Plus, an activist is pushing Madison Square Garden Company to sell part of its Knicks and Rangers teams, Expedia shares are tanking, and Ralph Lauren delivered a sales beat.
Stocks rallied to start Thursday, with the Dow adding 200 points, or 0.7%. The S&P 500 gained 0.5%, while the Nasdaq rose 0.6%.
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China’s Commerce Ministry spokesman, Gao Feng, said today that the U.S. and China have agreed to lift existing tariffs between the two nations in phases as they move toward signing the phase one trade deal. However, Feng said that one condition to the limited trade agreement is that the two sides must remove the same amount of tariff charges at the same time. “In the past two weeks, top negotiators had serious, constructive discussions and agreed to remove the additional tariffs in phases as progress is made on the agreement,” Feng said. “If China, U.S. reach a phase-one deal, both sides should roll back existing additional tariffs in the same proportion simultaneously based on the content of the agreement, which is an important condition for reaching the agreement.” If confirmed by the U.S., the move could help sketch out a road-map to the deescalation of the trade war that has weighed on the world economy. “I am skeptical on how fast the progress will be,” said Iris Pang, economist with Hong Kong’s ING Bank NV. “How fast the roll back will be is critical to get material and long lasting positive sentiment for the market as well as for both economies.”
HP Inc confirmed yesterday afternoon that it has received a proposal from Xerox about possibly combing their businesses. The sources said today that Xerox has offered HP Ince $22 per share in its takeover bid for the company. The deal would consist of 77% cash and 23% stock, or $17 in cash and .137 Xerox shares for each HP share. If accepted, the deal could generate $2 billion in cost synergies and result in HP shareholders owning 48% of the combined company. But concerns remain over the size disparity between the two companies. HP Inc is worth $29 billion, which is more than three times what Xerox is worth in terms of market cap. “We have considered, among other things, what would be required to merit a transaction,” HP Inc said in a statement. “We have a record of taking action if there is a better path forward and will continue to act with deliberation, discipline and an eye towards what is in the best interest of all our shareholders.”
Activist fund Blue Harbour Group is reportedly encouraging Madison Square Garden Company to sell a portion of the New York Knicks and New York Rangers in order to boost MSG share performance ahead of the planned spinoff of two teams. “We think Madison Square Garden is on a path to create and unlock significant shareholder value,” said Blue Harbour CEO Clifton Robbins, whose firm owns a 4% stake in MSG. “We think the shares are worth about $400 a share today.” Blue Harbour says the Knicks and Rangers are worth as much as $7.2 billion alone, or roughly 10% higher than the market value of MSG as a whole, and Robbins argues that selling a stake in the team franchises before or in conjunction with their IPO could allow MSG to get a higher multiple for the spinoff business before it goes public.
Roku shares were down as much as -17% early this morning after the streaming device maker reported an adjusted Q3 loss of $0.22 per share on revenue of $260.9 million, beating Wall Street expectations of a loss of $0.28 per share on revenue of $257 million. But investors had been expecting a larger beat, which sent the stock falling. “ROKU broke a string of 2019 beats reporting a mixed 3Q and a frankly surprising mixed 4Q despite its (temporary) leadership position in the distribution of Disney+,” wrote Pivotal Research analyst Jeffrey Wlodarczak. “We are not surprised by the … decline indicate in the stock in the after-market as an undeniably rich 12+X ’20 revenue multiple simply does not leave a lot of room for anything but material beats.” Expedia shares are down nearly -25% at the time of writing after the travel services company posted lower-than-expected Q3 profits. Expedia reposed revenue of $3.56 billion, lower than consensus estimates of $3.58 billion, while non-GAAP profit of $3.38 a share, sharply below the consensus forecast of $3.80 per share. The company said that “the decrease in revenue per ticket is primarily related to the reclassification of certain partner fees to other revenue and a shift in product mix.”
But it wasn’t all bad news on the earnings front this morning. Shares of payment processor Square are up nearly 6% this morning following its earnings beat. Cowen analyst George Mihalos said Square posted “solid” Q3 results and revised 2019 guidance reflects “strong underlying business trends” Mihalos added that Square’s 2020 framework showed a “higher level of investment than we had previously contemplated” and said he expects a “sizable increase in both revenue/margin expansion in 2021. Ralph Lauren shares are up 13% after the apparel maker reported same-store sales growth across all three of its regions. “We’re making solid progress on our plan,” said Ralph Lauren CEO Patrice Louvet. “We are running the play with a higher dose of agility than before.”
Stocks We’re Watching
Prevention Bio (NASDAQ: PRVB): Shares of this clinical stage biopharma stock jumped nearly 24% yesterday after it reported its Q3 earnings results. In its earnings release statement, Prevention Bio CEO Ashleigh Palmer said, “The PRV-031 program continues to build momentum, with positive developments on the regulatory front that strengthen our confidence in the path frontward for the prevention or delay for the onset of clinical the 1 diabetes (TID) in at-risk individuals. Recent Breakthrough Therapy and PRIME designation from the FDA and European Medicines Agency (EMA), respectively, recognize and confirm the unmet need of these individuals and we believe validate the transformative potential of this therapeutic candidate. Based on our interactions with the FDA, we believe that the existing clinical efficacy and safety, as well as non-clinical data, has the potential to support a BLA filing with the FDA in the fourth quarter of next year, and look forward to confirming this expedited regulatory path at a multi-function, Type B meeting with the Agency this quarter.”
Five9 Inc (NASDAQ: FIVN): Five9 shares were up as much as 15% yesterday after the company delivered a Q3 earnings beat and lifted its full-year guidance. The cloud software for customer service centers company said revenues rose 28% in the quarter to $83.8 million, beating estimates of $78.7 million. “In the third quarter, we maintained our strong momentum in strengthening the channel, and mad excellent inroads expanding internationally,” said Five9 CEO Rowan Trollope. “Overall, our balanced approach to growth is succeeding, and we believe the investments we have made in leadership and talent position Five9 for sustained long-term growth.”
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