In this briefing:
- Micron: Things Are Bad, and Getting Worse!
- CATL Could Be Tesla’s New Battery Supplier- Panasonic in Trouble?
- Tencent (700 HK): The Worst Part Online Game Recovered in Q4 Before Restarting License Approval
- Semiconductors Are Breaking Out — Add Exposure/Overweight
- Up Fintech (Tiger Brokers) IPO Trading Update – First Day Volume Was Higher than Futu, Close to QTT
1. Micron: Things Are Bad, and Getting Worse!
Today’s Micron earnings call underscored how difficult the memory business is getting, and the company’s guidance indicated that this is only the start of it. Revenues for 2FQ19 were down 26% Q/Q at $5.8 billion, and the company projects 3QF19 revenues to fall to $4.8 billion.
2. CATL Could Be Tesla’s New Battery Supplier- Panasonic in Trouble?
The news released on the 11th of March, about Tesla Motors (TSLA US) choosing CATL (A) (300750 CH) as battery supplier has focused much attention on the two companies and other battery suppliers. CATL which grabbed Panasonic Corp (6752 JP)’s leading position in the industry last year now seems to be grabbing the latter’s key customer as well. The news circulating states that, CATL could power Tesla’s Model 3 cars which Tesla is planning to start assembling at Tesla’s new factory near Shanghai. Following the release of this supposed deal, the stocks of the two companies moved positively, with CATL surging by almost 6.7% while Tesla rose by almost 2.4% during the day. However, both parties have not commented on this news yet or made any formal announcement regarding such a potential deal. In our Insight, Tesla Drifting Away Could Leave Panasonic Struggling to Gain Traction in China, we mentioned that Tesla was looking to locally source its batteries in China and that CATL could potentially be one such supplier. However, in January this year, it was reported that Tesla had signed a preliminary agreement with China’s Tianjin Lishen to supply batteries for its new Shanghai car factory, making the current news look less believable. Although it seems like the ongoing news about a Tesla-CATL pair up lacks integrity, with CATL sort of denying its intend to work with Tesla (according to an updated news release), the news does look interesting and its effect upon the related companies seems noteworthy.
3. Tencent (700 HK): The Worst Part Online Game Recovered in Q4 Before Restarting License Approval
- The worst business, online game, recovered in 4Q2018, because small competitors died.
- The growth rate of game broadcast also bounced up in 4Q2018, as an important competitor Panda TV went bankrupt.
- In fact, games are only a small part of Tencent and other businesses have been growing strongly.
- The re-organization in October 2018 controlled expenses well.
- The 5-year P/E band suggests that Tencent’s stock price has upside of 26%.
4. Semiconductors Are Breaking Out — Add Exposure/Overweight
Relative strength for the PHLX Semiconductor index began a bottoming process in November of 2018. In mid-December. Since then we have expanded our recommendations substantially and upgraded Technology to overweight in late-January. Despite four months of outperformance, we believe the move for semis is just beginning. In today’s report we highlight our favorite technical setups, including: AMAT, MRVL, AMBA, STM, ON, MU, NVDA, SWKS, MCHP, TXN, AVGO, LRCX, NXPI, ASML, TER, MKSI, ICHR, ACLS, and TSEM.
5. Up Fintech (Tiger Brokers) IPO Trading Update – First Day Volume Was Higher than Futu, Close to QTT
Up Fintech (TIGR US)‘s IPO was priced at US$8/share, above its range of US$5-7/ADS raising at total of US$111m, including the proceeds from the private placement with Interactive Brokers Group, Inc (IBKR US).
In my earlier insights, I looked at the company’s background, past financial performance, scored the deal on our IPO framework and compared it to Futu Holdings Ltd (FHL US):
- Futu Holdings IPO Quick Note – Comparison with Tiger Brokers – Same Market, Different Economics
- Up Fintech (Tiger Brokers) Pre-IPO Quick Note – Much Too Reliant on IBKR
- Up Fintech (Tiger Brokers) IPO Quick Take – It’s Not like Futu, Won’t Perform like It Either
In this insight, I will re-visit some of the deal dynamics, comment on share price drivers and provide a table with implied valuations.
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