48.61 0.00 (0.00%)
After hours: 5:51PM EST
|Bid||48.56 x 4000|
|Ask||48.59 x 900|
|Day's range||48.21 - 48.72|
|52-week range||36.74 - 49.89|
|Beta (3Y monthly)||1.35|
|PE ratio (TTM)||10.40|
|Earnings date||15 Jan 2020 - 20 Jan 2020|
|Forward dividend & yield||1.40 (2.86%)|
|1y target est||52.98|
(Bloomberg) -- Oil advanced for the first time in three days after a report that OPEC sees a potential reduction in supply from outside of the group.Futures rose as much as 1.3% in New York Wednesday after the American Petroleum Institute reported that U.S. stockpiles fell 541,000 barrels last week, according to people familiar. Apart from a “sharp” cut in projected output from non-member countries next year, the Organization of Petroleum Exporting Countries also sees a possible “upswing” in the forecast for demand growth, according to Secretary-General Mohammad Barkindo. The comments underscore a more upbeat outlook for the oil market into the new year.When the OPEC news hit the market, prices “started to rally from the red to the green,” said Bob Yawger, future divisions director for Mizuho Securities in New York. “Until this turnaround, things were getting ugly.”While crude prices have picked up over the past month, they’re still down about 14% from the peak reached in April as the prolonged U.S.-China trade dispute saps an already-fragile global economy and crimps fuel demand. OPEC, which cut production this year to prop up the market, has signaled it’s unlikely to take stronger action to prevent a renewed glut in 2020.Meanwhile, Federal Reserve Chairman Jerome Powell said the current stance of monetary policy is likely to be sufficient provided the economy stays on track, but warned that “noteworthy risks” remain to record U.S. expansion.“The market is digesting chairman Powell’s speech,” said John Kilduff, partner at Again Capital in New York. “This is a bit of positive pull up from Powell. It’s the fact that the Fed is going to be on hold because the economic outlook is looking brighter and is a key aspect to the energy market these days because of the focus on the demand.”West Texas Intermediate for December delivery traded at $57.45 at 4:37 p.m. after rising 32 cents to settle at $57.12 a barrel on the New York Mercantile Exchange.Brent for January rose 31 cents to close at $62.37 a barrel on the London-based ICE Futures Europe Exchange, and traded at a $5.17 premium to WTI for the same month.Read: Global Oil Demand to Hit a Plateau Around 2030, IEA PredictsThe industry-funded API also reported that stockpiles in Cushing, Oklahoma, fell 1.18 million barrels while gasoline and distillate inventories gained by a combined 3.15 million barrels. The Cushing fall would be first decline in over five weeks, if U.S. Energy Information Administration data confirms it.Meanwhile, in the U.S., crude stockpiles probably rose by 1.5 million barrels last week, according to the median estimate of analysts surveyed by Bloomberg.“Thursday is going to be the next big test here,” Yawger said in anticipation of the EIA report. “Whichever number is bigger will be the way most likely that the market will trade to.”To contact the reporter on this story: Jacquelyn Melinek in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: David Marino at email@example.com, Christine BuurmaFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Takeaway.com NV Chief Executive Officer Jitse Groen said it doesn’t make sense to overpay in its bid to gain control of U.K. rival Just Eat Plc.“I don’t want to be the idiot that runs into a ratio that doesn’t make any sense,” Groen said Wednesday at the sidelines of the Morgan Stanley European Technology, Media & Telecom Conference in Barcelona.Takeaway is currently battling Prosus NV, which officially filed its hostile offer for Just Eat on Monday. Just Eat investors have complained about both the 710 pence-per-share cash offer from Prosus and Takeaway’s all-stock offer, currently valued at about 626 pence. Neither company has indicated that they’d raise the bid.“We will be disciplined in our approach as in all M&A situations,” a spokesman for Takeaway said in an email. “For obvious regulatory reasons, we cannot speculate about the terms of the offer.”Takeaway published a presentation on Wednesday expanding on the rationale behind its bid, adding that it expects to launch its Scoober courier service to the U.K, which is projected to incur costs in the tens of millions of euros per year.Takeaway also pointed out that it expects to cut costs by consolidating Just Eat’s five IT platforms, starting in Continental Europe.Just Eat and Takeaway have a lot of overlap in their shareholder base and so the Takeaway offer is getting a lot of investor support, Groen said.Aberdeen Standard Investments, which holds about 5% of Just Eat, said that Prosus needs to increase its offer by 20%. The investor also wanted Takeaway to increase its bid. Eminence Capital, which holds about 4%, in September said Takeaway’s bid undervalued Just Eat and that it planned to vote against that deal.“The Takeaway.com materials published today continue to underestimate the level of investment required in a sector that is changing rapidly,” Prosus said in a statement Wednesday.(Updates with comment from Takeaway in fourth paragraph.)To contact the reporter on this story: Amy Thomson in Barcelona at firstname.lastname@example.orgTo contact the editors responsible for this story: Giles Turner at email@example.com, Andrew PollackFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
A company controlled by the billionaire Barclay brothers will inject an additional £75m of equity into Shop Direct, helping to resolve a cash crunch triggered by a spike in claims for payment protection insurance. The online retailer said it would continue to examine alternative sources for a second tranche of funds.
(Bloomberg) -- Analysts from Morgan Stanley to UBS Group AG to Societe Generale SA are taking an increasingly cautious stance on Mexico, warning that measures needed to bolster growth may come at the expense of government finances.They see a moribund economy and little hopes for a pickup without fiscal stimulus, a situation that runs up against President Andres Manuel Lopez Obrador‘s pledges to maintain a primary budget surplus. Already nervous about the president’s populist tendencies, they cite the spending versus growth dilemma as one of the biggest tests for his government as it looks toward its second year in power.“The main risk for Mexico is by the end of next year as we head toward the midterm elections and see how the AMLO administration is going to deal with potential slow growth,” said Bertrand Delgado, a strategist at Societe Generale.In Morgan Stanley’s view, the risks are too close for comfort. The bank on Wednesday closed its bullish call on the peso, rates and bonds from the state-owned oil company. UBS is cautious on Mexican fixed-income assets, citing the risk of worsening public finances and rating cuts. Foreign bondholders have already been pulling money out of the country, with overseas holdings of Mexico’s domestic debt down to 55% of the total outstanding from a peak of 66% in 2017.Mexican assets staged a broad sell-off in the months leading up to Lopez Obrador’s widely anticipated election win in July 2018, based on concerns he would boost state meddling in the economy. But there’s been a partial recovery since his inauguration in December. The peso is up 2.8% this year, among the best in emerging markets, and average overseas bond yields have dropped a full percentage point. The benchmark stock index has gained 5.4%, though that’s less than half the jump for MSCI’s Emerging Market Stocks Index.“It looks so-far-so-good in terms of conversations between the AMLO administration and the business and investor community,” said Delgado, who says gains could continue for a while before the ultimate reckoning comes for Mexico.For Alejo Czerwonko, a strategist at UBS in New York, that reckoning could come from a downgrade of Mexico’s credit rating sometime over the next year, which makes him bearish on the long-term investment outlook for Mexico.“In spite of the commitment to fiscal responsibility, the risk of deteriorating public finances persists,” he said. “Sovereign rating downgrades remain a question of when, not if.”Negative OutlooksMoody’s Investors Service Inc. and S&P Global Ratings have negative outlooks on the sovereign credit, while Fitch is neutral. Petroleos Mexicanos, the state oil company known as Pemex, is among the biggest drags on government finances, and that burden will continue as the company struggles to boost output while coping with more than $100 billion of debt.While Lopez Obrador has promised funds and a lower tax burden to rescue Pemex, the company was slashed to junk by Fitch in June, and a similar decision by either Moody’s or S&P would almost certainly push its bonds off the main investment-grade indexes and lead to a forced sell-off.Lopez Obrador has promised to preserve fiscal discipline and Finance Minister Arturo Herrera promised as recently as July that he’d hit this year’s 1% primary budget surplus target.But the fiscal pressure is amping up amid weak growth. Gross domestic product edged up just 0.1% in the third quarter after the economy barely avoided a technical recession in the second. Mexico’s central bank, known as Banxico, is expected to lower interest rates in coming months to boost growth, which could reduce the appeal of the peso for investors who borrow in dollars to purchase higher-yielding currencies.“Banxico has embarked on what is likely to be a protracted easing cycle, which would erode the peso’s carry advantage over time,” said Ilya Gofshteyn, a New York-based strategist at Standard Chartered. “We expect this to be a drag on the peso’s performance in the second half of 2020.”To contact the reporters on this story: Justin Villamil in Mexico City at firstname.lastname@example.org;Andres Guerra Luz in New York at email@example.com;Sydney Maki in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Carolina Wilson at email@example.com, Brendan WalshFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Morgan Stanley was accused of using “pump and dump” tactics to manipulate European bond markets and stave off a $20 million loss after its bets on the French sovereign turned sour amid the Greek debt crisis.The bank’s London desk was long on French bonds and short on German debt, betting the spread would narrow, said Bernard Field, an official at the Autorite des Marches Financiers. But the opposite scenario played out as Greece’s impasse with creditors deepened, causing the desk to lose $6 million on June 15, 2015 and an extra $8.7 million at market open the next day, Field said.To narrow its losses and avoid hitting a $20 million loss-limit set by Morgan Stanley’s management, the London desk allegedly acquired futures on French and German bonds on June 16, 2015, with the sole objective of increasing the market value of French and Belgian bonds before “massively and instantaneously” selling the latter, Field said at a Paris hearing.“This was clearly a pump and dump strategy,” added Camille Dropsy, another AMF official speaking on behalf of investigators. “Morgan Stanley consciously fooled the market.”‘High Standards’Morgan Stanley said in an emailed statement it “absolutely and categorically rejects the AMF’s allegations.” It said it was dismayed on learning investigators are seeking a 25 million-euro fine ($28 million). “The firm will continue to defend vigorously its integrity and high standards of professional behavior.”The AMF enforcement committee assesses market-abuse cases ranging from insider trading to publishing misleading information. It has the power to impose civil fines and bans and typically issues decisions several weeks after hearings.According to AMF investigators, Morgan Stanley’s tactic enabled the London desk to avoid about 5 millions euros in losses, said Field, who added that French and Belgian bonds are considered interchangeable.Field, who plays the role of a devil’s advocate in the case, disagreed with investigators on several points. In particular, he said the case should focus only French bonds traded on a platform regulated by the AMF, narrowing the loss Morgan Stanley is accused of unfairly avoiding to 1.7 million euros.‘No Impact’Stephane Benouville, a lawyer for the bank, said the accusations don’t stand up to scrutiny. He said the futures the London desk bought had no impact on French bonds and complained that AMF investigators hadn’t bothered trying to prove any effect.“When you listen to the prosecution it seems we’re being told that Morgan Stanley should have sat on its positions,” Benouville said. “If we weren’t allowed to deal German futures, French futures or French bonds what were we allowed to do? Sit tight as losses piled up?”Benouville said any decision to fine Morgan Stanley would send a message that market makers aren’t allowed to hedge themselves and exit risky positions. Ciaran O’Flynn, a managing director speaking on behalf of the bank at Friday’s hearing, went further.“As a market maker and like all market makers, we must provide a price to clients when they want it. We do not control when that will happen,” O’Flynn said. “All market makers, to provide that function, need to know that at a certain point they will be able to exit the risk. It is fundamental to the provision of liquidity to begin with. Any suggestion otherwise exhibits a poor understanding of the basis function of market making.”To contact the reporter on this story: Gaspard Sebag in Paris at firstname.lastname@example.orgTo contact the editors responsible for this story: Anthony Aarons at email@example.com, Peter Chapman, John AingerFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Google’s moves to cram the top of its search results with more and more advertising is hammering the online travel industry, one of the company’s biggest customers.Expedia Group Inc. fell the most in 14 years on Thursday and TripAdvisor Inc. dropped the most in two years after the companies reported dismal third-quarter results and laid the blame on Google. Booking Holdings Inc.’s shares dropped 8%, too, wiping out a combined market value of more than $13 billion from the three online travel agents.Google dominates the online search market, with at least three quarters of the market. People use the search engine to research trips, so for at least a decade online travel agents have refined their websites with trustworthy content and easy booking tools to show up high in Google results.This search engine optimization, or SEO, worked well until about five years ago. Around that time, Google began placing more ads on the top of search results, pushing down the free listings. The internet giant also built new travel search tools, which were mostly paid listings, too. This means online travel agents now must pay billions of dollars each year to Google to ensure they show up high in search results and get clicks from travel planners.The online travel industry has been concerned about Google’s changes since at least 2016. But the full impact was felt this week.“Google has got more aggressive,” TripAdvisor Chief Executive Officer Stephen Kaufer said during a conference call with analysts late Wednesday. “We’re not predicting that it’s going to turn around.”Free traffic is “shrinking all the time,” Expedia Chief Executive Officer Mark Okerstrom said the same day. “Google does continue to push for more revenue per visitor. And I think it’s just the reality of where the world is.”The industry has been trying other marketing channels, such as social media and more TV advertising. But Google’s search engine is so pervasive that online travel agents have to keep buying ads from the company to keep traffic coming to their sites.D.A. Davidson analysts wrote that Expedia is exploring alternatives to mitigate its “reliance on search/Google,” but they see “no alternatives that will be able to efficiently ‘move the needle’ from a volume perspective anytime soon.”Carnage in the online travel industry comes as antitrust scrutiny of Google is ramping up in the U.S. State, federal and congressional probes are all underway to determine whether the company violates competition law. One area of concern is vertical search, where Google uses its main search engine to promote its own industry-specific products over those of other companies. Travel is one example where this is happening, along with local search, contractor marketplaces like Angie’s List and shopping-comparison services.Google has been a rising risk for the travel industry for a while, but executives have been generally hesitant to blame it for poor results. The search giant is one of the most important sources of traffic and business for online travel agencies, so they have tried to maintain a good relationship. But this quarter, Google’s impact was so painful that industry executives and Wall Street analysts couldn’t avoid it.“We see these Google changes as a potential headwind to OTA profitability,” Morgan Stanley analyst Brian Nowak said in a note to clients. This trend isn’t going away, and people who want to invest in the online travel sector should do it through Google stock, he added.Booking Holdings, the largest online travel agent, was peppered with questions about Google during a conference call with analysts on Thursday.Glenn Fogel, Booking’s chief executive officer, said the company’s future success will rely on reaching people without Google getting in the way.“What we know is most important is for us to get customers to come to us directly,” he said. Building brand strength and retaining customers better means the company “will not be as dependent on other sources of traffic,” he added.\--With assistance from Ryan Vlastelica, Olivia Carville and Ian King.To contact the reporters on this story: Gerrit De Vynck in New York at firstname.lastname@example.org;Kiley Roache in New York at email@example.comTo contact the editors responsible for this story: Jillian Ward at firstname.lastname@example.org, Alistair Barr, Andrew PollackFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Morgan Stanley could face a €25m fine after allegations from French regulators that it manipulated European bond markets in an effort to avoid large losses on its trades. The bank’s London trading desk bought futures contracts on French and German debt in June 16 2015 in order to drive up the price of eurozone debt, before selling more than €1bn of French and Belgian bonds, an official from the French markets regulator told a hearing in Paris on Friday. According to the Autorité des Marchés Financiers’ investigation, the traders at Morgan Stanley aimed to raise the price of futures to “abnormal and artificial levels” in order to avoid millions of euros of losses.
(Bloomberg) -- Another large block trade in Uber Technologies Inc. priced overnight in the wake of its IPO lockup period expiration, a person familiar with the matter said.Morgan Stanley sold two million shares on behalf of an unknown holder at $26.75 each, the person said, a 0.71% discount to Wednesday’s closing price.It’s the latest of several blocks in this year’s largest U.S. IPO since selling restrictions lifted on Wedesday for pre-IPO shareholders and other insiders. Shares erased earlier pre-market gains to traded little changed.To contact the reporter on this story: Drew Singer in New York at email@example.comTo contact the editors responsible for this story: Brad Olesen at firstname.lastname@example.org, Courtney DentchFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Morgan Stanley is wading back into a difficult niche of the Hong Kong stock market, betting it’s found a way to complement its business serving wealthy clients.As protests roiled the city in recent months, the bank quietly began offering derivatives in Hong Kong known as callable bull or bear contracts, which track the performance of underlying assets without buying them directly. This week, the firm also began issuing warrants that can be traded at the Hong Kong Stock Exchange, helping fill a void left by European banks that have been pulling back from equities units with low returns.Together the listed contracts amount to a $733 billion market in Hong Kong, but because of thin spreads banks have to amass market share to produce adequate profits. For New York-based Morgan Stanley, the new retail products may provide a way to neutralize risks in its growing private bank in Asia. Many wealthy clients want the firm to help them bet stock prices will remain relatively steady -- known as shorting volatility -- trades that typically involve selling derivatives. Now, essentially taking the other side, retail investors can buy Morgan Stanley’s new contracts to bet on price swings.“We have returned to the HKSE warrant market with the technology and client focus necessary to establish a successful standalone business,” Craig Verdon, head of the institutional equity division for Asia said in a statement. “We anticipate synergies with our growing wealth-management business and our leading cash-trading client franchise.”Citigroup, JPMorganEuropean banks such as Barclays Plc, Standard Chartered Plc and Deutsche Bank AG have been paring Asia equities businesses including warrants trading as part of broad restructuring efforts, giving some rivals an opening.Citigroup Inc. also aims to return to that business in Hong Kong after exiting it years ago, a person familiar with its planning said, asking not to be named discussing internal deliberations. A spokesman declined to comment. JPMorgan Chase & Co., a more established player in that part of the Hong Kong market, began expanding its business into Thailand last year.Stock derivatives are popular in Asian markets, and investor demand for contracts to bet on equities in Hong Kong has remained robust despite the banks’ comings and goings. For small investors, warrants and other listed derivatives provide exposure to moves in an underlying stock or index for a fraction of the price of buying them directly. Trading in Hong Kong-listed structured products rose to a record $733 billion last year, a 38% increase from the start of the decade.Asia’s stock derivatives have proven tricky at times for overseas banks. France’s Natixis SA was left reeling last December after trades linked to volatile Korean financial products known as autocallables went awry, triggering losses and provisions of 259 million euros ($286 million).Technology FocusMorgan Stanley was among banks that quit the listed-warrants business in Hong Kong years ago, getting out just before the global credit crisis because of too little volume at the time. The lean spreads can make profits difficult, despite the risks.“Scale is incredibly important in this business, given the volatility of the market and the ongoing investments required to lead the market in serving clients,” Yowjie Chien, JPMorgan’s Hong Kong-based global head of warrants & options electronic client solutions, said in an interview. “We’ve grown significantly in terms of market share over the last nine years.”Morgan Stanley is hoping cutting-edge technology can help it with that challenge and allow it to operate a high-speed platform. The bank has assembled more than a dozen people dedicated to its new warrants unit, according to a person with knowledge of its business. Roughly two-thirds of that group will focus on the underlying tech, with the remainder working in quant strategy, trading and sales, the person said.Listed structured products amounted to more than 20% of trading volume at the Hong Kong stock exchange last year. Bull or bear contracts allow retail buyers to make leveraged bets. To limit their losses, the products are canceled if underlying stocks exceed predetermined amounts.Morgan Stanley does little retail business in the region. It offers wealth management to retail investors in Australia and provides some products to third-party private banks that incorporate them into their own retail offerings. While the new warrants are a retail product, Morgan Stanley will issue them on the exchange and won’t interact directly with buyers.The bank is returning to the market as regulators, hoping to cultivate a wider range of warrants and derivatives contracts, adjust rules to speed up product approvals. Executives declined to say how much they hope to earn by offering the contracts.(Adds description of contracts in third-to-last paragraph.)To contact the reporter on this story: Cathy Chan in Hong Kong at email@example.comTo contact the editors responsible for this story: Candice Zachariahs at firstname.lastname@example.org, David Scheer, Jonas BergmanFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- Germany’s finance minister Olaf Scholz acknowledged this week that the European Union needs to make progress on cementing a banking union. The bloc’s growing reliance on American and British banks to underwrite the bulk of its capital markets activity, combined with the prospect of Brexit putting up barriers to European lenders accessing London-based capital, helps explain his new urgency.While domestic politics is playing a part in Scholz’s newfound warmth for the project (as my colleague Leonid Bershidsky argues here) and his insistence on important red lines may hinder progress (as Ferdinando Giugliano suggests here), he described his key motivation in an article for the Financial Times succinctly:Now that the U.K., home to London's capital markets, is on the verge of withdrawing from the bloc, we must make real progress. Being dependent for financial services on either the U.S. or China is not an option. So if Europe does not want to be pushed around on the international stage, it must move forward with key banking union projects, as well as the complementary project of capital markets union.Companies in Europe, the Middle East and Africa have raised more than $78 billion in equity offerings this year. In equity underwriting, Wall Street banks are becoming more dominant as Deutsche Bank AG and BNP Paribas SA, the EU-27’s biggest players in this field, cede market share.More than 40% of that underwriting business was led by JPMorgan Chase & Co., Morgan Stanley, Goldman Sachs Group Inc. and Citigroup Inc. Deutsche Bank’s market share has more than halved in three years.There’s a similar picture in the league tables for international bonds, where borrowers have raised more than $3.8 trillion this year. JPMorgan’s position as top lead underwriter in that category gives it a market share of almost 8% for the past three years, double that of Deutsche Bank. While BNP has increased its share to 4.4%, it remains well behind JPMorgan, Citi and Bank of America Corp. as well as London-based HSBC Holdings Plc and Barclays Plc.So Scholz is absolutely right to worry that the EU risks being starved of capital if its financial services industry continues to stumble from crisis to crisis and its markets remain fragmented. The plan earlier this year to create a national banking champion by merging Deutsche Bank with Commerzbank AG — a project endorsed by Scholz — was doomed to fail. But a cross-border European champion able to compete with Wall Street and the City of London is sorely needed.To contact the author of this story: Mark Gilbert at email@example.comTo contact the editor responsible for this story: James Boxell at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Mark Gilbert is a Bloomberg Opinion columnist covering asset management. He previously was the London bureau chief for Bloomberg News. He is also the author of "Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable."For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- Uber Technologies Inc.’s new target of achieving profitability by 2021 impressed analysts, even as shares fell amid continued competitive pressures in the food delivery business and ahead of a lock-up expiry on Wednesday.Third-quarter results were weighed down by the Eats segment, where bookings came in well below analysts’ estimates. Overall, the results prompted a mixed response from Wall Street, with analysts at RBC Capital Markets and Morgan Stanley boosting their price targets noting signs of improvement in the main ride-hailing unit, while DA Davidson and Wedbush lowered their targets citing negative market sentiment, weak results and slower growth estimates.Analysts also cautioned that longer-term investors becoming able to sell down holdings from Nov. 6 could weigh on the shares.Uber shares fell as much as 9% to an all-time low in New York on Tuesday. Peer Lyft was down as much as 2.2%.Here’s a summary of what analysts have had to say.Citi, Itay Michaeli(Buy, price target $45)More positives than negatives, with clear improvements in ride fundamentals, demonstrated by a segment Ebitda margin of 22% versus 8% in the first quarter.Ride improvements offset Eats softness, which shouldn’t come as a surprise given recent signs of competitive pressures.New break-even target implies at least $1.3b upside to 2021 consensus Ebitda.RBC Capital Markets, Mark S.F. Mahaney(Outperform, price target raised to Street-high $64 from $62)“Bad news. Good news. Great News:” Bookings, users and trips came in slightly lower than expected, while Rides and Eats revenue beat and the Ebitda loss was materially better than expected.Goal of Ebitda profitability in 2021 is achievable, and would be well ahead of Street.Wedbush, Ygal Arounian(Outperform, price target $45 from $58)“Overall this was a B- quarter by Dara & Co. as the company missed underlying bookings and ridesharing metrics which will be viewed mixed to negatively by the Street.”“Despite the clearer path to profitability, mixed results and still-negative investor sentiment is leading to a lower target multiple.”Morgan Stanley, Brian Nowak(Overweight, price target raised to $55 from $53)Target of Ebitda profitability in 2021 is $775m better than Morgan Stanley’s estimate, demonstrating impact of scale, expenditure discipline, and higher efficiency.More importantly, messaging on food delivery indicates market is becoming more rational, although fourth quarter is expected to be another tough one for Eats.New segment disclosures (for example on rides margins) will enable investors to appreciate value of each core businesses.Loop Capital Markets, Jeffrey Kauffman, Rob Sanderson(Buy, price target $48)“Fairly solid results” with better ride revenue and loss margin similar to Lyft Inc. Tough dynamics in Eats, which faces difficult comparatives, was similar to competitor GrubHub Inc.More signs of improvement than deterioration since the IPO. Shares to stabilize once expiration passes.DA Davidson, Tom White(Neutral, price target $35 from $44)“Our 2020 and 2021 revenue estimates decline by 3% and 10%, respectively, due primarily to more conservative Eats growth assumptions.”“Near-term visibility for Eats remains limited in our view, but we continue to believe that, over the long-term, Uber’s multi-product platform can be a critical differentiator in the crowded online food delivery space.”MKM Partners, Rohit Kulkarni(Neutral, price target $32)“Baby step” on path toward profitability, with top and bottom lines beating expectations.That said, “lofty” goal of reaching break-even on Ebitda during 2021 is surprising. Gross bookings continue to decelerate and variable costs, including on marketing, rise.No evidence yet that Uber has been able to stabilize bookings growth via a reduction in incentives offered to both drivers and riders.(Updates share move in fourth paragraph.)\--With assistance from Kit Rees and James Cone.To contact the reporters on this story: Joe Easton in London at email@example.com;Esha Dey in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Beth Mellor at email@example.com, Brad Olesen, Janet FreundFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
First Horizon's recent all-stock merger of equals (FHN) with IBERIABANK (IBKC) reflects the companies' strategic efforts for business expansion with diversified products into the Southern market.
(Bloomberg Opinion) -- Larry Kudlow, President Donald Trump’s top economic aide, said on Friday that he’s working on a plan to cut taxes for the American middle class that would be announced ahead of the 2020 election.In the eyes of Moody’s Investors Service, several Democratic presidential candidates already have a similar proposal.In a sweeping report on the potential impact of student-loan forgiveness on the U.S. economy and the government’s finances, analysts led by William Foster made this striking statement: “In the near term, we would expect student loan debt cancellation to yield a tax-cut-like stimulus to economic activity.” The idea is that because more than 90% of the debt has been issued or guaranteed by the federal government, lowering or erasing those interest payments is tantamount to slashing taxes owed to ultimately the same source.Even for a subject like student loans that has been poked and prodded from every direction, this framing is novel. But it makes sense that Moody’s, which assesses the creditworthiness of sovereign governments like the U.S., would draw such a parallel between tax cuts and student loan relief as forms of fiscal stimulus. As the analysts noted, universally canceling student debt would barely impact America’s national debt because Treasuries have already been issued to finance the loans. Rather, one issue is that the government would lose the revenue from loan repayments, which amounted to about 0.4% of gross domestic product in 2018.Admittedly, it’s somewhat laughable to call that a concern, given that the nearly $1 trillion U.S. budget deficit is already practically unprecedented for a period outside of recession or wartime. The Trump administration’s 2017 tax cut relied on the assumption that accelerated economic growth would cover lost revenue, yet real GDP growth in the third quarter was 1.9%, Commerce Department data showed last week, the second-slowest annualized pace since Trump was elected. Candidates like Senator Elizabeth Warren of Massachusetts, by contrast, have mostly specified how they plan make up the revenue lost from forgiving student loans (in her case, a wealth tax).A more pressing question about canceling student loans revolves around whether doing so targets the segment of the population that needs the fiscal boost the most. My fellow Bloomberg Opinion columnists have weighed in on this, with Michael R. Strain arguing Warren’s plan helps the well-off, while Noah Smith thinks her income-based repayment plan is a good start and necessary to alleviate the $1.5 trillion debt’s drag on economic growth.Other candidates have proposed a more targeted approach. Mayor Pete Buttigieg of South Bend, Indiana, for instance, has said he would eliminate the debts of students who attended “low-quality, overwhelmingly for-profit programs” that failed the federal gainful employment rules, which were meant to root out higher-education programs that leave graduates with excessive debt relative to their job prospects. Moody’s analysts seem to fall somewhere in between. Here’s the upside of forgiving student loans:“Increased student debt can explain about 20% of the reduction in homeownership rates among young adults between 2005 and 2014, likely a reflection of a student loan borrower's reduced ability to save for a down payment on a home or qualify for a mortgage. Limited savings can also delay the pace of household formation, as the costs of starting a family can be prohibitive without sufficient savings. Meanwhile, high delinquency among student loan borrowers also impairs credit scores, which can further weigh on an individual's ability to access the credit necessary to start a business or purchase a home.”That likely resonates with a lot of young adults. But Moody’s analysts give a nod to Strain’s view on who would get most of the benefits:“The stimulative effect of a total student debt cancellation on the economy will be partially diluted by the relatively high-income levels of the majority of beneficiaries. … Nearly two-thirds of outstanding education debt is held by households in the upper half of the U.S. household income distribution, whose balance sheets are relatively healthy and whose propensity to consume savings from debt relief is lower than for earners on lower rungs of the income distribution.”And to Buttigieg’s point about for-profit colleges in particular:“In 2016, 32% of bachelor’s degree recipients from for-profit institutions had debt loads of $50,000 or more, compared to just 7% and 12% of peers at 4-year public and private nonprofit institutions, respectively. Although for-profit institutions educate less than 10% of U.S. undergraduates and graduates, their students represent nearly one-third of delinquent federal loan borrowers and are twice as likely to have delinquent loans than their counterparts at public and private nonprofit peer institutions.”I’m not in the business of opining on policy proposals. As Moody’s notes, the issues around the “moral hazard” of loan forgiveness are real and deserve to be debated publicly among elected officials.But from my vantage point within financial markets, the concept of student-loan forgiveness as a sort of tax cut is intriguing. Much of the talk among investors lately has centered on the limits of monetary policy and how governments are going to have to step up and do more to keep the economic expansion alive — or to combat the next downturn. I’ve written before that ultra-low bond yields are a sign that markets are begging for infrastructure spending, an oft-cited way to provide a fiscal jolt.Giving today’s young adults the chance to buy homes and start businesses sooner — like previous generations, before college costs exploded — might be an equally effective boost. After all, what good are interest rates at near-record lows to people who don’t take out mortgages or small-business loans? Morgan Stanley, for one, is counting on unshackled millennials and Generation Z to carry the U.S. economy and stock market for years to come.It’s starting to look as if a “tax cut 2.0” will be on the ballot in 2020. While that’s the language of the Republican Party, the Moody’s analysis is a reminder that there’s more than one way to reduce what some Americans owe the government and boost the U.S. economy in the process.To contact the author of this story: Brian Chappatta at firstname.lastname@example.orgTo contact the editor responsible for this story: Daniel Niemi at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Brian Chappatta is a Bloomberg Opinion columnist covering debt markets. He previously covered bonds for Bloomberg News. He is also a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg Opinion) -- Wall Street should fear Senator Elizabeth Warren, but not for the reason it thinks.Some of Wall Street’s biggest stars have howled recently about how Warren would wreck the U.S. economy and the stock market if she were elected president or merely continued to make strides in that direction. Billionaire Paul Tudor Jones predicted last week at the Robin Hood Investors Conference in New York that the S&P 500 Index would decline 25% and that U.S. economic growth would be cut in half if Warren were to win. Leon Cooperman, Rob Citrone and Jeffrey Vinik have also said that the market would react negatively.Those fears are misplaced. Presidents have far less control over the U.S. economy than many think. Most recently, President Donald Trump tried to boost the economy with his sweeping Tax Cuts and Jobs Act, but its effects have been negligible so far. Also, no one can reliably anticipate the stock market’s reaction to events. Instead, Wall Street ought to worry about what Warren would do to the rarefied world of private equity, particularly leveraged buyouts, or LBOs.LBOs are simple transactions in concept, similar to buying a home. LBO firms acquire companies by putting down a small percentage of the purchase price and borrowing the rest. That liberal use of leverage magnifies returns, which is the main reason LBOs have historically been among the best performing investments. They can also play a useful role. When a public company wants to go private, a firm with multiple business lines wants to shed a division or a business owner wants to cash out, LBO firms are often the buyers.The problem is there’s more money chasing LBOs than deals to accommodate it. Roughly $1.2 trillion was invested in the strategy as of March, according to research firm Preqin, double the amount invested across all private equity strategies in 2000. The unsurprising result is that companies are fetching higher purchase prices, if investors can find deals at all. In a 2018 survey, private equity firms cited high valuations, a scarcity of deals and intense competition as their biggest challenges, according to financial data company PitchBook.The numbers bear it out. In the first half of 2019, LBO investors paid 11.2 times Ebitda, or earnings before interest, taxes, depreciation and amortization, according to Morgan Stanley, nearly 70% more than the 6.7 times they paid in 2000. LBO firms have been able to offset higher purchase prices with help elsewhere. For one, interest rates have declined significantly over the last two decades, with the 10-year Treasury yield falling to less than 2% from close to 7% in 2000. Investors have demanded little more for low-quality debt in recent years, which features prominently in many LBO deals. Those low rates have allowed LBO firms to borrow or refinance more cheaply. In addition, the U.S. has enjoyed the longest economic expansion on record since 2009, which has helped bolster their portfolio companies’ profits. Third, rising valuations have allowed LBOs to sell their investments at ever higher multiples.Those tailwinds could evaporate quickly, but that hasn’t dissuaded investors, at least so far. They still expect higher returns from private equity than they do from U.S. stocks and bonds and a smooth ride, given that private assets are sheltered from turbulent public markets. Those perceived advantages have made private equity a fixture of institutional portfolios and, increasingly, those of individuals.To accommodate the flood of investment, LBO firms are venturing farther from their traditional turf and into every conceivable corner of the economy, including pet stores, doctors’ practices and newspapers. The industry says its expanding reach leaves companies better off, but there’s mounting evidence that companies acquired through LBOs are more likely to depress wages, cut investment or go bankrupt, in many cases because of their debt load. When that debt proves too burdensome, workers and their communities and the taxpayers who inevitably support them all lose, while LBO firms still collect their fees and dividends. Leverage is risky business, as the 2008 financial crisis laid bare, and the growth of private equity is spreading that risk well beyond its small sphere of well-heeled investors. Numbers for private equity are famously guarded, but one way to get a sense of the risks and rewards that come with the industry’s use of leverage is by looking at the stock performance of publicly traded private equity firms.The S&P Listed Private Equity Index, which includes industry titans Blackstone Group Inc., Apollo Global Management LLC and KKR & Co., tumbled 82% from peak to trough during the financial crisis, including dividends. That exceeded the 79% decline for the S&P 500 Financials Index, the sector whose excessive use of leverage triggered the crisis, and the 51% decline for the S&P 500. Since the crisis eased in March 2009, however, the private equity index has outpaced the financials index by 1.3 percentage points a year through October and the S&P 500 by 2.4 percentage points.That brings us back to Warren, who has said that “private equity firms are like vampires — bleeding the company dry and walking away enriched even as the company succumbs.” Warren has also called private equity “legalized looting” that “makes a handful of Wall Street managers very rich while costing thousands of people their jobs, putting valuable companies out of business and hurting communities across the country.”Warren introduced a sweeping bill in July titled — what else — the “Stop Wall Street Looting Act” that would, at the very least, fundamentally transform the industry. Her proposal would ratchet up the potential liability of private equity firms by putting them on the hook for debts of their portfolio companies, holding them responsible for certain pension obligations of those companies and limiting their ability to collect fees and dividends. It would change tax rules to deny private equity firms preferential rates on the debt they put on portfolio companies and close a loophole that allows them to pay lower taxes on investment profits. It would also modify bankruptcy rules to make it easier for workers to collect pay and benefits and harder for executives to walk away with bonuses. Steve Biggar, an Argus Research Corp. analyst who covers private equity firms, called Warren’s plan an “industry-destroying proposal.”Of course, the industry is just as vulnerable to a sustained downturn or higher interest rates, given its cocktail of leverage and high valuations. In the meantime, as more Americans encounter the fallout from failed LBO deals, support for regulation of private equity is likely to grow. And if Warren occupies the White House, she may well lead the charge.To contact the author of this story: Nir Kaissar at firstname.lastname@example.orgTo contact the editor responsible for this story: Daniel Niemi at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Nir Kaissar is a Bloomberg Opinion columnist covering the markets. He is the founder of Unison Advisors, an asset management firm. He has worked as a lawyer at Sullivan & Cromwell and a consultant at Ernst & Young. For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- Want the lowdown on European markets? In your inbox before the open, every day. Sign up here.The chief executive officer of jewelry maker Pandora A/S is trying to reassure investors that better days are around the corner, after a profit warning on Tuesday sent the company’s shares plunging as much as 13%.“Normally I don’t focus on what happens with the share price, but in this case I think it’s relevant to say why people should consider Pandora as a holding,’’ CEO Alexander Lacik said in a phone interview.Pandora, which makes mid-priced jewelry, delivered its first net loss since its initial public offering almost a decade ago. The company, which is in the middle of an inventory clean-up program that Lacik acknowledged is proving costlier than first assumed, cut its forecast for organic growth and warned investors it will only reach the lower end of its target for operating profit this year.Lacik said that Pandora, which is based in Copenhagen, has received “strong early positive signals’’ from its brand relaunch and that an improvement in so-called like-for-like sales continued into the fourth quarter.Analysts blamed the restructuring for the bad result, but said it wasn’t clear that the company was yet on the right track.Morgan Stanley said Pandora’s outlook is improving, but next year is still a “black box,” with results so far not adequate to suggest brand recovery over the medium term.“Pandora is in the middle of a turn-around and in such a phase, not all key figures are equally charming,” Per Hansen, an investment economist at Nordnet, said in a note. “Cleaning up costs money.” But it still remains “too early to claim that the turnaround is a success.”Pandora is trying to revive interest for its charms and bracelets by changing its brand and simplifying its product range. The company said third-quarter organic growth declined 14%, due to a change of payment terms in Italy and the continued clean-up of wholesale inventory through inventory reduction. Pandora also said the positive sales effect from new store openings was lower than expected.The Profit Warning -Pandora cut its Ebit-margin guidance to a range of 26-27% from 26-28% previously. It now sees negative organic growth in the range of 7-9%, compared with the 3-7% decline predicted earlier. At the same time, Pandora is stepping up plans to cut costs.Lacik rejected the notion that Pandora’s lowered outlook constitutes a profit warning, because the Ebit margin forecast was still within the previous range, he said. It “would be a bad outcome” if the company’s former reputation for serial profit warnings, which cost his predecessor his job, continued under his watch, Lacik said.But the CEO warned that Pandora’s efforts to clean up its business will also impact next year’s results. “Into 2020 you should probably see us still in negative like-for-like territory,’’ he said.What Bloomberg Intelligence SaysWhile not a quick fix, Pandora’s rebranding strategy will likely rekindle desirability for the name in 2020, in our view. New CEO Alexander Lacik is so far embracing the plan, with an added emphasis on investment in brand relevance. New designs, collaborations and fewer promotions will aid its jewelry charms offer. A store and product realignment includes a smaller retail footprint and inventory buybacks.----Deborah Aitken, Senior Analyst for Luxury Goods, HPC & Food, at Bloomberg IntelligenceEven with Tuesday’s decline, Lacik is on track to deliver a 15% share-price gain in 2019, which would end two years of stock-market losses for Pandora. The CEO promised that the net loss last quarter wouldn’t be repeated.“It just happened to all pile up in one quarter and the lion’s share is related to inventory reduction,’’ he said. “So it’s entirely a one-off.’’To contact the reporter on this story: Christian Wienberg in Copenhagen at firstname.lastname@example.orgTo contact the editor responsible for this story: Tasneem Hanfi Brögger at email@example.comFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. Responses from 645 investors worldwide surveyed by Morgan Stanley show they are most concerned about trade policy, fiscal policy and taxes, strategists Michael Zezas and Meredith Pickett and others wrote in a 100-plus page note on the 2020 election.Respondents are least concerned about immigration and energy and climate policy, they said. Most expected a Democrat would be more likely than a Republican to boost financial regulations, de-escalate China tariffs, and go for prescription drug changes. Respondents associated Republicans with a higher likelihood of pursuing fiscal stimulation.“Election-driven market volatility is to be expected,” they wrote, as “investor expectations are at odds with a market priced for a status quo policy outcome.” In particular, broad equity index, tech and financials sector options aren’t pricing in potential pressure from a possible Democratic victory.At the same time, the analysts were mindful that policy ambitions may “fall short in practice,” with only a portion of a candidate’s platform likely to be enacted. Neither party is likely to “take control in a way that gives it legislative carte blanche,” they said.They added that President Donald Trump’s ability to repeat his 2016 victories in the upper Midwest and Pennsylvania may depend on how local economies perform. Morgan Stanley will watch softening economies in Wisconsin and Pennsylvania, adding that other swing states -- Arizona, North Carolina, Florida -- are doing well economically.Morgan Stanley sees the greatest probability of “meaningful fiscal stimulus” in the event of a sweep by either party. Infrastructure spending would be more likely under a unified Democratic outcome.To contact the reporters on this story: Felice Maranz in New York at firstname.lastname@example.org;Joshua Fineman in New York at email@example.comTo contact the editors responsible for this story: Catherine Larkin at firstname.lastname@example.org, Scott SchnipperFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Ft. Lauderdale, Fla., Nov. 04, 2019 -- The law firm of Securities Fraud Attorney Mark A. Tepper has filed claim against Morgan Stanley on behalf of a retired nurse’s.
(Bloomberg) -- Explore what’s moving the global economy in the new season of the Stephanomics podcast. Subscribe via Pocket Cast or iTunes.Turkish inflation ended a run of surprises, slowing in line with forecasts as it capped a turnaround from a currency crash in 2018.Consumer prices grew an annual 8.6% in October, the slowest in almost three years and down from 9.3% in September, according to data released by Turkstat on Monday. After six straight months of undershooting estimates, the result matched the median in a Bloomberg survey of 19 economists.“We expect inflation to rise to double digits again in November due to the reversal of base effects in November and December,” Nihan Ziya Erdem, chief economist at Garanti Securities, said before the data release.Still helped along by a more stable lira and weak demand after a recession, the deceleration is losing momentum as the statistical effect of a high base of comparison after last year’s price spike is starting to wear off.Boasting among the highest real borrowing costs in emerging markets, Turkey’s central bank is coming off three rounds of interest-rate cuts totaling 10 percentage points that brought its benchmark to 14%. The looming reversal in inflation could, however, put in doubt further monetary easing at this year’s final meeting next month.The lira gained 0.2% against the dollar on Monday, appreciating for a second day. It’s still down about 2.5% in the past three months, among the worst performers in emerging markets.“The ongoing improvement in the inflation outlook paves the way for another cut on Dec. 12,” Morgan Stanley economist Ercan Erguzel said in a report. “Yet, the main driver of the decision should be the lira’s performance in the next five weeks.”A period of acceleration in prices will continue through the first quarter, according to Governor Murat Uysal. In its quarterly report last week, the central bank lowered its inflation estimate for the end of 2019 to 12%, from 13.9%.Treasury and Finance Minister Berat Albayrak said on Thursday that he estimates Turkish inflation slowed to around 8% in October and pledged a permanent drop to single digits starting from next year.Goldman Sachs Group Inc. expects price growth to end the year at 11% and then stabilize around 10% in the long run. “Orderly” moves in Turkey’s currency against the dollar could even push inflation toward 8% under its model, but “risks are actually more skewed towards higher inflation figures,” Goldman Sachs economists including Kevin Daly said in a note.“The authorities are prioritizing growth over disinflation, creating risks for the lira,” the Goldman economists said. “Going forward, we expect inflation to start rising once again as base effects become less pronounced.”(Updates with lira’s performance in sixth paragraph.)\--With assistance from Harumi Ichikura.To contact the reporter on this story: Cagan Koc in Istanbul at email@example.comTo contact the editors responsible for this story: Onur Ant at firstname.lastname@example.org, ;Lin Noueihed at email@example.com, Paul AbelskyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Treasury 10-year yields may surge while stocks grind higher over the next six months after the Federal Reserve’s third interest-rate cut, according to JPMorgan Chase & Co.The market reaction to the Fed’s “insurance” rate cuts has been most akin to a similar path taken in the mid-1990s, JPMorgan strategists said.“Assuming markets continue to follow the trajectory of the 1995 mid-cycle episode, this implies modest 5% or so upside for equities over the next six months, very big 100 basis point upside in the 10-year U.S. Treasury yield, steepening of the UST curve, and little change in the dollar or credit spreads,” strategists led by Nikolaos Panigirtzoglou wrote in a note Friday.The prediction comes with some big caveats, though.It assumes that the U.S. macro picture remains consistent with a mid-cycle adjustment, with resilience in employment and consumer confidence, as well as a rebound in manufacturing, JPMorgan said. It would also require a reversal of the pattern that has seen retail investors buy bond funds and sell equity funds at an unusually heavy level, and a re-steepening at the front end of the U.S. forward curve.Investors should monitor the gap between the one-month USD-OIS rate two-years forward minus the equivalent one-year forward. That “would need to enter positive territory on a sustained basis from here for us to be confident that the mid-cycle adjustment thesis is tracking,” the strategists wrote.(Adds link to Fed cut story in second paragraph.)\--With assistance from Stephen Spratt.To contact the reporter on this story: Joanna Ossinger in Singapore at firstname.lastname@example.orgTo contact the editors responsible for this story: Christopher Anstey at email@example.com, Andreea Papuc, Tan Hwee AnnFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.