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FTSE falters as Apple suppliers slide, but Arm bucks the trend

Discussion in 'Market News' started by Lily, May 4, 2016.

  1. Lily

    Lily Forum Member

    Aug 29, 2015
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    First fall in US group’s revenues in 13 years unsettles technology companies

    After Apple’s disappointing sales figures overnight, a number of iPhone suppliers have felt some of the backlash.

    Arm, a weak market of late is an exception, recovering from an early fall to 915p to add 7.5p to 935p.

    Amongst the UK suppliers, Imagination is most exposed ( around 50% of revenue from Apple), followed by Laird (17%) and Arm (above 10%)

    We already forecast a 25% year on year decline in Imagination’s graphics royalties in the second half of 2016 (ended April 2016) and believe new management set guidance conservatively when numbers were reduced.

    When we initiated on Worldpay, we highlighted our positive view on the business opportunities, but that we struggled with the valuation. Since it published 2015 full year results, Worldpay has fallen by 12% while its US peers have risen 12%, leaving Worldpay trading in-line with peers, and we believe the risk/reward (+41% upside versus -26% downside) is sufficiently attractive and upgrade to buy from neutral. We believe that Worldpay’s significant exposure to online transactions and investments in new value-added services will help the company to outgrow its peers. We believe the business can deliver around 9% net revenue growth compound annual growth rate and around 17% earnings per share compound annual growth rate (2016 to 2020).

    We’re seeing a slightly softer start to the day’s trade in London although there’s certainly no shortage of earnings news needing to be digested by the market. Barclays is [higher] despite a drop in profits for the quarter, with lower impairment charges and conformation that the company is still on course to meet full year guidance evidently offering investors something to cheer here. Informa is another big gainer on the day, supported off the back of a broker upgrade, while it’s the commodity stocks that are once again languishing. The miners are seeing weakness continue from lacklustre overnight trade in Australia, whilst Standard Chartered is on the back foot once again with yesterday’s bumper gains being chipped away at – the detail showed even the chief executive was cautious about calling the recovery too soon, so there’s still the potential to see further declines in the days and weeks ahead.

    Home Retail has reported slightly better than expected full year results with pretax profits of £94.7m, 2% ahead of consensus at £93m. By division, Argos EBIT of £83.1m was around 5% ahead of consensus expectations owing to better opex while Homebase EBIT of £23.5m missed consensus expectations of £28m. The year-end cash balance was £623m while the underlying financing net cash position, excluding the impact of the Homebase transaction, was broadly flat year on year at around £309m.

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