What It Took To Move Apple’s Stock Price Finally

Since late April, Apple’s stock has up 10% while the NASDAQ has remained relatively flat.  Through the NinjaTrader platform and SwamiCharts I’ve been able to technically analyze this movement from a contextual big-picture perspective.

As you can clearly see, in late June the SwamiPredict indicator suggested a possible upward price movement.  This is illustrated by the emerging green coloration.  Also, the MarketMode indicator detected a cyclical trading period (shown with the yellow coloration) that started around the 1st of March and lasted until early July.

From a fundamental perspective here are three specific areas that I believe would substantially benefit Apple’s business and stock.

Super-growth in China.  Through the first half of this fiscal year, Apple’s China revenues amounted to 10% of their overall revenues or $5 billion.  That was up 400% from Apple’s Chinese revenues in the prior year.  The question is how big could China grow to be out of Apple’s total revenues?  We don’t know but the opportunities there appear to be still very large.  There are only 4 stores in China, so news about new shop openings will be positive for Apple’s stock.  Some kind of news about an iPhone tailored to a new LTE 4G network in China could also be a big deal.  So could a low-cost version of the iPhone designed to work optimally in the pre-pay market.

Cheap iPhone for the low-tier of the market. iPhones now account for 50% of Apple’s revenues according to last week’s earnings.  Amazingly, the average selling price of an iPhone increased in the quarter to $660 from $622 a year ago.  iPhone sales in China increased by almost 250% in the quarter.  As such, I believe that if Apple was able to come out with a low-cost iPhone – maybe specifically catering to the prepaid market to make it have mass appeal in China – it could move the needle even more significantly for future iPhone sales.  Recently, Cook confirmed on the recent earnings call that they know they have to play in the pre-pay market to drive the kinds of volumes they want. Expect a tailored pre-pay offering – and likely a dedicated iPhone – for this purpose in the Fall.

New products.  iPad’s product announcement was a great entry to the stock a year ago.  No one really knew that it would take off until it started selling.  Apple doesn’t come out with big product announcements like that all the time, but even the perceived small new announcements could be significant.  This year, it could be Apple TV that moves the needle.  It all depends on how comprehensive it is, the extent of the iTunes offering on video right away, and whether they can license AirPlay to many other manufacturers.  But, all the signs suggest it could be a Netflix killer.

Advertisements
Posted in Company Watch | Tagged , , , , , , , , , , , , , | Leave a comment

LinkedIn CEO: Between Goole+ and Facebook There Can Be Only One

To continue from my recent post about Google I thought I’d share this interesting take on why the social media marketplace can not handle two inherently similar services.

Courtesy of Matt Rosoff

LinkedIn CEO Jeff Weiner  wonders where everybody will get the free time to use Google+.  Weiner shared the stage with super-agent Ari Emanuel and AllThingsD’s Kara Swisher at a Churchill Club event this evening.

Swisher asked if there was a limit to the number of social networks that could coexist, and while Weiner acknowledged that Google had to get more social, he questioned how far it would get.

“Nobody has any free time,” he said. “Unlike social platforms and TV, which can coexist, you don’t see people using Twitter while they’re using Facebook, or using Facebook while they’re using LinkedIn.”

He went on to say that the social networking landscape was pretty understandable before — people generally use LinkedIn for your professional life, Facebook for family and friends, and Twitter to microcast your thoughts to an audience. But, “you introduce google+, where am I going to spend that next minute or hour of my discretionary time? I have no more time.”

It’s a good point — while Google+ has grown fast in its first couple of weeks, at some point social networking becomes a zero sum game. For Google+ to win in the mainstream, somebody else is going to have to lose.

Posted in Company Watch | Tagged , , , , , , , , , , , , , , , | 1 Comment

A Rebound For Human Genome Sciences?

Human Genome Sciences (HGSI) is currently the most-watched diagnostic substance stock according to The Motley Fool… and for good reason!  As volatile as biotech stocks are I truly believe that this company should outperform over the next several years. They just had an FDA approval on Benlysta, their lupus drug, and the sales from that alone should shoot revenues through the roof.

And the big announcement released yesterday was that Benlysta received marketing approval as a treatment for lupus in patients who have not been helped by standard therapies. The U.S. Food and Drug Administration approved Benlysta on March 9, making it the first new treatment for lupus in the U.S. in more than fifty years. Benlysta was brought to market in partnership with London-based GlaxoSmithKline

But besides their flagship lupus drug, HGSI develops gene-based protein and antibody drugs to treat cancer and immunological and infectious diseases.  Guru funds sold a net $204 million out of their $255 million prior quarter position. Top guru funds that sold HGSI include SAC Capital Advisors LP($203 million) and Soros Fund Management LLC ($7 million). The mean analyst target is $33, with a high target of $39, well above the current $23 price; and of the 19 analysts covering the stock, thirteen rate it buy/strong buy, four rate it hold, and the remaining two rate it at underperform/sell.

Howver, from a technical standpoint I can’t quite recommend buying in yet.  By examining the SwamiChart one can tell that we’re still getting a red “sell” signal from the SwamiPredict.  That said, the SwingWave indicator is giving a strong blue “valley” signal that could suggest a possible reversal.  Therefore, if we begin to see any bottom support creation I would absolutely consider buying-in with accordance to a “value” and “swing” strategy.

Posted in Company Watch | Tagged , , , , , , , , , , , , , , | Leave a comment

Is Ocean Power Tech Finished Making New Lows?

Ocean Power Technologies, Inc. (OPTT) engages in the development and commercialization of proprietary systems that generate electricity by harnessing the renewable energy of ocean waves primarily in North America, Europe, and Australia.  I researched this company several months ago and, after noticing it bounce from it’s LIFETIME low, wondered if it’s finally cheap enough to consider.  But first, check out this short video that details the unique way this company is able to generate energy from waves.

Pretty fascinating concept, isn’t it?  And although the company has been struggling to turn a profit there is little worry of bankruptcy thanks to a steady stream of federal alternative energy grants.  Also, OPTT recently announced that their full-year revenue for the year ended April 30 rose 31 percent to $6.7 million from $5.1 million the previous year.

In addition, a couple of weeks ago the company also revealed that their new generation utility-scale PowerBuoy® device, the PB150, has delivered better-than-expected initial results from tests being conducted off the northeast coast of Scotland.  Wave conditions encountered have included storm waves, and electrical power generated by the PB150 has included peaks of over 400 kilowatts.  To learn more about their new buoy check out the following link.

But before I suggest buying in let’s take a look at the SwamiChart.  As you can easily tell, around July 11th we would have seen an emerging green “buy” signal from the SwamiPredict indicator.  That said, the MarketMode indicator has been signaling a downtrend for so long that even the newly formed yellow “cycle” signal should only be cautiously noted.  As such, I would not yet recommend getting in at these levels until we begin to see this lower support line hold for a longer amount of time.

Posted in Company Watch | Tagged , , , , , , , , , , , , , | 5 Comments

The Time Bomb in Netflix’s Streaming Strategy

[I planned on writing an original post today but I just had to share this fascinating article on what could be a serious problem with Netflix’s new strategy.  As a reminder, recently Netflix introduced a new subscription pricing plan that ultimately boils down to a price hike aimed at moving customers to a streaming only arrangement.  (More about why this change was necessary but poorly timed here).  And although the new plan may have been needed it comes with an unintended consequence that, in future years, could be devastating for both the consumer and Netflix.]

Courtesy of Martin Peers

How much casual driving would the average American do if gasoline cost $6 a gallon? A similar question may confront Web companies pushing bandwidth-guzzling services one day.

Several Web companies, including Amazon.com, Google and Netflix, are promoting services like music and video streaming that encourage consumers to gobble up bandwidth. Indeed, Netflix’s new pricing plans, eliminating the combined DVD-streaming offering, may push more people into streaming. These efforts come as broadband providers are discussing, or actually implementing, pricing plans that eventually could make those services pricey to use.

Most obviously this is an issue for the mobile Web, still a small portion of consumer Internet traffic in North America. Verizon Communications‘ majority-owned wireless service last week introduced tiered data pricing, about a year after AT&T made a similar move. But potentially much more disruptive is consumption-based pricing for “fixed broadband,” landlines that provide Internet access for consumers in their homes, either via a cable or a home Wi-Fi network. Long offered on an effectively unlimited basis, American consumers aren’t used to thinking about the bytes they consume online at home.

[MEDIAHERD]

That will change. Time Warner Cable Chairman Glenn Britt said last month, “it’s inevitable that there will be a consumption dimension” to broadband billing, although his company hasn’t yet introduced it. One of the few to have done so is AT&T. Since May, subscribers to its high-speed U-Verse broadband service get 250 gigabytes a month. For every 50 GB they use above that, they pay $10. Comcast also limits its broadband customers to 250 GB a month as a traffic-management tool; it eventually cuts off customers who breach it.

To be sure, for most people right now, 250 GB is plenty. Cisco Systems estimates that only 12% of U.S. households with the Internet consumed more than 100 GB a month in Internet traffic last year, while the average household used 31.8 GB. But by 2015, it projects 17% of households with the Internet will use more than 200 GB a month, with 5% using more than 500 GB. These figures exclude mobile-data users.

Which services will put households in danger of breaching the 250 GB threshold? Music streaming or video chats on Skype or Facetime certainly won’t help. Neither will gamers playing online. But the most obvious bandwidth hog is long-form video, particularly movies or TV shows such as those streamed via Netflix, according to Cisco. No surprise Netflix has been vocal about warning of the dangers of usage-based pricing. It means that Netflix’s streaming consumers eventually will have to factor in both the $7.99 a month cost of the service plus the implications for their broadband bill of using it.

It’s hard to argue broadband providers shouldn’t be able to offset the cost of network upgrades by charging more for heavy users, particularly given the threat posed to their video and phone businesses. For investors in Netflix and other Web companies, this is a sleeper issue they can’t afford to ignore.

Posted in Company Watch | Tagged , , , , , , , , , , , , , , , , , , | 2 Comments

7 Reasons Why Netflix’s Price Hike Is a Bonehead Move

[In terms of Netflix’s current stock price I believe we’re entering rarefied air.  In my previous Netflix-related post I predicted a continued upward price movement while also articulating my concerns for continued growth of the company.  And as we begin to test the 300 level this week amid the negative news of a subscription price increase one has to wonder how long the current trend can last.  Below is a excellently written summary of some of the main reasons why, although it was necessary, Netflix handled the rate increase poorly.]

*Courtesy of Daniel Indiviglio

1. It Amounts to a Giant Price Hike

This new strategy by Netflix will not be perceived by consumers as a way to empower them to decide whether they need streaming or not. To accomplish that result, Netflix should have left the total price for by-mail plus streaming unchanged, but broke the two out and allowed customers to stop paying for one or the other. Instead, it will slightly decrease the cost of its by-mail service and will require customers who want to keep streaming as well to pay a significant premium. As a result, the move will be interpreted by customers as a rate hike, not a move meant to provide them more flexibility.

2. No Value Added

If you’re on the one DVD-by-mail plan, then you currently pay $9.99 per month and enjoy streaming as part of the deal. To continue to stream, you’ll now have to pay $15.98. That’s a 60% increase! Now if Netflix was suddenly offering its entire library via stream or providing some other additional service, then customers might be able to stomach this rate hike. It isn’t. They’re getting the same services they got before, but now Netflix is charging much more money for them.

3. Streaming Isn’t There Yet

A time might come when it would make sense for Netflix to charge a significant premium for its streaming, but the service has not yet reached that point. Although its streaming library has grown significantly over the past few years, a huge portion of desirable movie and television titles remain unavailable by stream. Using my own Netflix queue as an example, just 3% of my selections are available by stream — and less than one-third of my queue’s titles were released in 2010 or later. If Netflix wants customers to pay a lot more for streaming, then it needs the quality of its service to better reflect its cost.

4. Netflix Doesn’t Need the Money

The oddest part about this rate hike is that Netflix doesn’t really need the money. It recently increased its fees (announced last November) by between 7% and 17%. Moreover, its profits have been strong over the past couple of years. And in the first quarter its profit soared 28%. It may want additional revenue to acquire more licensing to stream more titles, but a big rate hike like this may do more harm than good.

[I actually disagree with this point in that Netflix DOES in fact need the money.  For further explanation check out this fascinating blog post by Andrew Schneck.]

5. Netflix May Lose Money

In fact, this pricing change could easily cause a decline in Netflix’s revenue. Last night, when I got home from work I told my wife about the rate hike. She was coincidentally watching an old Diane Lane movie she found scouring the Netflix streaming library. But without taking a beat, she said, “Oh, we can cancel streaming. It isn’t that good.” If you don’t think a service is worth its price at the moment you’re using it, that’s a pretty bad sign. Many subscribers will agree that streaming isn’t worth the extra money at this time.

How much could Netflix lose? Let’s do a quick analysis. According to one estimate, about 80% of Netflix subscribers currently have by-mail service that includes free streaming. Of that portion, let’s say half cancel streaming but keep by-mail service. Remember, many people don’t use streaming at all. In particular, if you don’t have an Internet-ready device connected to your television with a Netflix widget, then streaming is far less attractive. Through Netflix’s new pricing, by-mail only service will be about 20% cheaper than the current rate that includes free streaming.

If you assume that all of its revenue comes from subscribers, then its first quarter revenue would decline by 8% to $661.1 million from $718.6 million. This would reduce its profit of $60.2 million by $57.5 million, or by 95%! Netflix will have some subscriber growth as well, but the assumptions above aren’t crazy. If a large portion of subscribers shed their streaming, then Netflix could see a huge hit to its profits. And remember, this assumes that no subscribers cancel altogether. Some will.

6. Terrible Timing

Let’s imagine for a moment that Netflix’s streaming service is robust enough to warrant a big rate hike. Even then, putting that rate hike in place now is a pretty bad idea. The economy remains weak, as Americans are still nervous about the future. Inflation has also been squeezing Americans’ budgets. As they look for ways to save money, Netflix just gave them an easy one: don’t pay more for video streaming unless you really can’t live without it. By dumping the service, not only will you escape the big fee hike, but you’ll actually save money on your by-mail subscription service under the new plan.

7. Investors May Suddenly Begin to Question Netflix’s Strategy

Netflix has been a darling of investors for some time now. In just the past year, its stock price has increased by an amazing 144%. But Wall Street might begin to question its strategy. The company has said that streaming is the future. It’s right. But the future isn’t here yet. If its streaming subscriber base suddenly plummets by 50% or even by a smaller margin like 30%, then investors might worry about whether consumers are really ready to embrace the service on which Netflix has been investing a huge portion of its revenue. And if its profits dive as a result of the rate hike, then investors will be even more concerned with Netflix’s vision.

So what should Netflix have done? It should have increased its rates slightly, maybe by a dollar or two, and broke out streaming and by-mail service. For example, the company could have increased the cost of its basic plan from $9.99 to $11.98 for streaming plus by-mail service. If you wanted the two a la carte, it could have charged $4.99 for streaming and $6.99 for one DVD-by-mail. Although customers wouldn’t love the rate increase, they’d be better able to stomach it. It would also give Netflix the ability to up its fees in future years gradually, to hit the target that it believes is appropriate. But putting the hike in place immediately may do the company more harm than good.

Technical Analysis: [Finally, let’s take a quick look at the SwamiChart.  As you can tell, the SwamiPredict indicator is still giving a green “buy” signal.  However, it should be noted that it’s strength is diminished because it is not emerging from a different signal.  Also, the SwingWave indicator is giving an orange “peaking” signal that could be very telling…. especially considering that it is coming a couple of bars off an outside day to the downside.]

Posted in Company Watch | Tagged , , , , , , , , , , , , , , , | 1 Comment

Syneron Medical Watch

I first learned about Syneron Medical, the leading global aesthetic device company, when they announced that its Board of Directors has terminated the shareholder rights plan. This contract was meant to ensure that all Syneron shareholders would be treated fairly in the event of any unsolicited takeover of the company. The termination occurred around the 1st of June and caused the stock to dip 1.7%.

Around the same time Seth Jayson posted a light analysis of Syneron’s books concluding that their decreasing revenue was troubling but not consistent enough to be predictive of any future price movement.

Since then, Seth Klarman, the founder and president of a Boston-based private investment partnership, has increased his ELOS position.  As a long time follower of his recommendations I decided to take another look.  Heuristically speaking, the stock made an outside day to the upside which is a moderate short term buy signal.  Also, by examining the SwamiChart below one can clearly see the cyclical monthly down-trending pattern.  As such, the Predict indicator has given wonderful buy signals (emerging green) and sell signals (emerging red).  And these signals are even more accurate when used in conjunction with the SwingWave indicator which gives indication that a stock could be peaking (orange) or in a valley (blue).  Therefore, I expect for selling to continue (despite the outside day) before we see a rebound.

Additional Company Info: Syneron Medical (ELOS), together with its subsidiaries, engages in the research, development, marketing, and sale of aesthetic medical products worldwide. The company develops products based on its proprietary ELOS technology, which combines conducted radiofrequency energy, an electrical energy; and light or laser-based energy, an optical energy.

Posted in Company Watch | Tagged , , , , , , , , , , , , , , , , , | Leave a comment