CLSA analyst Mark Heller halved his estimates of GT’s sapphire capacity and revenue for 2014. He cited lower than expected growth in GT’s shipments of its sapphire screens for Apple (AAPL) products, indicating that “GT is having issues ramping the new furnaces, which adopt leading edge technology to grow larger boules for mainstream supplier.” He also noted that GT is not supplying sapphire for the upcoming iWatch, despite consensus expectations that it would.
However, Heller’s expectations for the company are positive in the longer term, noting he "expect[s] GT to solve its yield issues over time and see no change to the view that Apple will increasingly adopt sapphire cover technology over the next few years.”
Despite a new partnership with Sotheby’s (BID), eBay (EBAY) shares fell 0.5% to $51.23 following an analyst downgrade. Pacific Crest Securities analyst Chad Bartley downgraded eBay to “sector perform” from “outperform.” He wrote that Pacific Crest’s Consumer Tech survey and checks with sellers “have raised concerned about growth trends in Q2” and that he now expects only “modest growth,” adding that “2014 results could finish closer to the low end of guidance.” One driver of the slowed growth was Google’s (GOOG) May update of its search algorithm, which negatively impacted eBay search result rankings. Additionally, eBay’s security breach the same month still has “lingering effects” on the online auction company’s performance. Bartley notes, for example, that his consumer tech survey showed that only 50% of eBay users changed their password after the breach came to light. Today, eBay announced a partnership with Sotheby’s, the blue-chip auction house. The two companies will collaborate “to deliver a new live-auction experience on eBay.com that will offer mid-priced inventory from the Sotheby’s portfolio.” Unlike typical eBay auctions, the Sotheby auctions on the site will feature “enhanced functionality” including backstories on the items for auction. Users will also be able to follow and participate in Sotheby’s auctions by video in real time. The financial terms of the deal were not disclosed. “The growth of the art market, new generation technology and our shared strengths make this the right time for this exciting new online opportunity,” Bruno Vinciguerra, Sotheby’s chief operating officer, said in a statement. “We are joining with eBay to make our sales more accessible to the broadest possible audience around the world.” “Sotheby’s is one of the most respected names in the world,” added Devin Wenig, president of eBay Marketplaces. “When you combine its inventory with eBay’s technology platform and global reach, we can give people access to the world’s finest, most inspiring items – anytime, anywhere and from any device.”
Apple (AAPL) shares rose 1.7% to $96.85 following an analyst’s upgrade. Barclays analyst Ben A. Reitzes upgraded Apple to “overweight” from “equal weight” and increased the price target to $110 from $95. Reitzes acknowledged that since Barclays downgraded Apple in April, CEO Tim Cook has made significant changes, restoring the confidence of Apple shareholders and “reversing many of the warning signs we saw earlier in the year.” He also wrote that Samsung’s unexpected weakness created a buffer for Apple, and that Apple’s products going into 2015 are so strong that “we are compelled to get on board even if its [sic] midway through the rebound trade.” Reitzes predicts earnings and revenues ahead of consensus, raising June quarter estimates to $38.33 billion (above consensus $37.85 billion) in revenues and EPS of $1.24 (consensus $1.22). Finally, he raised iPhone unit sales for 2014 and 2015 to 172 million from 169 million and 197 million from 190 million, respectively. Reitzes compared Apple’s performance to that of Google in 2013, writing that the market wants and needs to own this bellwether into the end of CY14 and into 1H15.” As such, he revised his long-term predictions from “Microsoft (MSFT)-like stagnation” to the strong growth Google exhibited: “Like Google, the market seems to believe Apple is a ‘must own’ name if things are tilting in the right direction.” Risks to Apple shares include “a lack of visibility in Apple’s web service streams,” peak margins, Chinese competitors such as Xiaomi, and increased competition with Google (GOOG) and Amazon (AMZN).
Shares of Amazon (AMZN) jumped 2.5% to $354.97 after snagging a key Google executive. Babak Parviz, the founder and head of the Google Glass project, has left Google to join Amazon. In addition to Google Glass, Parviz co-founded the Smart Contact Lens program at Google and led numerous other programs which haven’t been publicly announced. According to his biography at the University of Washington, where he is an affiliate professor, his interests include “novel communication and computing paradigms, biotechnology, nano and micro technology, and photonics.” He was also a member of the Google X team, which is the secretive Google division that works on self-driving cars, Google Glass, and Project Loon, a Google initiative to provide Internet service in remote areas using high-altitude balloons. Parviz made the announcement on his personal Google+ page, where he posted “Status: super excited!” followed by a smiley face and the Amazon logo. He did not disclose what projects he will work on at Amazon. His most recent project at Google was the contact lens program, which aims to track glucose levels in the tears of diabetics to obviate the need for periodic needle sticks. Amazon has its own equivalent of Google X, Amazon Lab126, which describes itself as “an inventive research and development company that designs and engineers high-profile consumer electronic devices,” including the Kindle, Amazon Fire TV, and the Amazon Fire Phone.
GoPro (GPRO) shares dropped 5.0% to $36.91 after Barron's published a cautious article on the company. On Saturday, Alexander Eule wrote an article for Barron's titled "GoPro's Thrill-Filled IPO Adventure May End Badly." Eule argued that the company, which makes wearable cameras for extreme sports enthusiasts, risks being "subsumed by our phones." He cites Flip, the small video camera purchased by Cisco (CSCO) in 2009 for $590 million, as a cautionary tale. The Flip was a "miniature marvel," Eule wrote, "but it was a feature, not a product, as Apple's iPhone soon made clear. Cisco shuttered the Flip business just two years after its purchase." GoPro's astonishing success since its June 25 IPO represents "a quaint return to pre-smartphone days" that Eule predicts may not last. GoPro is now worth $4.8 billion, 83 times last year's earnings. Eule cautions, "As accessory makers perfect wearable mounts for smartphones--and they inevitably will--it becomes hard to justify GoPro's competitive advantage, particularly at 83 times earnings. The stock is up 63% since the IPO less than three weeks ago.
--Written by Laura Berman in New York >Contact by Email.
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