Tesla Bottoms Popular J.D. Power Vehicles Quality Survey, Shares Down Over 4%

Tesla Inc, an American electric vehicle and clean energy company based in California, came last in the quality ranking of major auto manufacturers survey by J.D. Power. It was the first time Tesla vehicles were profiled by the closely watched survey of customer satisfaction.

Out of thirty-three major automakers brands survey, Tesla was rock bottom with 250 problems per 100 vehicles, way above an industry average of 166 seen this year, according to the annual J.D Power survey, where auto brands like Dodge and Kia topped the list.

Land Rover, a car brand that specializes in four-wheel-drive vehicles, owned by India’s Tata Motors since 2008, scored second-worst performer after Tesla.

“Unlike other manufacturers, Tesla doesn’t grant us permission to survey its owners in 15 states where it is required. However, we were able to collect a large enough sample of surveys from owners in the other 35 states and, from that base, we calculated Tesla’s score,” Doug Betts, president of the automotive division at J.D. Power, said in a statement, CNBC reported.

Following this report, investors’ optimism soared, pushing shares below the $1,000 level. It closed 4.08% lower at $960.85 on Wednesday.

Tesla outlook and target price

Twenty-six analysts forecast the average price in 12 months at $713.40 with a high of $1,250.00 and a low of $275.00. The average price target represents a -25.75% decrease from the last price of $960.85, according to Tipranks. From that, eight analysts rated ‘Buy’, eight rated ‘Hold’ and eleven rated ‘Sell’.

On the other hand, it is good to buy at the current level as 50-day Moving Average and 100-200-day MACD Oscillator signals a strong buying opportunity. Jefferies Financial Group raised the target price to $1,200.00 from $650.00 in a research note released on Thursday.

New Street Research upgraded Tesla from a neutral rating to a buy rating. Wedbush raised the target price to $1,000 from $800. In May, JMP Securities raised the target price to $1,001.00 from $1,020.00.

Analyst comment

“We understand the attraction of the Tesla story, we think investors may have a chance to revisit the stock at a more attractive price. We believe $1,000/share discounts outcomes that, while plausible, may ignore a host of execution/market risks,” said Adam Jonas, an auto analyst at Morgan Stanley.

“We downgraded Tesla from Equal-weight to Underweight on three primary risks: Near term risk to demand/pricing, as well as longer-term risks to the China business and potential competition from other “mega-tech” platforms,” he added.

Dell Technologies Exploring Options of $50 Billion Stake Spinoff in VMware

Dell Technologies Inc, an American multinational technology company headquartered in Texas, is exploring options of a spinoff for its $50 billion stake in VMware Inc to increase its stock value, according to a Wall Street Journal report.

The tech giant has recently sought options either to sell its existing stake or consider other options, including the full buyout of VMware. People familiar with the matter told the WSJ that the companies are working with outside advisers. The share offload will also come a long way in helping Dell to ease its $48 billion debt load.

However, both the companies are unlikely to ink a deal this year as the examinations are at an early stage and Dell may even choose to opt-out and do nothing.

The review is aimed at addressing the difference in Dell’s market value – roughly $36 billion as of June 23 and the 81% stake value in VMware. The gap indicates that Dell’s PC and data storage business is gaining very less or no attention in the market. However, dismantling the companies could add value further, the international daily newspaper based in New York City added.

Immediately after The Wall Street Journal reported on the review, investors’ optimism soared, pushing shares of both companies higher. On Tuesday, Dell shares jumped over 14%, following a 1.5% gain to close at $49.01, while VMware climbed 8% and closed about 1% higher $149.23.

Dell outlook and target price

Eight analysts forecast the average price in 12 months at $48.57 with a high of $55.00 and a low of $42.00. The average price target represents a -0.90% decrease from the last price of $49.01, according to Tipranks. From that, two analysts rated ‘Buy’, six rated ‘Hold’ and none rated ‘Sell’.

It is good to buy at the current level for the short-term as 20-day Moving Average and 20-200-day MACD Oscillator signals a buying opportunity.

On June 1, Citigroup raised price target to $55 from $40. Last month, Deutsche Bank raised price target to $55 from $52, Instinet raised to $55 from $35, Credit Suisse raised to $44 from $41 and Evercore ISI raised target price to $54 from $46.

VMware outlook and target price

Eighteen analysts forecast the average price in 12 months at $170.31 with a high of $200.00 and a low of $140.00. The average price target represents a 14.13% increase from the last price of $149.23, according to Tipranks. From that, twelve analysts rated ‘Buy’, six rated ‘Hold’ and none rated ‘Sell’.

It is good to buy at the current level as 50-day Moving Average and 100-200-day MACD Oscillator signals a buying opportunity. Today, Stifel raised to ‘Buy’ from ‘Hold’; raised target price to $196 from $166. In May, CCFRA raised to ‘Buy’ from ‘Hold’, raising the target price to $180 from $154; BMO to $165 from $152 and Wells Fargo raises to $200 from $190.

Spirit AeroSystems Seek Relief From Lenders, Stock Plunges Over 13%

Shares of Spirit AeroSystems Holdings Inc, the world’s largest first-tier aerostructures manufacturer, plunged over 13% overnight after it announced that it is seeking concessions from lenders on repayment timelines and financial covenants as they worry about a sharp erosion in earnings after Boeing directed to cut production amid coronavirus pandemic.

The coronavirus related travel restrictions and grounding of passenger jets have led to a collapse in air travel demand.

Boeing Company, an American multinational corporation that designs, manufactures, and sells airplanes, rotorcraft, rockets, satellites, telecommunications equipment, and missiles worldwide, said that it has asked its biggest part supplier to substantially lower 737 Max production this year. However, Spirit cautioned that it may have an adverse impact on the financial condition of the company.

The company which manufactures several key pieces of Boeing, including the fuselage of the 737, portions of the 787 fuselage, and the cockpit section of the fuselage of nearly all of its airliners, said that it anticipates to hand over only around 70 shipsets, down from over 120 planned previously.

“Given the substantial production plan reduction, Spirit could breach the financial covenants under its credit agreement in the fourth quarter of 2020 without an amendment or waiver,” the company said in the SEC filing.

The COVID-19 pandemic along with the B737 MAX grounding presents significant challenges to Spirit’s liquidity. The COVID-19 pandemic presents the potential for impairment charges and increased bad debt expense provisions, which could negatively impact the company’s results, the company added.

“Our business depends, in large part, on sales of components for a single aircraft program, the B737 MAX. Further suspensions or reductions in our production rates for the B737 MAX as well as our other programs, as a result of the COVID-19 pandemic, may have a material adverse impact on our business, financial condition, results of operations, and cash flows.”

Spirit AeroSystems outlook

On Tuesday, Spirit AeroSystems shares closed 13.34% down at $23.58. Ten analysts forecast the average price in 12 months at $24.00 with a high of $40.00 and a low of $14.00. The average price target represents a 1.78% increase from the last price of $23.58, according to Tipranks.

However, it is good to buy at the current level for the short-term as 50-day Moving Average and 20-50-day MACD Oscillator signals a buying opportunity. On June 11, Jefferies raised the target price to $30 from $21. However, UBS cuts price target to $19 from $21, Suntrust Robinson cuts to $14 from $16 and Cowen and Company cut to $21 from $25 in May.

Nasdaq Sends Second Delisting Notice to Luckin Coffee, Shares Sink

Luckin Coffee Inc, a Chinese coffee company and coffeehouse chain, announced that the Nasdaq has sent a de-listing notice to the company after it missed to file its annual financial report, dragging down its share about 85% since April.

The Chinese company, which competes with U.S. coffeehouse Starbucks, has received such a notice for the second time. It received the same in May after an investigation exposed a top executive of fabricating and overestimating around 2.2 billion yuan or around 311.5 million dollars of sales in 2019.

Nasdaq, apart from the two bases disclosed last month, cited worries over the counterfeited transactions and the company’s failure to reveal material information. Luckin Coffee said that the delay in filing its annual report has been caused by the coronavirus pandemic, which affected the timely submission of the internal probe result.

An extraordinary general meeting is expected to be held next month to decide whether to expel several directors, including chairman Charles Zhengyao Lu.

Since April, shares of Luckin Coffee Inc have slumped over 80% after the internal audit showed the company failing back to pay interest on a loan mortgaged by millions of shares.

Luckin Coffee outlook

Two analysts forecast the average price in 12 months at $36.60, with a high of $53.20 and a low of $20.00. The median estimate represents a +1,043.75% increase from the last price of $3.20, according to a CNN survey.

Needham & Company LLC reaffirmed a “buy” rating and issued a $40.00 price objective on shares of Luckin Coffee in a research note in April. Zacks Investment Research lowered Luckin Coffee from a “buy” rating to a “hold” rating in a research note published last month.

However, it is good to sell at the current level as all major technical indicators, including 20-day Moving Average and 100-200-day MACD Oscillator signals a selling opportunity.

“The company has more stores in China, than Starbucks. Coffee demand is skyrocketing in the region. Now, if they can stay listed by Nasdaq, and regain some of the lost trust, I believe the Luckin Coffee stock could at least double from current prices. It’ll be a bumpy ride near-term, but patience could pay off well,” wrote Ian Cooper at InvestorPlace.

Google’s Advertising Revenue to Drop 5.3% as Coronavirus Bites

Google LLC, an American multinational technology company that specializes in internet-related services and products, is likely to post an advertising revenue drop of 5.3% as the impact of the coronavirus pandemic hits businesses and ad expenditures worldwide, according to eMarketer.

That fall for the world’s largest online advertising company is largely due to their heavy dependence on international tourism and travel advertisement on Google search, which has been affected by the COVID-19 pandemic. If eMarketer’s forecasts were realized, Google will post its first decline since the global financial crisis of 2008.

All industries have been affected by the coronavirus pandemic worldwide, pushing firms to cut their advertising expenditure as travel restrictions worsened demand.

According to eMarketer, Google’s U.S. ad revenue could have grown by nearly 13% without the recent pandemic. The research firm expects that Google’s competitors will also feel the heat. Facebook Inc, an American social media conglomerate based in Menlo Park, California, is forecast to grow its U.S. advertising revenue by about 5%, way less than 2019’s growth of over 25%.

Problems are not over yet

Over 1,600 employees at Alphabet Inc, the parent company of Google, are petitioning to stop providing Gmail and other services to police departments, a source familiar with the matter told Reuters.

The workers in a petition seen by Reuters expressed disappointment with Google for not joining the “millions who want to defang and defund” police departments. Protests have erupted in the U.S. and around the world over the killing of George Floyd, who died after a police officer knelt on his neck for minutes in Minneapolis last month.

“We should not be in the business of profiting from racist policing,” the Google petition has seen by Reuters noted.

Google stock outlook

Thirty-four analysts forecast the average price in 12 months at $1,493.03 with a high of $1,800.00 and a low of $1,237.00. The average price target represents a 2.92% increase from the last price of $1,450.66, according to Tipranks.

It is good to buy at the current level as all major technical indicators, including 20-day Moving Average and 100-200-day MACD Oscillator signals a buying opportunity. BofA global research raises price objective to $1,610 from $1,420 and Citigroup raises price target to $1600 from $1400.

Citigroup analysts in its May research report noted that “We now model 5% year-on-year growth in 2020, with full-year revenue reaching $169.6 billion, and we expect 20% year-on-year rebound in 2021, with full-year revenue reaching $203.4 billion.”

The bank further cut Alphabet Inc’s revenue estimates for the Q2 2020 to reflect the impact of the health crisis, which has hurt advertising revenues.

Wirecard Confirms Previously Missing 1.9 Billion Euros Do Not Exist

Wirecard, a German payment processor and financial services provider that links retailers, announced that previously missing 1.9 billion euros ($2.1 billion) it had booked in its balance sheet do not exist, tarnishing the image of a fast-growing online payments business in the country.

The German financial startup is in process of negotiations with banks, attempting to sell or close parts of its business to survive a mounting liquidity crunch.

Felix Hufeld, the head of Germany’s financial watchdog sees the event as a “total disaster”, describing it as “a scandal that something like this could happen”, reported Reuters.

Wirecard has appointed investment bank Houlihan Lokey to help it float through. The company’s Chief Executive Markus Braun resigned on Friday, June 19, following denial by two Philippine banks thought to be holding the funds, who said they never had them.

Wirecard’s Statement

The Management Board of Wirecard assesses on the basis of further examination that there is a prevailing likelihood that the bank trust account balances in the amount of 1.9 billion euros ($2.1 billion) do not exist.

The company previously assumed that these trust accounts have been established for the benefit of the company in connection with the so-called Third Party Acquiring business and has reported them as an asset in its financial accounts. The foregoing also causes the company to question the previous assumptions regarding the reliability of the trustee relationships, the company said.

The Management Board further assesses that previous descriptions of the so-called Third Party Acquiring business by the company are not correct. The Company continues to examine, whether, in which manner and to what extent such business has actually been conducted for the benefit of the company.

Wirecard outlook

After the announcement, Wirecard shares plunged massively on Monday, hitting its lowest level in nearly a decade. The Munich-based company has wiped out about $19 billion in market value. At the time of writing, Wirecard share was down 43% to EUR 14.77. It is already down about 90% so far this year.

Moody’s has already slashed Wirecard’s rating to ‘junk’ last week and said, “insufficient or otherwise inadequate information to support the maintenance of the ratings”.

An independent researcher cuts target price to EUR 12.00 from EUR 40.00 and rated ‘Sell’. Equity analyst at Autonomous Research, Josh Levin, slashed Wirecard’s price target to ZERO from EUR 39.

American Airlines Plans to Secure $3.5 Billion in New Financing

American Airlines Group Inc, a publicly-traded airline holding company headquartered in Fort Worth, Texas, announced that it is planning to secure $3.5 billion in new financing to enhance the company’s liquidity position as the coronavirus and related travel restrictions have led to a collapse in air travel demand.

American Airlines Group, the largest in the U.S., proposed a private offering of $1.5 billion aggregate principal amount of secured senior notes due 2025. The notes will be guaranteed on a senior unsecured basis by American Airlines Group Inc.

The company also stated that it intends to enter into a new $500 million Term Loan B Facility due 2024 concurrently with the closing of the offering of the Notes, American Airlines Inc reported.

Debt Terms

According to Bloomberg’s June 19 report, the junk bonds were expected to carry a yield of 11%. However, the company said that the final terms and amounts of the notes and the Term Loan are subject to market and other conditions and may be different from expectations.

The Company intends to grant the underwriters of the offerings a 30-day option to purchase, in whole or in part, up to $112.5 million of additional shares of Common Stock in the Common Stock Offering and a 30-day option to purchase, in whole or in part, up to $112.5 million aggregate principal amount of additional Convertible Notes in the Convertible Notes Offering, in each case solely to cover over-allotments, if any, the company said.

The Company expects to use the net proceeds from the Common Stock Offering and the Convertible Notes Offering for general corporate purposes and to enhance the Company’s liquidity position. The closing of neither the Common Stock Offering nor the Convertible Notes Offering is conditioned upon the closing of the other offering, the airline added.

Goldman Sachs & Company LLC, Citigroup, BofA Securities and J.P. Morgan will act as the joint active book-runners and as representatives of the underwriters for the Common Stock Offering and the Convertible Notes Offering.

Stock Outlook

American Airlines Group closed nearly 3% lower at $16 on Friday. It has plunged about 45% so far this year, still outperforming every peer. Fourteen analysts forecast the average price in 12 months at $13.78 with a high of $27.00 and a low of $7.00.

The average price target represents a -13.88% decrease from the last price of $16.00, according to Tipranks.

It is good to sell at the current level as 150-day Moving Average and 100-200-day MACD Oscillator signals a selling opportunity.

S&P 500 Has Room to Run Higher, Says Raymond James Strategist

U.S. stocks ended the week low, erasing previous gains amid investors’ pessimism as some states saw a second wave of COVID-19 infections. The Dow Jones Industrial Average gained 1.0%, the S&P 500 increased 1.9%, and the NASDAQ jumped 3.7% last week.

Although economic data remained mixed, showing that the recession brought in by the COVID-19 pandemic may be sharp, but will not sustain for long. However, markets recovered to a bullish stance again this week after the Federal Reserve announced stimulus for corporate bonds, leading to tighter spreads, which lent a helping hand to riskier assets.

“On the positive note, we got further confirmation from the Fed that it will remain supportive. Potential COVID-19 treatments, improvement in economic data, and further fiscal stimulus could push the market closer to our upside case scenario of 3,384,” wrote Michael Gibbs, director of equity portfolio and technical strategy at Raymond James.

“We use 3,111 as our base case S&P 500 price target for 2020. With the S&P 500 currently trading in line with this target, we would look to accumulate favored sectors during market volatility. Moreover, the market will need to pass the baton from valuation expansion to re-acceleration of economic and earnings expansion. We believe this could cause some periods of volatility as this transition takes place and would use any dislocation to add to positions.”

Raymond James in its weekly market guide noted that earning per share growth has seen stabilization as earnings season approaches. While it is largely expected to be a very challenging quarter, it is also expected to be the trough in earnings for this recessionary period. S&P 500 earnings are expected to drop 43.2% year-on-year.

While this continues to point to the severity of the economic situation, the recent stability, not just for the second quarter of this year, but also for the third and the fourth quarters, points to some expectation that the worst is likely behind us. However, the worst-case scenario may be averted.

The sectors that have seen the largest earnings revisions since the end of 2019 have been the more cyclical sectors such as Energy, Consumer Discretionary, Industrials, and Financials, Raymond James strategist added.

For a look at all of today’s economic events, check out our economic calendar.

Deutsche Telekom in Talks to Buy Out Shares in T-Mobile From Softbank

Deutsche Telekom, by revenue the largest telecommunications provider in Europe, announced that it is in talks to acquire stakes in its U.S. subsidiary T-Mobile from Japanese multinational conglomerate holding company Softbank.

The European telecommunications leader, Deutsche Telekom, that delivers services to more than 150 million global customers, owns over 40% stake in its U.S. subsidiary T-Mobile but it can vote shares owned by Japanese holding company SoftBank.

That brings its voting stake to 67%, ensuring overall financial control and allow the company to consolidate the financial statement of T-Mobile. Hoettges added that the negotiation is still in its nascent stage will inform when one has reached.

CEO Tim Hoettges’ comment

CEO Tim Hoettges on Friday said that the deal will be under a shareholder agreement and it has the right of first refusal.

According to Reuters, Hoettges, answering a question at Deutsche Telekom’s annual general meeting, said Softbank was seeking to sell down its stake due to “heightened liquidity needs arising from the demanding economic environment”.

He further noted that, under a 4-year shareholder agreement that entered effect when T-Mobile completed its acquisition of Sprint, Deutsche Telekom had the pre-emptive purchase right to ensure it retains control of its U.S. subsidiary, Reuters reported.

CEO also confirmed that the profit outlook was resilient to the coronavirus pandemic.

“Of course, we are also feeling the effects. From bad debts. Forgone roaming revenues and temporary shop closures,” Hoettges said, according to pre-released extracts of his video address to the event which is being held online.

“But we are confident that we will bounce back. Because digitalization is everywhere right now. And this brings us opportunities.”

Stock price outlook

According to Tipranks, three analysts forecast the average price in 12 months at $18.83 with a high of $19.28 and a low of $17.93. The average price target represents a 10.76% increase from the last price of $17.00.

Prudential sells $500 million stake in Jackson to Athene

Prudential, a British multinational life insurance and financial services company, reached a reinsurance deal to sell its $500 million stake in U.S. business Jackson to a leading retirement services company Athene Holding.

Following the announcement, Prudential shares rose 7.8%.

On Thursday, the UK insurer announced that Athene, the life insurer backed by private equity group Apollo, would buy 11.1% of its stake in the FTSE 100 life insurer’s Jackson arm.

Athene, which is buying $500 million in equities just ahead of an initial public offer (IPO) of Jackson, has acknowledged to reinsure Jackson’s $27.6 billion in-force fixed and fixed indexed annuity portfolio under a long-term arrangement, effective from 1 June 2020.

The company in its press release noted that Athene’s investment will take the form of a cash subscription for the issuance of new common equity in Brooke Inc, the holding company containing Prudential’s U.S. businesses.

These include Jackson National Life Insurance Company, a top-two annuity provider with best-in-class products, distribution and operations headquartered in Lansing, Michigan, and PPM America Inc, an asset manager headquartered in Chicago, Illinois.

The combined effects of the investment and reinsurance transactions are expected to increase Jackson’s risk-based capital cover ratio by approximately 80 percentage points.

 

Executives’ comments

Mike Wells, Group Chief Executive of Prudential, said in a statement, “We are delighted to be forging a new relationship with the team at Athene, given their deep expertise in the US annuity sector and long-term commitment to its development. This agreement is a key step forward in meeting our strategic objectives for Jackson.”

Michael Falcon, Chairman and Chief Executive Officer of Jackson, said in a statement, “Today’s transactions with Athene, a leading franchise in the retirement services market, further strengthen our capital position and enhance our ability to grow. We value Athene’s investment in Jackson, which is aligned to our common goal of serving the growing population of American savers transitioning into and through retirement.”

Jim Belardi, CEO of Athene, said in a statement, “We are very pleased to announce this mutually beneficial transaction in coordination with Jackson and its parent, Prudential plc. As top annuity providers focused on serving the US retirement marketplace, we are excited to bring these two leading franchises together through a large-scale reinsurance transaction that includes a new investment in Jackson by Athene.”

Analyst comment and stock outlook

In an interview with Reuters, Nicholas Hyett, equity analyst at Hargreaves Lansdown said “The deal is particularly welcome since there were concerns the current market conditions would make a disposal difficult. The inherently unpredictable nature of Jackson’s large variable annuity portfolio isn’t exactly the reliable income model investors generally expect from a life insurer.”

According to Tipranks, eight analysts forecast the average price in 12 months at $70.20 with a high of $100.00 and a low of $57.00. The average price target represents a 9.62% increase from the last price of $64.04.

Deutsche Bank cuts Prudential’s target price to 1400p from 1480p and Evercore ISI raises price target to 1550p from 1525p.

‘Some Energy Firms Can Thrive Amid Low Prices’, Says Fidelity’s FitzMaurice

Most energy stocks, which naturally move in tandem with the price of oil, have suffered a broad sell-off as crude oil prices plunged on concerns over the lasting economic fallout from the COVID-19 pandemic that reduced global demand.

Brent crude futures, the global benchmark for crude oil, has fallen about 40% so far this year to $40.6 a barrel on Thursday. The Brent crude prices in April fell to its lowest level since June 1999 to $15.98 a barrel but has rebounded since then. That meltdown caused a massive sell-off in energy stocks, with almost entire sector collapsing over 10% on the day.

However, Maurice FitzMaurice, portfolio manager of Fidelity Select Energy Portfolio, said the sector-wide sell-off in early 2020 has lowered prices of energy stocks that he thinks could still do well, the company noted in its research note.

“Exploration & production companies have been hurting because they need higher oil prices to thrive and, in some cases, survive, but that’s not true for all segments of the energy sector,” wrote Fidelity’s FitzMaurice.

“It’s created opportunities to buy shares of companies with resilient business models and financial flexibility for well below my assessment of fair value,” he added.

The portfolio manager further noted that he is focused more on high-quality firms, companies levered to natural-gas markets, including pipeline and terminal operators and businesses with a strong order backlog.

For instance, in March and April, he added notably to the fund’s stakes in both Chevron and ExxonMobil, believing each had the financial flexibility to weather a protracted decline in the energy sector.

According to the Fidelity note, FitzMaurice also increased holdings in Cheniere Energy, which operates seven liquefied natural gas terminals, with two more under construction. About 85% of its business is subject to long-term contracts.

Mr. FitzMaurice saw a strong opportunity for the company in the next decade and possibly beyond—as natural gas takes market share from dirtier fuels.
Lastly, he boosted exposure to independent power producer and energy trader Vistra Energy, partly because a large portion of its volumes in 2020 and 2021 are hedged against price declines, according to FitzMaurice.

“It’s a stockpicker’s environment,” affirms FitzMaurice, “and I’m seeing what I think are good stocks at good prices to hold for the long term.”

Fidelity Select Energy Portfolio held securities mentioned in this article on April 30, 2020. As of June 17, Chevron accounted for 20.43% of the fund’s assets, ExxonMobil 13.95%, Cheniere Energy 5.11%, and Vistra Energy 2.86%.

British Petroleum Raises $12 Billion in Debt With Equity-like Features

British Petroleum, a multinational oil and gas company headquartered in London, announced that it has raised $12 billion in debt with equity-like features, according to an FT report, trying to take advantage of the hot credit markets to infuse fresh capital and consolidate its balance sheet.

The world’s six largest oil and gas company raised 5 billion in dollars, 1.25 billion in pounds and 4.75 billion in euros, locking in its annual interest as low as 3.25% on some of its fresh euro notes.

The deal is the biggest sale ever of this kind of hybrid security, relieving stress from the company’s balance sheet as the principal amount raised on the debt is never repaid.

The capital infusion comes just a day after the oil giant British Petroleum, now commonly known as BP, announced it would reduce the value of its oil and gas assets by $17.5 billion as the coronavirus pandemic brought the global economy to a near-standstill, affecting day-to-day business and demand.

The COVID-19 crisis has also affected energy demand massively, leading to record low crude oil prices in April that pushed the oil company to shift away from fossil fuels.

Analysts’ views:

Citigroup director of debt capital markets, Colm Rainey, in an interview with the FT said, “BP hasn’t issued hybrids in any market and now they’re hitting every market at once. A decently sized and priced hybrid can help the balance sheet when in the eye of the storm.”

Neuberger Berman’s Julian Marks, who manages a fund dedicated to investing in hybrid bonds, in an interview with the FT said, “Clearly, given the difficulties in the industry recently [and] the lower oil price related to COVID-19, this is a really good way of enhancing their credit profile.”

Stock outlook:

Goldman Sachs Group set a price target of GBP 550 ($7.00) in a research note published on Tuesday. BNP Paribas lowered its price target to GBX 430 ($5.47) from GBX 600 ($7.64). Deutsche Bank set it at GBX 300 ($3.82).

Further, JP Morgan Chase and Company set its target price at GBX 425 ($5.41) target price and reaffirmed a buy rating. Credit Suisse Group set it at GBX 350 ($4.45) and rated the stock as ‘Neutral’. DZ Bank AG lowered its target price to GBX 280 ($3.56) from GBX 300 ($3.82).

Alpha Bank in Talks to Sell $11 Billion of Bad Loans to PIMCO, Cerberus

Alpha Bank, the fourth largest bank in Greece, is in talks with PIMCO, Cerberus and at least three other U.S. investment companies to sell its $11 billion worth of bad debts, according to Reuters sources.

The Bank is anticipated to gain around 500 million euros after offloading the portfolio of bad loans. The portfolio consists of loans from retail lenders worth about 7.6 billion euros and debt to medium- and large-sized businesses of 3 billion euros. This attempt is to clean up the Greece Bank’s balance sheet.

The coronavirus pandemic hit banks in Greece at a time when they were restructuring billions of non-performing loans gathered during and after the global financial crisis of 2007-08.

The economy in Greece is also widely expected to contract by 6% this year as the coronavirus pandemic paralyzed economies worldwide and increased interest payment defaults.

If negotiations are successfully concluded, it could revive disposals bad debts in Europe.

According to a Reuters source, Alpha Bank is aiming to sign a deal by end-2020. This deal is expected to gain momentum after the summer and probably ink the deal in the last quarter of this year. Greece’s other largest lender, the National Bank of Greece is also expected to make the same decision by selling its Frontier portfolio.

Last month, Alpha Bank, one of the leading Groups of the financial sector in Greece, posted a net loss of 10.9 million euros in the first quarter of this year on higher provisions for loan impairments and lower revenue compared to the fourth quarter of last year. The bank also reported that its non-performing loans dipped to 30% in its balance sheet from 30.1% seen in the fourth quarter of 2019.

At the time of writing, Alpha Bank shares traded 1.34% higher at 0.70 euro. Still, the stock price is down over 60% so far this year.

According to Tipranks, a few analysts forecast the average price in 12 months at 1.39 with a high of 1.54 and a low of 1.24. The average price target represents a 79.96% increase from the last price of 0.77.

Oracle Revenue Hit by Coronavirus Outbreak, Misses Fiscal Q4 Estimates

Oracle Corporation, an American multinational computer technology company, missed Wall Street’s revenue targets in the fourth-quarter as clients in retail industries and hospitality have either cancelled or postponed purchases in the wake of the coronavirus pandemic.

Database giant, Oracle, reported a net income of $3.11 billion for the last quarter of the fiscal year 2019-20, or 99 cents per share, down from $1.07 per share seen in the same period a year ago. Revenue dipped over 6% to $10.44 billion, missing the analysts’ prediction of $10.61 billion, down from $11.14 billion in the same quarter year ago.

Adjusted earnings were reported at $1.20 per share, again down from $1.16 per share seen a year ago. That is close to Oracle’s lower bound of March prediction of $1.20 to $1.28 per share on revenue of $10.92-$11.36 billion.

“Our overall business did remarkably well considering the pandemic, but our results would have been even better except for customers in the hardest-hit industries that we serve such as hospitality, retail, and transportation postponing some of their purchases,” chief executive officer, Safra Catz said in the statement.

Most of the customers in the business have postponed orders as the COVID-19 brought the global economy to a near-standstill affecting day-to-day business and demand. Some of the companies competing with Oracle have flagged the same ongoing problems, affecting its yearly outlook.

Oracle, which is making an aggressive push for its diversified software solutions and integrated cloud computing services, posted a quarterly sale of $6.85 billion, missing the forecast of $6.98 billion, including business from Oracle Cloud.
The company also reported a massive drop of 22% to $1.96 billion in revenue from on-premise license and cloud license, missing market consensus of $2.11 billion.

It is worth noting the company did not publish a numerical target for fiscal year 2020-21.

“We are now at a point where our growing businesses are now larger than our declining businesses and this favorable shift will inevitably drive revenue acceleration going forward,” said Chief Executive Safra Catz on a conference call with analysts Tuesday, reported by MarketWatch.

After the earnings release, Oracle shares slumped more than 4%, but later recovered all of its losses ad closed +2.5% at $54.59. The stock price has gained about 40% from the March’s low of $39.74 and recouped all of its coronavirus-induced losses, gaining over 3% so far this year.

According to Tipranks, 16 analysts forecast the average price in 12 months at $54.90 with a high of $60.00 and a low of $50.00. The average price target represents a 0.57% increase from the last price of $54.59.

It is good to buy at the current level as 20-day Moving Average and 100-day Moving Average signals a ‘buy’ opportunity; target $56 in the near-term with a stop loss of around $52.

KKR-led Group Invests $650 Million in Vietnam’s Property Developer Vinhomes

A group led by KKR, an American global investment firm, has invested $650 million in Vietnam’s largest property developer Vinhomes JSC, marking the deal one of the biggest private equity investments in south-east Asia.

KKR, a firm that manages investments across multiple asset classes, has said the deal underscores the attractiveness of Vietnam as an investment destination with strong economic growth projected this year when the whole world is battling with the novel coronavirus.

Vietnam has recorded zero COVID-19 death so far despite having a population of around 100 million.

Ashish Shastry, co-head of private equity for KKR Asia Pacific and head of Southeast Asia, said in a press release, “We are truly honored to have the opportunity to invest in a successful, leading business like Vinhomes which is an integral part of the consumer services ecosystem within the Vingroup family.

“This investment exemplifies the type of platinum brands and management teams KKR looks to work within Southeast Asia. Today’s announcement further underscores our strong commitment to Vietnam, where KKR has been active and present for nearly a decade.”

KKR has $207 billion in assets under management.

Singapore state-owned company Temasek Holdings, a partner in the consortium with KKR, has bought a total 6% stake in Vinhomes, a subsidiary of Vingroup.
Cherishing the announcement, Vinhomes shares closed 7% higher on Tuesday at 74,900.00 dong. A similar upside is expected from KKR in the U.S. session as well.

Nguyen Dieu Linh, chairwoman of Vinhomes said in a press release, “We are pleased to welcome KKR as a shareholder in Vinhomes, and believe that the investment demonstrates the confidence of international investors in Vinhomes, Vingroup and the Vietnamese market.

“As a reputable, world-class institution, KKR’s expertise and proven track record of helping companies achieve long-term success will be valuable as we work together to enhance value for Vinhomes shareholders.”

KKR shares closed 3.29% higher at $30.11 on Monday. The stock price has recovered all of its coronavirus -induced losses and gained over 3% so far this year.

According to Tipranks, ten analysts forecast the average price in 12 months at $31.89 with a high of $39.00 and a low of $21.00. The average price target represents a 5.91% increase from the last price of $30.11.

It is good to buy at the current level as 100-day Moving Average and 20-200-day MACD Oscillator signal a strong buy opportunity; target $33 in the near-term with a stop loss of around $27.

Chesapeake Energy Prepares To File For Bankruptcy This Week

Chesapeake Energy Corporation, the second-largest producer of natural gas in the United States, is considering to file for bankruptcy as early as this week, becoming one of the biggest energy-producing company to unravel after the deadly coronavirus outbreak slammed the brakes on the global economy and hurt energy prices this year.

The Oklahoma City-based company, which ranked 309 on the Fortune 500 list last year, failed to make an interest payment of nearly $10 million on debt due on June 15. Another interest payment obligation is due on July 1, according to a report from Reuters.

People familiar with the matter said, Chesapeake, which employs 2,350 people, is nearing a bankruptcy filing and negotiating the financing is in final stages of around $1 billion debtor-in-possession loan.

The company is in constant talks with creditors to roll some of its loans and add it as a part of the company’s bankruptcy loan. That will help bring the total debtor-in-possession to around $2 billion. The company has a massive debt of around $9 billion on its balance sheet.

Last year, Chesapeake, reworked its bank sheet and pushed out the average maturity on some debt, and intended to pivot toward oil production and away from gas.

However, the price war between Russia and Saudi Arabia and the deadly coronavirus outbreak hobbled the global economy and massively affected jet fuel demand as airlines grounded flights amid global travel restrictions to curb the spread of the virus, which altered the company’s original business plan.

According to one of the sources, Chesapeake would attempt to work out a capital infusion from its creditors to be able to successfully emerge from bankruptcy and will file for liquidation latest by Thursday, only after a final talk with its creditors, although talks could delay until next week based on the success of the negotiation.

Last month, Chesapeake alerted that it may seek relief from some or all of their debts as recent events cast significant doubt on the entity’s ability to continue as a going concern.

Post the news, shares of Chesapeake Energy Corporation dipped -1.87% to $18.87 from the previous day. From an all-time high of $13,964 seen during the global financial crisis, Chesapeake’s share price has fallen massively to a two-digit number. The stock price is still down about 90% so far this year.

According to Tipranks, six analysts forecast the average price in 12 months at $16.50 with a high of $50.00 and a low of $1.00. The average price target represents a -12.56% decrease from the last price of $18.87.

The earning per share of Chesapeake is predicted to fall -87.97% by the end of this year and -151.19 by end-2021, according to Raymond James.

It is good to sell at the current level as 100-day Moving Average and 100-200-day MACD Oscillator signals a strong sell opportunity; target 15 in the near-term with a stop loss of around 25.

Metro Bank Confirms talks to Acquire Peer-to-Peer Lender RateSetter

Metro Bank PLC, a UK-based commercial bank, has confirmed it is in exclusive talks to acquire the country’s one of the biggest peer-to-peer lender RateSetter but said discussions regarding the potential deal are at a nascent stage.

Although the value of a potential business acquisition was unclear, it is speculated that Metro Bank would be taking it over at “a knockdown valuation”. If talks progress well, a deal could be struck as early as next month, as first reported by Sky News.

The London-based challenger bank said in a statement, “Metro Bank PLC notes the recent press speculation regarding a potential acquisition of Retail Money Market Ltd and its subsidiaries. The company regularly assesses various opportunities in the market and accordingly confirms that it has entered into a period of exclusivity with RateSetter, but discussions regarding the potential acquisition are at an early stage.”

“There can be no certainty at this stage that a formal agreement will be reached, nor as to the terms of any agreement. A further announcement will be made if and when appropriate,” Metro Bank said.

Metro Bank which was set up in the aftermath of the 2007-08’s global financial crisis, when dispositors’ trust in the banking system was low, was hit last year by a damaging accounting scandal which wiped off 90% of its market value.

From an all-time high of 4,056 seen in March 2018, Metro Bank’s share price has fallen about 95% to 104.19 on Monday. At the time of writing, Metro Bank’s shares were up 0.9% at 105.95 pence each in London. However, the stock price is still down about 50% this year.

John Cronin, an analyst at Goodbody, in an interview with the FT said that an acquisition could have “compelling industrial logic”, depending on the price demanded by Ratesetter’s board, providing a “ready-made platform through which [Metro] could drive potentially quite profitable growth”.

RateSetter launched in 2010, is the UK’s biggest peer-to-peer lending company, providing unsecured personal loans with a fixed or variable rate, car loans for used cars and property development loans.

Despite all the setbacks, some big market players remain interested in the London-based challenger bank. For instance, Goldman Sachs has built an 8.5% voting right attached to shares.

According to MarketBeat, eight Wall Street analysts have set an average price target of 209.63 in the next 12 months with the highest forecast of 690 and the low-price target of 90. Last month Investec also upgraded its investment rating on Metro Bank PLC to ‘buy’ from ‘hold’.

It is good to buy at the current level and target the next resistance of 140 with a stop loss of around 95.