Qualcomm to Ride Oppo, Vivo Smartphone Gains in China, Says Rosenblatt

Rosenblatt Securities’s Jun Zhang today reiterates a Buy rating on shares of Qualcomm (QCOM), and raises his price target to $75 from $70, writing that the company’s set to ride the wave of smartphone sales by Chinese phone makers Vive and Oppo.

The recently introduced “Snapdragon 835” chip from Qualcomm is helping the company take share in the Chinese market, writes Zhang:

We believe Qualcomm’s Snapdragon shipments largely increased in 1Q17 due to design wins from Vivo and OPPO. We expect Qualcomm to ship around 28M Snapdragon 825 units in March 2017 in China versus 8M in March of 2016. We also expect Qualcomm’s market share in China to grow from 50% in 2016 to 65% in 2017 with share gains in OPPO, Vivo, Xiaomi and Meizu, with stable market share in Samsung (005930-KR:NR) but a chance to grow market share in the iPhone 8.

So far, Qualcomm’s competition from MediaTek (2454TW) for phone chips is not a big problem:

Without meaningful competition in the high-end baseband SOC market from MediaTek, we believe gross margin would improve with cost reductions from the 10nm process. However, price competition in the middle and low-end mar- kets will continue, which limits gross margin improvements. The poor 10nm yield rate will also affect initial Snapdragon 835 gross margin. Qualcomm would gain market share in the high-end to offset the gross margin pressure. Medi- aTek could have more gross margin pressure due to a volume decline.

Qualcomm shares closed up 2 cents at $66.12 on Thursday.

Facebook, Alphabet: Good Times for ‘Net Stocks, Despite Uncertainty, Says Cantor

After a “strong” 2016, Internet stocks, writes Youssef Squali of Cantor Fitzgerald, are set for a “another good year, fueled by robust demand for digital services, offset somewhat by macro uncertainty and currency headwinds from the strengthening US dollar.”

Squali, who considers Facebook (FB), Alphabet (GOOGL), Amazon (AMZN), and Expedia (EXPE) his “best ideas,” writes that after a 19.4% rise for the group last year, there are more good times ahead, as trends in the Internet business are accelerating.

For example, Squali notes that advertising and e-commerce picked up pace:

Twitter: Five Reasons It’s a Sell in 2017, Per MoffettNathanson

Michael Nathanson, one half of boutique research firm MoffettNathanson, today offered up to clients five reasons why he believes that Twitter (TWTR) will be a Sell in 2017, which is his formal rating on the stock.

His reasons, in brief, are that the company’s lost a lot of execs without recruiting new talent; it’s attempt to be a streaming sports platform, with the NFL’s help, is destined to fail; president-elect Donald Trump hasn’t helped it revive user growth; his “checks” suggest revenue may have declined in the U.S. in Q4; and “the valuation is just wrong!”

Nathanson calls it a “head scratcher” that the stock’s up 20% since his own downgrade in May of last year, “given the magnitude of negative revisions and organizational challenges” in that time.

Splunk Lays out ‘Significant Opportunities,’ Per Drexel

Shares of Big Data and analytics software maker Splunk (SPLK) closed down $1.35, or 2%, at $56.33, after the company held an analyst day presentation in San Francisco with The Street today, during which it forecast revenue this year slightly below consensus.

Spunk sees revenue of $1.175 billion in the fiscal year ending in January of 2018, which is slightly below consensus of $1.194 billion.

Brian White of Drexel Hamilton, who has a Buy rating on the shares, and a $90 price target, and who was at the meeting, reported on the first half of the day, which included a vision statement from CEO Doug Merritt, and a customer testimonial, from Ally Financial (ALLY):

Kicking off today’s meeting was Doug Merritt (CEO, President) and he set the tone for the big opportunity that remains in front of Splunk. Splunk raised its total available market opportunity to $55 billion from the $45 billion discussed at the last analyst meeting in September 2015.

Nutanix: Big Competiton from Dell Makes it a Sell, Says Summit

Shares of storage and compute upstart Nutanix (NTNX) are up 4 cents at $30 despite a negative piece today from Summit Redstone’s Srini Nandury, who reiterates a Sell rating on the stock, predicting heightened competition from privately held Dell.

“Competition is closer than many believe,” writes Nandury.

He cites in particular an announcement this week by Dell, at an event held by Citrix Systems (CTXS), of new versions of its “VxRail” server systems.

Nutanix is the “market leader” in what’s called “hyper-converged infrastructure,” or HCI, and has “single-handedly pioneered” its adoption, in enterprise, writes Nandury.

Dell has had an agreement to resell Nutanix’s equipment, but one of the worries has always been that Dell could also be a competitor. In my interview with Dell’ s CFO, Tom Sweet, back on December 8th, Sweet told me that “Nutanix has been a good partner for us,” but he also added that “We try to offer our customers choice,” and so, “We also provide VXrail and VXrax,” home-grown Dell products.

Nandury notes the VxRail announcement by Dell:

Apple: Wells Chops $5B off March Revenue Estimates on iPhone Weakness

Wells Fargo’s Maynard Um today reiterates a Market Perform rating on shares of Apple (AAPL), writing that there might be some minimal upside to the company’s December-quarter results, but that his numbers are going down for March.

“While there could be some positive news out of the AAPL supply chain (we think supply chain guided conservatively given the prior year’s inventory issues that led to estimate cuts into Jan 2015),” writes Um, “we see think March guide poses some risk.”

Um cuts his March-quarter estimates to $52.8 billion in revenue and $2 in EPS from a prior $57.9 billion and $2.25 per share, after concluding iPhone units will be about 53 million versus a prior expectation for perhaps 60 million.

He’s also cutting his June numbers, to $46 billion and $1.62 per share from $49.5 billion and $1.76 per share previously.

He thinks demand for the iPhone could be slipping:

Amazon Rising: U.S. Jobs Plan Not Political, Says Baird

Shares of Amazon.com (AMZN) are up $7.77, or 1%, at $806.79, after the company this morning said it would create “more than 100,000 new, full-time, full-benefit jobs” in the U.S. the next 18 months, bringing its workforce to 280,000 from 180,000 today.

The context, of course, for the announcement, is Amazon CEO Jeff Bezos having met with U.S. president-elect Donald Trump, along with other tech leaders, on December 14th, and implications of trouble for Bezos by Trump during Trump’s campaign speeches.

The company made the case it also creates follow-on jobs for partners and suppliers: “In addition to direct job creation, Amazon businesses like Marketplace and Amazon Flex will continue to create hundreds of thousands of jobs for people across the U.S. who want the flexibility to start their own business, work part-time or set their own schedule.”

Intel, Apple, HP: Good News in Q4 PCs, Say RBC, Credit Suisse

Following word last night from research firm Gartner of another quarterly decline in personal computer sales in Q4, Street observers are today assessing what it means to individual players in the market.

Turns out, this decline was better than most people were expecting, and there are actually some happy implications here for Intel (INTC), Western Digital (WDC), Seagate Technology (STX), and HP Inc. (HPQ).

RBC Capital’s Amit Daryanani, noting that the 3.7% quarterly decline, and the drop of 6.2% for the full year, were better than expected, even though this marks the fifth consecutive year of PC declines.

Daryanani thinks things get better from here: “The y/y trajectory for PCs improved in Dec-qtr, and we think y/y performance should continue to get better in CY17 although our forecast is significantly more conservative than that of industry analyst estimates.”

IBM: Oracle or Microsoft-Like Multiple Possible, Says Morgan Stanley

Shares of International Business Machines (IBM) are down $1.42, or 0.9%, at $166.33, after Morgan Stanley’s Katy Huberty this morning reiterated an Overweight rating on the shares, and a $187 price target, writing that the stock can see a higher valuation multiple as its “Watson” A.I. effort begins to pay off.

Huberty sees IBM attaining a multiple of its free cash flow more like that of Oracle (ORCL) or Microsoft (MSFT) as Watson and other “strategic imperatives” of the company take over from the older product lines:

Our $187 PT (up from $179) assumes a turn premium to ORCL’s P/FCF multiple, in light of a less disruptive cloud story and what we view as a transformation to more durable, less infrastructure-dependent revenues.

Lenovo, HP, Dell, Apple All Gain Amidst PC Stagnation

Research firm Gartner this afternoon reports that personal computer sales dropped 3.7% in Q4 from the prior-year period, to 72.6 million units, which represented a continuation of “stagnation” in the industry, according to the firm.

The drop brought full-year sales down 6.2% compared to 2015′s total.

Lenovo Group (0992HK) was once again tops in PC shipments, with its sales rising 1.6%, year over year, to 15.78 million, or 21.7%, an increase from 20.6% a year earlier. HP Inc. (HPQ) saw sales rose 4.3%, for 20.4% share, up from 18.8% a year earlier. Privately held Dell was in third place, with its shipments rising 5.4%, to 14.8% share, up from 13.5% a year earlier.

Asustek (2357TW)  was in fourth place with 7.5% share, which was down from the prior-year 7.9% share, as its units dropped by 8.5%. And Apple (AAPL) made fifth place and saw its share rise to 7.5%, tying Asus, up from 7% share, as its unites rose 2.4%.

Gartner analyst Mikako Kitagawa said that areas such as high-end video gaming PCs, where there is growth in PCs, could not fully offset stagnation as consumer buyers delayed purchases of computers:

Stagnation in the PC market continued into the fourth quarter of 2016 as holiday sales were generally weak due to the fundamental change in PC buying behavior. The broad PC market has been static as technology improvements have not been sufficient to drive real market growth. There have been innovative form factors like 2-in-1s and thin and light notebooks, as well as technology improvements, such as longer battery life. This end of the market has grown fast, led by engaged PC users who put high priority on PCs. However, the market driven by PC enthusiasts is not big enough to drive overall market growth. There is the other side of the PC market, where PCs are infrequently used. Consumers in this segment have high dependency on smartphones, so they stretch PC life cycles longer. This side of the market is much bigger than the PC enthusiast segment; thus, steep declines in the infrequent PC user market offset the fast growth of the PC enthusiast market.

Despite the pockets of growth, “these growth areas will not prevent the overall decline of the PC market, at least in the next year.”