outperform Wall Street’s earnings expectations.


Wednesday Estimize contributors are looking for a 1 cent gain in earnings per share while year over year revenue rises 3%. These results would maintain Oracle’s rate of sales expansion over the past 5 quarters and represent a slowing of profit growth to a rate between 1% and 2%.

Wednesday – FedEx

At one point this summer crude oil was trading at over $100 per barrel. As we enter the final stretch of the year that price has collapsed to just $56. As a major player in logistics FedEx’s (FDX) financial performance is greatly impacted by the price of oil, falling gas prices throughout the fall could provide FedEx an opportunity to post gains to its bottom line.


Over the past 3 months EPS estimates and revenue projections from both Estimize and Wall Street have been rising. With the final picture clearing up the Estimize community’s EPS forecast is settling at $2.16 per share, 2 cents lower than the Wall Street consensus, but still an impressive 38% higher than the number FedEx reported in the same quarter of last year.

On the top line Estimize analysts are calling for $11.99 billion which is marginally higher than Wall Street’s prediction and would mark a 5% improvement from last year’s total.

Apple Update Target Price $ 120

AAPL : NASDAQ : US$99.76
Target: US$120.00

Technology — Communications Technology — Wireless Equipment

Investment recommendation:

Apple reported strong September quarter results above our and consensus estimates. Consistent with our surveys
indicating very strong global iPhone 6 demand with limited supply, Apple
issued strong Q1/F’15 EPS guidance slightly above our estimates as Apple is
currently selling all iPhone 6 devices it can produce. Please see our October
13 report titled “Monthly surveys indicate very strong iPhone 6/6 Plus
demand; limited supply” for more details on our survey work.

We maintain our expectations for a record iPhone 6 upgrade cycle driven by strong
replacement sales to existing iPhone customers and strong high-end
smartphone market share gains due to our surveys indicating a greater mix
of Android smartphone consumers switching to the iPhone 6 smartphones
than during the iPhone 5 series launches. Mac sales were also above our
expectations as Apple gained material PC market share during the important
back-to-school season. We reiterate our BUY rating and increase our price
target to $120 from $115.

Investment highlights

 Apple reported Q4/F’14 sales of $42.1B and EPS of $1.42, above our
$39.7B/$1.28 and consensus of $40.0B/$1.30. The strong results were
driven primarily by stronger iPhone sales of 39.3M units at $606 ASP
versus our above-consensus 37.7M/$574 estimates.
 We believe Apple’s Q1/’15 sales guidance in the range of $63.5-66.5B
was adversely impacted by F/X from the stronger dollar and iPhone
demand well above Apple’s ability to supply throughout the December
quarter. Our updated estimates are at the high-end of Apple’s guidance
due to our surveys indicating an increasing sales mix of higher-ASP
64GB (versus 16GB) iPhone 6/6 Plus SKUs combined with a growing
demand for the higher-ASP iPhone 6 Plus, particularly in China. We
anticipate materially higher iPhone ASPs during Q1/F’15 and maintain
above-consensus iPhone ASP of $680 adjusting for deferred revenue.
 Given the strong results and guidance, we maintain our bullish F2015
product cycle thesis and raise our F’15/F’16 EPS estimates from
$7.77/$8.19 to $8.00/$8.50.


Our $120 price target is based on shares trading at roughly 14x
our F2016 EPS estimate.

The $199 HP Stream 14, The First Of Microsoft’s Chromebook Killers


In mid-July, Microsoft announced its uber-cheap line of Windows 8.1 notebooks, with the cheapest model from HP, called “the Stream,” costing just $199.

With such a cheap price point, Microsoft is taking aim at Google’s line of super-cheap Chromebooks, which also start at $199.

Chromebooks are flying off the shelves thanks in part to the education sector, which is swiping up Google’s cheap internet-powered notebooks for classroom use. But Microsoft believes its own cheap laptops could better compete in the enterprise, particularly in financial services and banking, thanks to its popular Windows software.

Microsoft and HP didn’t show off the Stream notebook when it was announced in July, but thanks to some sleuthing from German site Mobile Geeks and Liliputing, we can now see several purported listings of HP’s Stream 14, which will rival the company’s Chromebook 14 in terms of technical specifications, even though the Windows 8.1 model will be roughly $80 cheaper.

As PCWorld’s Ian Paul points out, the Stream 14 and Chromebook 14 share many of the same specs, including the same number of ports, same 2GB of RAM, and same 14-inch display with a 1,366×768 resolution. But the Stream 14 comes with a more powerful quad-core 1.6 GHz system-on-a-chip from AMD, compared to the 1.4GHz Intel Celeron processor that powers HP’s Chromebook 14.

The Stream will also boast more onboard storage: Compared to the Chromebook 14’s 16GB of storage, the Stream will offer 32GB and 64GB options.

Based on the leaks, the Stream will also boast a 720p front-facing webcam, Bluetooth 4.0, a USB 3.0 port, four speakers with Beats audio, and a 2,960mAH battery. The laptop will also run on Windows 8.1 and ship with two-years and 100GB of cloud storage from Microsoft’s OneDrive.

But of course, the Stream 14 notebook hopes to attract users with its price point. Compared to most entry-level PCs, which typically cost around $1,000, Google’s various Chromebooks average at about $300. Microsoft’s first batch of cheap Windows 8.1 notebooks will cost between $199 and $279.

Microsoft has an anti-Google website called “Scroogled,” where the company collects and creates material to put down Google’s various services. When it comes to the Chromebook, Microsoft’s main criticism is that the computer “is a brick” when it’s not connected to the internet, since most Chrome OS applications require an internet connection. Google looks to address some of those criticisms by adding more apps that work in offline mode.

So, as it turns out, Microsoft and Google have succeeded at creating near-identical laptops at near-identical prices. But the HP Stream 14 laptop might get the slight edge right now since it can do more when it’s offline.



ADSK : NASDAQ : US$48.32
Target: US$60.00

Autodesk is a global design software company that sells
high-function, low-cost 2D and 3D computer-aided design
(CAD) applications. The firm also provides visualization
and simulation tools, which in conjunction with the
company’s design apps, enable customers to experience
their ideas early in the design process through the
development and analysis of virtual prototypes.


Technology — Enterprise Software — Applications
Investment thesis
There are enough company-specific changes, augmented by what we believe
will be a multi-year macro tailwind in commercial construction, that ADSK
appears poised to resume an advance that we believe will take the stock back to
its old nearly $60 highs in fairly short order. We are equally bullish about the
possibility of a multi-year transition to a more predictable model that we
forecast to easily clear the 30% operating margin threshold in calendar 2017.
 Best-in-class portfolio. Taken as a whole, we believe ADSK has the design
industry’s most complete Design, Simulation and Visualization suite.
 Model switch means greater predictability and likely higher realized per
customer revenues. Much like the Adobe transition, we expect Autodesk’s
transition to begin slowly, if not occasionally haltingly, and then accelerate,
pushing recurring revenues to nearly 80% in late calendar 2017.
 Optionality from cloud PLM and simulation. Design collaboration, which is
really what PLM is, is tailor made for the cloud. Simulation, especially for
small- and mid-sized firms without dedicated CPU capacity, is also a great
use case for cloud. ADSK is the largest firm with credible cloud offerings in
these areas.
 A lot of moving parts, but the relevant ones subscription growth and cash
flow growth should move in the right direction. Specifically, our long-term
modeling says subscriptions and cash flow advance at a mid-to-high teens
pace for the next five years. In CY17/FY18E Autodesk should evolve to
become a less cyclical 30% non-GAAP, 32-35% operating cash flow margin
business with gradually accelerating mid-single-digit to total revenue growth.

 Therefore, we believe ADSK deserves consideration for a growth portfolio. While we
are not making a “called shot” on the quarter, it would not surprise us that ADSK’s
management will make sufficiently positive commentary on Thursday night’s earnings
call that the stock could advance on Friday.
Valuation and price target
Our new $60 price target (up from $52) is based on a 23x multiple applied to our
F2016/C2015 FCF per share estimate of $2.32 plus approximately $6.00 in prospective net
cash per share.
For perspective, looking out further, if we use this same 23x multiple, which could prove
conservative as investors give ADSK full credit for the transition to subscription, on
F2018/C2017 estimates, which we will be looking at in ~18 months, it implies a stock in
the $75-80 range. The math is roughly $3.07B in F2018 revenue at a 30% operating
margin, taxed at 25% over 245M shares, plus $11-13 per share in prospective net cash per
share. This implies a >50% return from current levels over the next 18-24 months

Goldman on High Frequency Trading

There’s only one bank that’s come out publicly against high frequency trading, and that’s Goldman Sachs.

It’s not an easy thing to do. Banks work with high frequency trading firms to execute orders, they also have their own dark pools — private, anonymous exchanges that have become a part of the new market ecosystem synonymous with HFT. Goldman’s dark pool is called Sigma X.

So why would a bank take on HFT?

Because Goldman bank believes it’s hurting their equities trading business, which has been on the decline for some time now. And as the WSJ’s Justin Baer and Scott Patterson point out, the bank would rather have a healthy stock trading business that can make it billions of dollars than a dark pool that only brings in hundreds of millions of dollars.

Thursday morning’s first quarter earnings numbers say it all. Goldman is losing stock trading share to its rivals. In Q1 2014, the bank made $416 million trading equities for clients. That’s down 49% from the same time in 2013 when the bank made $809 million.

In 2013, a year when the price of stocks exploded, Goldman’s client stock trading revenue fell from $3.2 billion in 2012 to $2.6 billion.

Arch rival Morgan Stanley, on the other hand, has seen it’s equity sales and trading rise 16% over the last year, and 24% over the last quarter.

Obviously for the biggest baddest bank on Wall Street, this is worrisome. The bank is not only losing market share in equity sales, but also its dark pool has lost its share of the market as rivals from Barclays, Deutsche Bank and Morgan Stanley have entered the market.

So once big institutional clients — the mutual funds and hedge funds that HFT firms love to pick off when they notice the institutionals’ big block trades in the market — started complaining about HFT, Goldman knew it was time to change their strategy.

Patterson and Baer reported that at a meeting in London several weeks ago, Goldman’s institutional clients voiced concerns that are now familiar thanks to Michael Lewis’ book, ‘Flash Boys‘.  They said that they felt HFT firms were given an unfair advantage and that the market was too opaque, complicated and dangerous.

That’s when Goldman started sending around internal memos asking for commentary on market structure, and COO Gary Cohn wrote the anti-HFT op-ed that shocked people across the Street.

In the op-ed, he mentions one more issue that has Goldman worried about HFT. The bank is known for having some of the best technology in finance, but last August a glitch in its software sent erroneous quotes into the market and cost the bank $100 million. And Goldman doesn’t lose $100 million.

From Cohn’s op-ed:

The economic model of the exchanges, as shaped by regulation, is oriented around market volume. Volume generates price discovery and liquidity, which are clearly beneficial. But the industry must recognize how certain activities related to volume can place stress on a market infrastructure ill-equipped to deal with it.

In other words, exchange software is now so complicated that it is not something a firm can do as a side show — it has to be the main event. 

Read more:

ARM Holdings Raising Target Price $ 60

ARMH : NASDAQ : US$48.48
Target: US$60.00 


ARM is a leading semiconductor IP supplier to the diverse global
semiconductor market. ARM’s revenues are driven through a
licensing and royalty business model, with a majority of the
royalty sales driven by the mobile market including handsets,
smartphones, and tablets. ARM also supplies semiconductor IP to
the server, PC, and embedded markets and physical
implementation libraries and IP to semiconductor foundries.

Technology — Communications Technology — Semiconductors
Investment recommendation:

We participated in an open investor call on ARMv8 with Nandan Nayampally, ARM’s VP of Marketing for the CPU Group.
This note summarizes key points from the call. Since Apple’s A7 processor
announcement in September, the evolution of the 64-bit ARMv8 ecosystem
within the mobile market has progressed even more quickly than we had
anticipated. In fact, following Qualcomm and MediaTek both announcing
broad ARMv8 mobile roadmaps at MWC to include mid-tier smartphone
chips, we believe the path toward 64-bit smartphone/tablet ubiquity across
all tiers is well underway. Further, we believe ARMv8 opens new markets
including server and enterprise networking where ARM is less than 10%
penetrated today and ASPs tend to be much higher than in mobile. Given our
belief that near-term mobile royalty seasonality is well understood and
reflected in consensus estimates, we recommend investors accumulate ARM
shares ahead of reaccelerating royalty growth trends during 2H/14 and
2015. We reiterate our BUY rating and raise our price target to $60.
Investment highlights

 We believe ARM’s newest architecture, ARMv8, will both materially
increase the base royalty profile of ARM’s incumbent markets and open
new and equally large market opportunities including server and
enterprise networking where ARM has minimal market share today and
that should yield royalty rates at 2%+, or above the corporate average.
 In addition, given we believe ARMv8’s licensing applicability could be
broader than ARMv7 with the inclusion of these new markets, we believe
ARMv8 is still in the early innings of the licensing opportunity with
roughly 30 licenses to 20 companies today where ARMv7 has been
licensed 130+ times to roughly 80 companies.
 Our more detailed analysis of the ARMv8 architecture, including its
features and market applicability, and incremental licensing and royalty
revenue opportunities for ARM, is discussed at length in our September
19th ARM 64-bit white paper titled “ARM’s 64-bit smartphone coup:
Apple accelerates timing for higher royalties”.
Valuation: Our $60 price target is based on shares trading at roughly 38x our
2015 normalized EPS/ADS estimate and our royalty stream DCF.

APPLE Target $600


NASDAQ : US$526.24
BUY  Target: US$600.00

COMPANY DESCRIPTION: Apple designs, manufactures, and sells PCs, portable digital music players, and mobile communication devices, along with related software, services, peripherals, and networking solutions globally. The company was founded in 1976 and is headquartered in Cupertino, California.
All amounts in US$ unless otherwise noted.

Technology — Communications Technology — Wireless Equipment MWC MEETINGS AND FEBRUARY WIRELESS SURVEYS:


Investment recommendation:

While a host of new Android LTE smartphones for C2014 were introduced at MWC, our meetings suggested the maturity of the high-end smartphone market with the lack of innovation in the new high- end Android models. Given the lack of differentiated Android smartphones, we believe Apple could gain market share of the high-end smartphone and tablet markets during 2H/2014 based on our belief new iPhones and iPads with larger screen sizes could create a strong upgrade cycle among Apple’s loyal base. In fact, our February wireless store surveys indicated the iPhone 5s was still the most aspirational smartphone and the top selling device in the U.S. and in many international markets despite seasonally slower sales trends. Given these trends, we increase our F’14/F’15 iPhone and iPad unit estimates. We maintain our BUY rating and raise our price target to $600.  Investment highlights  Following our MWC meetings and after evaluating feature sets for a host of new Android LTE smartphones introduced during the show, we believe Android OEMs have only added incremental improvements to their prior generation smartphones. For example, the announced Galaxy S5 is another solid product from Samsung but more incremental to the Galaxy S4 than a compelling upgrade. Please see our separate MWC report published today, titled ‘MWC Meetings focus on Internet of Things, China TD-LTE, smartphone innovation and IP licensing’ for additional details.  Our Feb U.S. surveys indicated the iPhone 5s was the top selling U.S. smartphone. However, our surveys indicated certain carrier upgrade policies were more strictly enforced and adversely impacted the near-term uptake of the increasingly popular early upgrade or smartphone leasing type of plans. Based on our surveys, we anticipate stronger take-up rates for these plans once current subscribers reach the end of their 24-month contracts. Given strong iPhone and iPad customer loyalty, we believe a new larger screen iPhone and iPad should create a very strong upgrade cycle in North America, especially given the timing of grandfathering in 2 year plans and globally given the popularity of larger screen smartphones and tablets.   Given these trends, we slightly increase our F2014/F2015 iPhone and iPad estimates resulting in our F’14/F’15 EPS estimates from $42.86/$47.56 to $42.92/$49.96. Valuation: Our $600 (was $570) price target is based on shares trading at 12x our F2015 EPS estimate.