State Auto Financial Corp (STFC) Files 10-K for the Fiscal Year Ended on December 31, 2018

State Auto Financial Corp (NASDAQ:STFC) files its latest 10-K with SEC for the fiscal year ended on December 31, 2018. State Auto Financial Corp is a property and casualty insurance holding company. It is engaged in writing both personal and business and specialty insurance. State Auto Financial Corp has a market cap of $1.48 billion; its shares were traded at around $34.27 with a P/E ratio of 122.39 and P/S ratio of 1.18. The dividend yield of State Auto Financial Corp stocks is 1.15%.

For the last quarter State Auto Financial Corp reported a revenue of $263.6 million, compared with the revenue of $363.8 million during the same period a year ago. For the latest fiscal year the company reported a revenue of $1.3 billion, a decrease of 10.4% from the previous year. For the last five years State Auto Financial Corp had an average revenue growth rate of 3.2% a year.

The reported diluted earnings per share was 29 cents for the year, an increase of -216% from previous year. The profitability rank of the company is 3 (out of 10).

At the end of the fiscal year, State Auto Financial Corp has the cash and cash equivalents of $59.8 million, compared with $91.5 million in the previous year. The long term debt was $122.0 million, compared with $122.1 million in the previous year. State Auto Financial Corp has a financial strength rank of 5 (out of 10).

At the current stock price of $34.27, State Auto Financial Corp is traded at 66% premium to its historical median P/S valuation band of $20.64. The P/S ratio of the stock is 1.18, while the historical median P/S ratio is 0.70. The stock gained 24.85% during the past 12 months.

Directors and Officers Recent Trades:

Senior Vice President Melissa A Centers sold 1,095 shares of STFC stock on 02/19/2019 at the average price of $34.81. The price of the stock has decreased by 1.55% since.

For the complete 20-year historical financial data of STFC, click here.

Should Social Security's Earnings Test Get the Ax?

Social Security offers a valuable financial safety net to older Americans, with an emphasis on helping retirees replace the income they used to get from work. Yet there's no requirement to stop working before you collect Social Security, and increasingly, people have started claiming Social Security at the earliest possible opportunity even if they continue to stay in their jobs.

However, there is a catch to claiming Social Security while you're still working. The Social Security earnings test applies to those who haven't yet reached full retirement age and claim early retiree benefits while still working. Yet as one policymaker recently pointed out, the earnings test has some shortcomings of its own. That makes eliminating the earnings test worth considering -- even if such a move would have some related consequences.

Image source: Getty Images.

A new controversy about Social Security

Alicia Munnell heads the Center for Retirement Research at Boston College, and she recently wrote about the impact of Social Security's earnings test. As Munnell sees it, the best way to ensure that older Americans have the income they need is to take away any obstacles to their choosing to work as long as possible. The longer people stay in the workforce, the easier it is for them to sustain themselves financially once they do retire.

The earnings test takes away Social Security benefits under certain circumstances. Each year, new Social Security earnings limits come into effect that define the maximum that a person who's younger than full retirement age can earn before forfeiting a portion of his or her Social Security benefits. In particular, the following rules apply for 2019:

If you're younger than full retirement age throughout 2019, then maximum earnings for 2019 are $17,640. Above that, you'll lose $1 in annual Social Security benefits for every additional $2 you earn. If you start taking benefits during 2019, then the monthly limit is $1,470 for the period of time you're receiving Social Security. Those who reach full retirement age during the year have higher limits and less onerous forfeiture provisions. For 2019, you'll lose $1 in annual benefits for every $3 you earn above the annual limit of $46,920. But once you reach full retirement age, any earnings after that date don't count toward the total. If you intend to retire in the middle of the year, another rule applies. Even if your earnings while you were still working were so high that they'd take away your benefits for the full year, you can still claim monthly checks for the months that you aren't working.

If that seems complicated, that's because it is. Munnell argues that many people don't understand the earnings test, and that acts to deter people from working while on Social Security -- and from claiming Social Security while they're still working.

So would getting rid of the earnings test be a good thing?

It's that last point that leaves Munnell in a dilemma. On one hand, if getting rid of the earnings test would keep more people working longer, it would be a net positive for the financial condition of older Americans. But if eliminating the earnings test leads more people to claim Social Security before they retire, then it would potentially lead more people to claim as early as possible.

Claiming early has an unrelated impact on financial security by reducing the size of benefit payments. That in turn affects how much surviving spouses receive after the death of a working spouse. Because surviving spouses are often in the most precarious financial condition among retirees, anything that cuts those payments could have a negative effect that outweighs any positives from longer workforce participation.

Nevertheless, there's past evidence that eliminating the earnings test could boost employment levels among older Americans. It used to be that the earnings test applied to all recipients, but in 2000, it was removed for those who had reached full retirement age. The impact of that move included a 3-percentage-point boost to labor force participation and a 15% rise in earnings.

The question of what to do with the Social Security earnings test is more complicated than it might seem at first glance. Yet if the top priority in trying to help older Americans be as financially stable as possible in their golden years, taking away any perceived impediment to work -- whether or not it's really intended to be an obstacle -- could be worth any related downsides.

Live the life you want

Deciding when to stop working can have an impact on your Social Security, but you shouldn't let potential reductions in benefits keep you from making the right life decision. By being aware of the multiple options you have to avoid losing your benefits, you'll be able to manage your career exactly the way you want.

XPO's Growth Engine Sputters

Onetime highflier XPO Logistics (NYSE:XPO) has had a difficult run of late, as a third-quarter miss followed by a blistering criticism from short-seller Spruce Point Capital caused XPO shares to lose more than half of their value since Oct. 1.

The company's fourth-quarter results added to those woes, with XPO managing to find new ways to underperform separate from the issues that plagued it earlier in the year.

Given the run of poor results, it's fair to ask whether the best is over for this stock, which despite the recent declines has still doubled over the past three years and is up more than 1,000% since 2011. To try to determine what current, and potential, XPO investors should do today, here's a look at the recent results and what management has to say about the future.

XPO and S&P 500 data by YCharts.

A big customer departs

XPO posted fourth-quarter adjusted earnings of $0.72 per share on revenue of $4.39 billion, falling short of the consensus estimate of $0.84 per share in earnings on revenue of $4.55 billion. Organic revenue was up 9.3% from a year prior, which was down 120 basis points from third-quarter results but still quite healthy for a transport company.

Management blamed the shortfall on challenges in France and the United Kingdom, and on a significant drawdown by its largest customer. That large customer, who was not named but is believed to be Amazon.com, has apparently decided to move much of the business it was doing with XPO in-house.

XPO management said that it would likely take the next few quarters to redeploy the significant capacity and resources that were previously devoted to that customer.

Image source: XPO Logistics.

XPO also said that it expects to generate $1.65 billion to $1.725 billion in earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2019, which would be an increase of between 6% and 10% from 2018, but that revised guidance was down from previous expectations for 12% to 15% EBITDA growth. It also said it expects $525 million to $625 million in free cash flow for the year, down from previous guidance of $650 million.

Notably, this longtime mergers and acquisitions machine has seemingly reassessed its strategy. XPO in December, following the release of the Spruce Point report, announced a $1 billion stock buyback. In the fourth-quarter earnings release, XPO said that buyback program has already been completed, announcing a new $1.5 billion authorization to be funded with cash and debt.

CEO Brad Jacobs on a call with investors following the earnings release said buybacks are the priority for now:

We love M&A [mergers and acquisitions]. We have a very good track record of creating significant shareholder value through M&A. But today, even though we spent a lot of time, we're getting very close to concluding a long search for a good M&A candidate, the best M&A target is acquiring our own stock. And that's where we're going to deploy our resources for the foreseeable future, not on external M&A.

The logistics provider for everyone else

Given the damage done by one large customer, XPO spent a lot of time on a call discussing customer concentration. In 2018, the company's top five customers contributed about 11% of total revenue, with that one large customer accounting for nearly 5% of the total. With that customer now cutting about two-thirds of its business with XPO, management expects its top five customers to account for about 8% of revenue in 2019.

"Customer concentration will be less. But when you lose your -- when you lose the majority of your top customer's business, that hurts," CEO Brad Jacobs said on the call. "Nothing you can do -- there's nothing positive. It's only negative."

XPO is one of the most diverse companies in the transport sector in terms of its exposure to different businesses, but the concentration of large customers was an unwelcome surprise. Investors can take some solace in seeing that number trend downward and knowing that few if any e-commerce retailers have the desire and the resources to follow Amazon's lead and take logistics in-house.

Image source: XPO Logistics.

In fact, to my thinking, Amazon is a key part of the bull argument for XPO. As the e-commerce giant moves its logistics operation in-house, it's forcing its online and brick-and-mortar retailers to become more efficient operators.

XPO offers a one-stop-shop for a wide range of shipping, logistics, warehousing, and last-mile services at a scale that few retailers other than Amazon can offer on their own. The company is well-positioned to be the logistics Amazon-alternative for a wide range of retailers looking to streamline operations and bring down prices so they can be an Amazon-alternative to customers.

Patience required

It's worth noting that while Spruce Point did include worries about growth and the health of the European economy in its list of concerns, the fund's primary issues were centered around alleged financial irregularities and what it described as dubious accounting. So far, those concerns have proven unfounded.

XPO has certainly hit a speed bump, but there is nothing to suggest the underlying business is on shaky ground. Despite the loss of a major customer and its exposure to Europe the company still expects upwards of $600 million in free cash flow in 2019. And while its projected revenue growth of 3% to 5% is well below the double-figures organic revenue growth in 2018, the business is still expected to grow its top and bottom line in 2019.

Last summer, before the trouble hit, XPO was trading at more than 30 times earnings, a valuation that can only be justified by sustainable blockbuster growth. That premium has evaporated, and XPO now trades at a more reasonable 18.7 times earnings, in line with logistics rival C.H. Robinson Worldwide's valuation of 19.3 times earnings and United Parcel Service's multiple of 20.

XPO, UPS, CHRW PE Ratio (TTM) data by YCharts.

As painful as that reset has been for shareholders, the market has arguably done its job and adjusted XPO's valuation based on the company's stumbles and management's shift away from M&A. Management in the quarters to come needs to show that the company can regain its footing and avoid any additional unwelcome surprises. With that in mind, 2019 appears likely to be at best a forgettable year, but if things go well, it should lay the groundwork for XPO to again focus on growth in 2020.

As an existing XPO shareholder who believes in Jacobs and the management team, I'm holding on. But even after the share-price drop, I wouldn't urge new investors to rush in. XPO has made it clear the reset will take time. It's understandable that a potential investor might want to wait another quarter or two to see how the recovery is going.

Best Performing Stocks To Buy For 2019

tags:HSC,LBAI,PNNT,ESIO,

Boeing Co. (NYSE: BA) continues to hold on to its top ranking as the best-performing stock for the year to date among the 30 equities that comprise the Dow Jones Industrial Average (DJIA). Even after Friday’s 666-point drop in the Dow, Boeing stock ended the week with a share price gain of nearly 1.7% and a year-to-date gain of about 17.2%.

The second-best performer among the Dow 30 so far this year is Travelers Companies Inc. (NYSE: TRV), up about 9.1%, followed by Nike Inc. (NYSE: NKE) with about a 7.5% gain. Microsoft Corp. (NASDAQ: MSFT) is up about 7.3%, and Cisco Systems Inc. (NASDAQ: CSCO) is up about 6.9%.

The Dow did not post an all-time high last week. In fact, the index posted a loss on every day last week except Thursday, when it managed a gain of about 0.4%. Overall, the index dropped 4% last week.

Boeing reported fourth-quarter and full-year 2017 results on Thursday, and the stock added more than 6% by the end of the trading day. Leaving out a tax benefit of $1.74 per share, the company still beat earnings per share and revenue expectations. Operating cash flow of $13.3 billion was well above the company’s estimated range of $12.0 billion to $12.5 billion.

Best Performing Stocks To Buy For 2019: Harsco Corporation(HSC)

Advisors' Opinion:

• [By Joseph Griffin]

  HashCoin (CURRENCY:HSC) traded up 2.5% against the dollar during the 1-day period ending at 17:00 PM ET on July 17th. One HashCoin token can now be purchased for about $0.0025 or 0.00000034 BTC on exchanges including Gate.io and BCEX. HashCoin has a market cap of $0.00 and $2.52 million worth of HashCoin was traded on exchanges in the last day. During the last week, HashCoin has traded 3.7% higher against the dollar.

• [By Stephan Byrd]

  Harsco Co. (NYSE:HSC) has earned an average recommendation of “Buy” from the eight ratings firms that are presently covering the company, Marketbeat.com reports. One equities research analyst has rated the stock with a hold recommendation and six have assigned a buy recommendation to the company. The average 12 month target price among analysts that have updated their coverage on the stock in the last year is $29.50.

• [By Joseph Griffin]

  Intrust Bank NA acquired a new position in shares of Harsco Co. (NYSE:HSC) in the second quarter, according to its most recent Form 13F filing with the Securities and Exchange Commission. The firm acquired 10,293 shares of the industrial products company’s stock, valued at approximately $227,000.

• [By Ethan Ryder]

  Harsco (NYSE:HSC) – Research analysts at KeyCorp lifted their Q2 2018 earnings estimates for Harsco in a report issued on Wednesday, May 2nd. KeyCorp analyst J. Hammond now expects that the industrial products company will post earnings per share of $0.35 for the quarter, up from their prior forecast of $0.31. KeyCorp has a “Overweight” rating and a $27.00 price objective on the stock. KeyCorp also issued estimates for Harsco’s Q3 2018 earnings at $0.36 EPS, Q4 2018 earnings at $0.27 EPS, FY2018 earnings at $1.20 EPS and FY2019 earnings at $1.35 EPS.

Best Performing Stocks To Buy For 2019: Lakeland Bancorp Inc.(LBAI)

Advisors' Opinion:

• [By Joseph Griffin]

  Lakeland Bancorp (NASDAQ:LBAI) was upgraded by research analysts at BidaskClub from a “strong sell” rating to a “sell” rating in a research note issued to investors on Wednesday.

• [By Shane Hupp]

  Lakeland Bancorp, Inc. (NASDAQ:LBAI) – Equities research analysts at FIG Partners lifted their Q4 2020 earnings per share (EPS) estimates for Lakeland Bancorp in a report released on Tuesday, January 29th. FIG Partners analyst D. Bishop now forecasts that the financial services provider will earn $0.40 per share for the quarter, up from their prior forecast of $0.39. FIG Partners has a “Outperform” rating and a $20.00 price target on the stock.

Best Performing Stocks To Buy For 2019: PennantPark Investment Corporation(PNNT)

Advisors' Opinion:

• [By Ethan Ryder]

  Live Ventures (NASDAQ: LIVE) and PennantPark Investment (NASDAQ:PNNT) are both small-cap computer and technology companies, but which is the better business? We will compare the two companies based on the strength of their valuation, dividends, analyst recommendations, risk, earnings, profitability and institutional ownership.

• [By Ethan Ryder]

  Shares of PennantPark Investment Corp. (NASDAQ:PNNT) have earned an average rating of “Hold” from the seven ratings firms that are covering the firm, MarketBeat Ratings reports. Five research analysts have rated the stock with a hold recommendation and one has issued a buy recommendation on the company. The average 12 month price target among analysts that have issued a report on the stock in the last year is $8.00.

• [By Ethan Ryder]

  Get a free copy of the Zacks research report on PennantPark Investment (PNNT)

  For more information about research offerings from Zacks Investment Research, visit Zacks.com

• [By Shane Hupp]

  Garrison Capital (NASDAQ: GARS) and PennantPark Investment (NASDAQ:PNNT) are both small-cap finance companies, but which is the better stock? We will contrast the two businesses based on the strength of their risk, analyst recommendations, earnings, valuation, institutional ownership, dividends and profitability.

• [By Motley Fool Transcribers]

  PennantPark Investment Corporation  (NASDAQ:PNNT)Q1 2019 Earnings Conference CallFeb. 08, 2019, 10:00 a.m. ET

  Contents: Prepared Remarks Questions and Answers Call Participants Prepared Remarks:

  Operator

• [By Logan Wallace]

  BidaskClub upgraded shares of PennantPark Investment (NASDAQ:PNNT) from a sell rating to a hold rating in a research report report published on Thursday morning.

Best Performing Stocks To Buy For 2019: Electro Scientific Industries, Inc.(ESIO)

Advisors' Opinion:

• [By Shane Hupp]

  Electro Scientific Industries (NASDAQ: ESIO) and FuelCell Energy (NASDAQ:FCEL) are both small-cap computer and technology companies, but which is the better stock? We will compare the two businesses based on the strength of their analyst recommendations, valuation, institutional ownership, risk, profitability, dividends and earnings.

• [By Max Byerly]

  Media coverage about Electro Scientific Industries (NASDAQ:ESIO) has been trending positive on Sunday, according to Accern Sentiment. The research firm identifies negative and positive media coverage by analyzing more than 20 million blog and news sources. Accern ranks coverage of companies on a scale of -1 to 1, with scores closest to one being the most favorable. Electro Scientific Industries earned a media sentiment score of 0.27 on Accern’s scale. Accern also gave news headlines about the semiconductor company an impact score of 48.1496069802222 out of 100, meaning that recent media coverage is somewhat unlikely to have an effect on the company’s share price in the next several days.

• [By Ethan Ryder]

  ValuEngine downgraded shares of Electro Scientific Industries (NASDAQ:ESIO) from a buy rating to a hold rating in a report issued on Friday morning.

Impinj (PI) Q4 2018 Earnings Conference Call Transcript

Image source: The Motley Fool.

Impinj (NASDAQ:PI) Q4 2018 Earnings Conference CallFeb. 20, 2019 5:00 p.m. ET

Contents: Prepared Remarks Questions and Answers Call Participants Prepared Remarks:

Operator

Good afternoon, and welcome to Impinj's fourth-quarter and full-year 2018 earnings conference call. [Operator instructions] Please note this event is being recorded. I would now like to turn the conference over to Chelsea Lish, investor relations for Impinj. Please go ahead.

Chelsea Lish -- Investor Relations

Thank you, operator. Thank you all for joining us to discuss Impinj's fourth-quarter and year-end 2018 results. On today's call, Chris Diorio, Impinj's co-founder and CEO, will provide a brief overview of our market opportunity and performance. Eric Brodersen, Impinj's president, COO and principal financial officer, will follow with a detailed review of our fourth-quarter and year-end 2018 financial results and first-quarter 2019 outlook.

We will then open the call for questions. Impinj's CFO consultant, Linda Breard, and Impinj's executive vice president of sales and marketing, Jeff Dossett, are also on the call and will join Chris and Eric in the Q&A session. Management's prepared remarks, along with quarterly financial data for the last eight quarters, are available on the company's website. Before we start, note that we will make certain statements during this call that are not historical facts, including those regarding our plans, objectives and expected performance.

To the extent we make such statements, they are considered forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Any such forward-looking statements represent our outlook only as of the date of this conference call. While we believe any forward-looking statements we make are reasonable, our actual results could differ materially because any statements based on current expectations are subject to risks and uncertainties. Please see the risk factors sections in the annual and quarterly reports we file with the SEC for additional information about these risks.

We do not undertake and expressly disclaim any obligation to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Also during today's call, all financial numbers we discuss, except for revenue or where we explicitly state otherwise, are non-GAAP financial measures. Balance sheet and cash flow metrics are on a GAAP basis. Before moving to the financial results, I'd like to announce the company will attend the Morgan Stanley Technology, Media & Telecom Conference in San Francisco in February 26th -- excuse me, and the annual ROTH conference in Dana Point on March 19.

We hope to see many of you there. I will now turn the call to Chris Diorio, Impinj's co-founder and chief executive officer. Chris?

Chris Diorio -- Co-Founder and Chief Executive Officer

Thank you, Chelsea. Thank you all for joining the call. We delivered a strong close to 2018 with record fourth-quarter revenue. We beat the high end of our guidance on revenue, adjusted EBITDA and non-GAAP earnings per share.

We also increased our cash, cash equivalents and short-term investments on a sequential basis by $1.4 million. On a year-over-year basis, backlog grew, inventory declined, and we grew and recast our leadership team. I am pleased with how we ended the year and feel we have strong momentum heading into 2019. fourth-quarter 2018 endpoint IC revenue was in line with our expectations, returning to growth on a year-over-year basis.

On a sequential basis, an 8% decline in endpoint IC revenue reflects normal and expected seasonality. We maintained steady supply and lead times while reducing our internal inventory, marking yet another quarter of solid execution. We also shipped our 30 billionth endpoint IC in the quarter. Reflecting on that 30 billion number for a moment, while it is already large relative to other Internet technologies, recall our vision is to connect and give digital life to trillions of items per year.

We are at the very beginning of our journey, leading a market whose opportunity is huge and whose secular trend has been and was again in 2018 strong growth. fourth-quarter systems revenue exceeded our expectations, delivering another quarterly record highlighted by strong reader IC and gateway sales. Our reader IC opportunities are broad-based, and reader IC see revenue showed year-over-year strength but declined sequentially due to supply fulfilling backlog in the third quarter. Our gateway opportunities are significantly, although not exclusively, in the supply chain, driven by solutions we enable for shipment verification.

We are energized by our system's success in the fourth quarter and remain keenly focused on execution. Turning to the market. Retail adoption continues to grow with new retailers and brands announcing deployments and existing retailers and brands now piloting or deploying solutions beyond inventory visibility such as frictionless self-checkout and Rain-based loss prevention. We even have visionary retailers publicly asking for technology advancements like Decathlon did at the most recent Rain Alliance meeting in Xiamen, China, where they presented a wish list that included embedded tagging solutions and Rain readers in consumer devices.

Beyond retail, the board of governors of IATA, the International Air Transport Association, at their annual meeting in December, announced they have completed their first step toward a global plan to add Rain inlays to all baggage tags. And we see significant supply chain opportunities tracking pallets and cases as they move into or out of a dock door or facility. Impinj's technology and solutions cost effectively address this use case, providing business-critical data that verifies shipments and enable automatic contract fulfillment. In 2019, we will build on our traction in these verticals and others as we and our partners deliver solutions built on our platform.

Last month, we exhibited at the National Retail Federation show in New York City, the fourth time in its many years. Our progress every year we attend continues to amaze me. In 2016, our first year, most retailers were unaware of us, our platform or how we connected items. Some returned to our booth multiple times to see our demos over and over.

The conversations back then centered on technology, how our platform worked and how improving inventory visibility reduce costs and increase sales. By contrast, conversations this year focused on enhancing customer experiences by expanding proven inventory visibility programs to frictionless self-checkout and Rain-based loss prevention. Our booth showcased these solutions as well as smart fitting rooms, enhanced supply chain visibility, loss analytics and robotic inventory taking. We also showed a brand protection demonstration that first registered items to an Impinj cloud service and subsequently verified the item's authenticity, our first step in enabling item-based cloud services with our platform.

We see ever-growing opportunities in retail and are focused on playing an ever-increasing role in retail innovation, building solutions that leverage our unique position as the only company with a platform spanning endpoint ICs to services. In another exciting development, I'm pleased to welcome Hussein Mecklai as Impinj's executive vice president of engineering. Hussein has more than 20 years of experience leading engineering organizations including most recently as vice president and general manager of the product architecture group at Intel and prior to Intel, as engineering vice president of the wireless division at Infineon. He has extensive experience in systems, silicon, radio and software engineering as well as in scaling businesses and turning those businesses into profit centers.

He previously received a national award for promoting diversity from the Society of Women Engineers for his commitment to recruiting, retaining and progressing women in technical roles. We warmly welcome Hussein to our team and look forward to leveraging his talent and experience in transforming organizations, growing people, building teams, delivering our platform and helping us achieve rapid, sustainable growth. In summary, Impinj delivered another quarter in which we outperformed our financial targets and delivered on our vision. We saw continued Rain industry growth with strong endpoint IC demand and significant platform opportunities in the supply chain.

We enter 2019 confident, excited and passionate about our opportunity to connect, locate and authenticate trillions of items -- of everyday items. I would like to thank each and every Impinj employee for their dedication, commitment to our principles and focus on truly enabling the internet of things. I will now turn the call over to Eric for our detailed financial review and first-quarter outlook. Eric?

Eric Brodersen -- President, Chief Operating Officer and Principal Financial Officer

Thanks, Chris. As a reminder, except for revenue or unless explicitly stated otherwise, today's statement of operations is on a non-GAAP basis. All balance sheet and cash flow metrics are on a GAAP basis. A reconciliation between our non-GAAP and GAAP measures, as well as how we define our non-GAAP measures, is included on our earnings release available on our website.

Recall we took a $3.2 million accounting reserve in the fourth quarter of 2017 related to a onetime product exchange, for which we recognized $3.2 million in revenue in the first quarter of 2018. Please see the exhibit appended to the written version of this earnings script available on our Investor Relations website for revenue comparisons related to this exchange for fourth-quarter and full-year 2017 and 2018. fourth-quarter 2018 GAAP revenue was $34.6 million, compared with 34.4 million in third-quarter 2018 and 26.9 million in fourth-quarter 2017, reflecting 1% sequential and 29% year-over-year growth. Gateway sales were the primary driver of the fourth-quarter overperformance versus our guidance.

Endpoint IC revenue declined sequentially and grew 25% year over year. Systems revenue grew 20% sequentially and 37% year over year. fourth-quarter revenue mix was 63% endpoint ICs and 37% systems. We are pleased with our second straight quarter of record revenue, year-over-year endpoint IC growth and system strength.

2018 GAAP revenue was $122.6 million, compared with 125.3 million in 2017. Revenue mix was 69% endpoint ICs and 31% systems, compared with 73% and 27%, respectively, in 2017. Endpoint IC revenue declined 7% year over year, primarily due to an ASP decrease on similar unit volumes, the latter negatively impacted by the channel inventory correction we discussed on prior calls. 2018 systems revenue grew 12% year over year due to strength in our reader ICs and gateways.

Despite the year-over-year revenue decline, we are pleased with our results considering the challenging start to the year, and we exit 2018 with strength in both our endpoint IC and systems businesses. fourth-quarter gross margin was 49%, compared with 50% in the prior quarter and 50.5% in fourth-quarter 2017. The sequential decline was due primarily to the mix change within our systems business and higher customer attainment of volume incentives than in the prior quarter, partially offset by lower excess and obsolete charges. We view customer attainment of volume incentives as an indicator of the strength of our business.

The year-over-year decline was due primarily to higher manufacturing overhead expenses, which include excess and obsolescence charges. Total fourth-quarter operating expense was $18.7 million, compared with 18.1 million in the prior quarter and 19.3 million in fourth-quarter 2017. Research and development expense was $7.5 million. Sales and marketing expense was 6.8 million.

G&A expense was 4.4 million. Adjusted EBITDA was a loss of $1.7 million, compared with a loss of $900,000 in the prior quarter and a loss of 5.8 million in fourth-quarter 2017. The 4.1 million year-over-year improvement in adjusted EBITDA reflects, in my view, our determined focus on business execution and cost containment. GAAP net loss for the fourth quarter was $6 million, and for the year, was 35.2 million.

Non-GAAP net loss for the fourth quarter was $2 million, or $0.09 per share, using a weighted average diluted share count of 21.5 million shares. Non-GAAP net loss for the full year was $14.5 million, or $0.68 per share, using a weighted average diluted share count of 21.3 million shares. Turning to the balance sheet. We ended the fourth quarter with cash, cash equivalents and short-term investments of $56.1 million compared with 54.7 million in the prior quarter and 58.1 million in fourth-quarter 2017.

Our accounts receivable balance was 18.5 million, down from the prior quarter and from fourth-quarter 2017. Our total end of 2018 federal NOL was $159.5 million. Inventory totaled $44.7 million, down 4.5 million over the prior quarter and 2.4 million from the prior year. We expect total inventory to continue to decline through 2019.

Before I transition to first-quarter guidance, I would like to remind you the seasonality trends we typically see in our business. In the fourth quarter, lower endpoint IC volumes are partially offset by stronger system sales. In the first-quarter, annual endpoint IC pricing negotiations typically impact both revenue and gross margin, while system sales are seasonally lower. Also in the first-quarter, expenses tend to increase over the prior quarter.

Although these are typical trends, any number of factors can mask that seasonality in any given year, including private-based systems revenue, where size, timing and mix all play an important role in our quarterly results. Turning to our outlook. We expect first-quarter 2019 revenue in the range of 30 to $32 million, an especially strong 24% year-over-year improvement at the midpoint of the range considering the $3.2 million reserve-related revenue we recognized in the first-quarter 2018. The sequential decline is in line with our seasonality expectations.

We expect adjusted EBITDA to be a net loss in the range of 5.9 to $4.4 million. On the bottom line, we expect a non-GAAP loss of between 6.2 and $4.7 million, and non-GAAP loss per share between $0.29 and $0.22 per share based on a weighted average diluted share count of 21.5 million to 21.6 million shares. Throughout 2018, we were intensely focused on execution and regaining momentum in this gigantic market opportunity. As we exit 2018, with two consecutive quarters of record revenue just behind us, we feel strong momentum.

I want to thank our team, customers, our suppliers and our investors for your ongoing support as we drive our long-term vision of digital life for everyday items. I will now turn the call to the operator to open the question-and-answer session. 

Questions and Answers:

Operator

[Operator instructions] The first question comes from Troy Jensen with Piper. Please go ahead.

Troy Jensen -- Piper Jaffray -- Analyst

Hey, gentlemen first off, congrats on a solid end of the year.

Chris Diorio -- Co-Founder and Chief Executive Officer

Thank you.

Eric Brodersen -- President, Chief Operating Officer and Principal Financial Officer

Thank you.

Troy Jensen -- Piper Jaffray -- Analyst

So maybe first for Eric, just a question on the gross margins. You discussed some of the mix stuff pretty well in the prepared remarks. But did ASP erosion play at all into the sequential decline?

Eric Brodersen -- President, Chief Operating Officer and Principal Financial Officer

From a gross margin standpoint and ASP erosion in our sequential decline in Q4, that's not part of our gross margin impact on that period. Linda, do you want to add to that?

Linda Breard -- Executive Vice President of Sales and Marketing

Try to just add to that. It really is primarily related to mix within our systems business, and then the other items that sequentially was impactful was our volume incentives, which is a good thing with volumes going up with our customers. So those are the primary drivers versus ASP.

Troy Jensen -- Piper Jaffray -- Analyst

OK, perfect, Linda. How about for either one of you or anyone in the room, just thoughts on tag IC growth in 2019. Maybe what was it in 2018? And what do you think the growth rate of tags will be here in 2019?

Chris Diorio -- Co-Founder and Chief Executive Officer

Troy, so we don't have the numbers yet out from the industry analysts yet or from the Rain Alliance. So I don't think we're prepared to speculate. The Rain Alliance, as you know, collects data from all the key suppliers in terms of the endpoint IC volumes, and hopefully, those data will be published soon. We will note that historically, the trends have been growing at somewhere in the range of 25% year-over-year growth going back the past eight or nine years, but we're not making any predictions for 2019.

Troy Jensen -- Piper Jaffray -- Analyst

OK, that's fair. And then how about just to that subject line here. What do you think the ASP erosion is on tags? So we can kind of back into it, we could expect to see tag IC revenue growth.

Eric Brodersen -- President, Chief Operating Officer and Principal Financial Officer

Troy, as you're familiar, this is the time period where we complete our annualized pricing negotiations -- pricing and supply negotiations with our partners. Those concluded in line with our expectations. But from -- really for competitive reasons, we're going to remain silent on the outcomes of those negotiations.

Troy Jensen -- Piper Jaffray -- Analyst

OK, understood. Last question from me then. You guys mentioned that cashier-less applications. Just curious if there's any U.S.

deployments, or are these mostly overseas?

Chris Diorio -- Co-Founder and Chief Executive Officer

So Troy, this is Chris. Looking around the room, I don't know of any U.S. deployments currently. That doesn't mean there aren't any, but I am not personally aware of any.

There's obviously deployments overseas. And as I've spoken to my prior calls, I've actually used some of them. But I will say that we see, as I mentioned from the National Retail Federation Show, a lot of retailer interest in what they're calling frictionless self-checkout. And when you have that self-checkout, the retailers also want to do Rain-based loss prevention so that they can tie the two together and ensure that there's not an increased step when they go to frictionless self-checkout.

Troy Jensen -- Piper Jaffray -- Analyst

OK, understood. All right, guys. Wish you the best in 2019.

Eric Brodersen -- President, Chief Operating Officer and Principal Financial Officer

Thank you, Troy.

Linda Breard -- Executive Vice President of Sales and Marketing

Thanks, Troy.

Operator

Our next question will be from Craig Hettenbach with Morgan Stanley. Please go ahead.

Craig Hettenbach -- Morgan Stanley -- Analyst

Yes, thanks. Can you elaborate just on some of the systems' momentum that you're seeing? Any incremental color by geography and also kind of key verticals to watch for in 2019.

Chris Diorio -- Co-Founder and Chief Executive Officer

So this is Chris, Craig. And I think both Eric and I will probably have a couple answers to that question. So in terms of systems, in terms of strong momentum just overall, we have two record revenue quarters, and our discussions with our customers, partners and industry groups and others highlight significant IoT market opportunity. So we feel good about the future.

In terms of systems opportunities, we see good opportunities in shipment verification, and I'll let Eric say a couple of additional words there.

Eric Brodersen -- President, Chief Operating Officer and Principal Financial Officer

Yes. The overall systems business, we had strength both in the reader IC business and the gateways on a year-over-year basis. The gateway momentum was particularly focused primarily but not exclusively in supply chain and logistics, really with our continued focus on shipment verification where we're really helping those in the supply chain improve operational efficiency and reduce missed shipments.

Craig Hettenbach -- Morgan Stanley -- Analyst

Got it. And then just as a follow-up, Chris, if I think through last year when you made some arguably modest adjustments to OPEX but nonetheless kind of aligning for what was a more difficult environment back then. How do you feel today in terms of kind of cost structure relative to the growth opportunities you have over the intermediate term?

Chris Diorio -- Co-Founder and Chief Executive Officer

I think I'll let Linda take that question. Linda, go ahead.

Linda Breard -- Executive Vice President of Sales and Marketing

Sure, Craig, so we made a number of adjustments coming into 2018, including exiting some facilities and a headcount overall reduction of approximately 9% of our headcount. I think we feel good about where we're sitting today. We're very thoughtful about where we invest and where we look for opportunities to either reduce investment or move it to other things that add more value to the organization overall. So as we head into '19, we're very thoughtful about our investments, and we will continue to be diligent as we go forward and looking forward to the year.

Craig Hettenbach -- Morgan Stanley -- Analyst

Got it. Thank you.

Eric Brodersen -- President, Chief Operating Officer and Principal Financial Officer

Thanks, Craig.

Operator

The next question comes from Charlie Anderson of Dougherty & Company. Please go ahead.

Charlie Anderson -- Doughtery and Company -- Analyst

Yes. Thanks for taking my question. I appreciate the color on the Q4 gross margin, but I was kind of curious also on Q1. I know you're not guiding to a specific gross margin, but it looks like it will be down.

So I guess I'm just curious, mix aside, just kind of on a like-for-like basis, what's going on there in gross margin? And then on OPEX too, I'm curious, is there anything that's sort of seasonal about it? I think you did mention in the script there are some seasonal expenses in Q1. If you could just speak to those and the degree of those historically. And I've got a follow-up.

Linda Breard -- Executive Vice President of Sales and Marketing

OK. Charlie, this is Linda. I'll take that one. So from a sequential perspective, as we head into Q1, we've talked about the fact that we in the fall of '18, we do our price negotiations with our largest customers on our endpoint IC, which is approximately 70% of our business.

So those negotiations typically is what we've seen in the past. In past both revenue and gross margin, we see compression on a gross margin perspective. From an OPEX perspective, you typically see a step-up, not always. There can be things that overshadow this, but you typically see a step-up in the first quarter of the year that's related to payroll tax resets, typically healthcare benefits and sort of increases that you see in the market every year, and you have some other small things that might drive up the first-quarter compare.

Charlie Anderson -- Doughtery and Company -- Analyst

OK. Great. And then, Chris, a question for you maybe just on new product cadence. How is the pipeline looking there? And then I know you talked in the past about wanting to sort of...

Chris Diorio -- Co-Founder and Chief Executive Officer

Charlie, do you -- oh sorry, go ahead.

Charlie Anderson -- Doughtery and Company -- Analyst

Yes, I think you talked in the past too about wanting to do things that help speed adoption. Maybe you could just update us on where some of those efforts are.

Chris Diorio -- Co-Founder and Chief Executive Officer

So we focused significantly on engaging both with our direct customers and partners in the market as well as with end customers with their partners at our side to help those end customers solve problems, deploy solutions and really grow their market opportunities. And I think it's illustrative that as a consequence of some of those efforts that we and of course others have put into growing and accelerating the market, you see significant end customer participation in the various standard bodies, in the Rain Alliance and things along those lines. And like I mentioned, there's one specific example in the earnings script. We have one retailer even coming to -- forward to the industry and saying, here's the things that we need in order for us to adopt more of the solutions that you as an industry are offering.

And so you should expect us to be putting significant efforts going forward into driving and accelerating growth and adoption in the industry.

Linda Breard -- Executive Vice President of Sales and Marketing

And Charlie, this is Linda. One more thing on non-GAAP OPEX and sequential increase into Q1. We have a fair number of trade shows that we attend in the first quarter, so it's a heavier investment in the first quarter than later in the year, too, from a seasonality perspective.

Charlie Anderson -- Doughtery and Company -- Analyst

Great. If I could just tack on one more to that. Just kind of curious with the negative EBITDA in Q1, how you guys are thinking about cash use for the year.

Linda Breard -- Executive Vice President of Sales and Marketing

So cash use. We are definitely very focused as a company, like I said earlier, on our investments and cash balances. As Chris and Eric both talked about, we were up sequentially in the fourth quarter on a cash and cash investment perspective. We will be focused on continuing to manage cash the way we have in past year.

And since we're not guiding any further out than Q1, it's hard to just take Q1 and extrapolate.

Charlie Anderson -- Doughtery and Company -- Analyst

OK, great. Thanks so much.

Eric Brodersen -- President, Chief Operating Officer and Principal Financial Officer

OK. Thanks, Charlie.

Operator

[Operator instructions] The next question comes from Mike Walkley with Canaccord Genuity. Please go ahead.

Mike Walkley -- Canaccord Genuity Inc. -- Analyst

Thank you. Just building on maybe that last question. With the industry working through inventory levels, how do you feel about your inventory level? Is it something where you want it to be? Or is it something you can work out as a source of cash throughout the next year?

Linda Breard -- Executive Vice President of Sales and Marketing

Mike, this is Linda again. So we definitely will look at reducing inventory further in 2019. We're not guiding to what number, but it would be -- it would generate cash in 2019 similar to our decline in 2018.

Mike Walkley -- Canaccord Genuity Inc. -- Analyst

OK. And then just bigger picture on the industry. Can you just let us know kind of how you feel about the inventory levels for the industry? Are we through the lowering? I guess you getting some incentive volumes is a good sign that we're through the inventory clearing. But could you maybe just comment on that? And then also on the backdrop of that, any change in the competitive environment in the industry post this year of inventory clearing?

Eric Brodersen -- President, Chief Operating Officer and Principal Financial Officer

So Mike, as of today, we believe the inventory correction is resolved as we've said previously. And we do expect this period and going forward a return to more typical endpoint IC volume unit growth and trends overall. So from a channel inventory position, we believe that's been completed and corrected. You made a -- you have a secondary question about the competitive environment.

I'd harken back a little bit to my comments with respect to the volume and pricing negotiations on the endpoint business where really that process completed in line with our expectations. But we won't comment any further really from -- due to competitive reasons. We want to be cautious about how we talk about the overall pricing environment.

Mike Walkley -- Canaccord Genuity Inc. -- Analyst

Maybe just more qualitatively on endpoints or systems or any change in the competitors out there, any new entrants or anything that's changed in maybe the last, last year during the transitional period for the channel inventory?

Chris Diorio -- Co-Founder and Chief Executive Officer

Yes. So Mike, this is Chris. In terms of those metrics, we haven't seen significant recent changes in the competitive environment.

Mike Walkley -- Canaccord Genuity Inc. -- Analyst

OK, great. Last question from me. Just on the airline industry, how should we think about maybe the size of that opportunity? Should Rain be adopted across all baggage tags with the penetration today? And how large can that opportunity be longer term for the industry?

Chris Diorio -- Co-Founder and Chief Executive Officer

So a couple of points there, Mike. So first, we anticipate a multiyear rollout, which is what IATA has basically said they're going to be doing. It's going to be a multiyear rollout not only in terms of the tagging but the infrastructure build-out. Their own numbers, and you should look at their numbers that they quoted, but it's something in the range of a little bit north of four billion bags a year, and that's just bags alone.

That doesn't count any other freight or anything else. They're just talking about bags right now. But then there also is a significant infrastructure build-out across some airports and facilities worldwide. So multiyear rollout.

We see opportunities for both endpoint ICs and systems. And as I said on a prior call, at least I feel really great about the fact that the airline or aviation industry is moving forward because aviation is one of those industries that's very thoughtful and deliberate in terms of the technologies they adopt. And the fact that they're moving forward with Rain to drive a critical piece of their operations is really a -- really signals the strength of what we and our industry have delivered.

Mike Walkley -- Canaccord Genuity Inc. -- Analyst

Great. well, congrats to the strong close to the year, and best wishes for 2019.

Chris Diorio -- Co-Founder and Chief Executive Officer

Thank you.

Eric Brodersen -- President, Chief Operating Officer and Principal Financial Officer

Thank you.

Operator

The next question will be from Mitch Steves with RBC Capital Markets. Please go ahead.

Mitch Steves -- RBC Capital Markets -- Analyst

Hey, guys. Thanks for taking my question. I just want to kind of focus a bit on the gross margin side here. It looks like the systems business is getting to be a larger portion of revenue, but then the margins came down a bit sequentially.

Can you help me understand why there was sort of component pricing issues here, if it's -- or I guess, why the mix wouldn't drive the margins up?

Linda Breard -- Executive Vice President of Sales and Marketing

Right. This is Linda, Mitch. Mix within the systems business really drives margin there. So we have a lot of different products that we sell within the systems business, and that can definitely, and did this quarter from a sequential perspective, definitely impacts the margin.

We talked earlier about higher customer attainment on our volume incentive, which is a positive thing with higher volumes of customers. And those are the two factors that primarily, from a sequential perspective, impacted Q3 to Q4.

Mitch Steves -- RBC Capital Markets -- Analyst

OK. Just as a quick follow-up there, just in terms of the mix, I guess, what products were selling better than others from a high-level basis?

Eric Brodersen -- President, Chief Operating Officer and Principal Financial Officer

The primary change, if you refer back to Q3 when we were fulfilling significant amounts of backlog on the reader ICs, I think you can understand how the mix shifted in Q4 a little bit as reader ICs played a -- were a smaller component of the overall systems mix.

Mitch Steves -- RBC Capital Markets -- Analyst

Got it. Thank you.

Operator

Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Chris Diorio for any closing remarks.

Chris Diorio -- Co-Founder and Chief Executive Officer

I'd just like to close by thanking everybody for joining the call today and to again thank the Impinj team for their execution this past quarter. Thank you very much.

Operator

[Operator signoff]

Duration: 35 minutes

Call Participants:

Chelsea Lish -- Investor Relations

Chris Diorio -- Co-Founder and Chief Executive Officer

Eric Brodersen -- President, Chief Operating Officer and Principal Financial Officer

Troy Jensen -- Piper Jaffray -- Analyst

Linda Breard -- Executive Vice President of Sales and Marketing

Craig Hettenbach -- Morgan Stanley -- Analyst

Charlie Anderson -- Doughtery and Company -- Analyst

Mike Walkley -- Canaccord Genuity Inc. -- Analyst

Mitch Steves -- RBC Capital Markets -- Analyst

More PI analysis

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

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Groupon Inc Expected to Post Q1 2019 Earnings of ($0.05) Per Share (GRPN)

Groupon Inc (NASDAQ:GRPN) – DA Davidson decreased their Q1 2019 earnings per share estimates for Groupon in a report released on Thursday, February 14th. DA Davidson analyst T. Forte now forecasts that the coupon company will post earnings of ($0.05) per share for the quarter, down from their prior forecast of ($0.01). DA Davidson also issued estimates for Groupon’s Q2 2019 earnings at ($0.02) EPS, Q3 2019 earnings at $0.02 EPS, Q4 2019 earnings at $0.10 EPS, FY2020 earnings at $0.07 EPS, FY2021 earnings at $0.13 EPS, FY2022 earnings at $0.16 EPS and FY2023 earnings at $0.18 EPS.

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Groupon (NASDAQ:GRPN) last released its earnings results on Tuesday, February 12th. The coupon company reported $0.08 earnings per share for the quarter, missing the consensus estimate of $0.10 by ($0.02). Groupon had a negative net margin of 0.42% and a positive return on equity of 17.33%. The business had revenue of $799.93 million for the quarter, compared to the consensus estimate of $782.54 million. During the same quarter in the previous year, the firm earned $0.07 EPS. The firm’s revenue for the quarter was down 8.4% on a year-over-year basis.

Several other analysts have also weighed in on GRPN. Zacks Investment Research lowered shares of Groupon from a “hold” rating to a “sell” rating in a research note on Monday. Goldman Sachs Group began coverage on shares of Groupon in a research note on Monday, February 4th. They set a “neutral” rating and a $3.50 target price for the company. BidaskClub upgraded shares of Groupon from a “strong sell” rating to a “sell” rating in a research note on Friday, November 23rd. B. Riley lowered their target price on shares of Groupon from $6.30 to $5.60 and set a “buy” rating for the company in a research note on Thursday, November 8th. Finally, ValuEngine upgraded shares of Groupon from a “sell” rating to a “hold” rating in a research note on Tuesday, January 15th. Two research analysts have rated the stock with a sell rating, six have assigned a hold rating and one has given a buy rating to the company. The stock has an average rating of “Hold” and a consensus target price of $4.56.

GRPN stock opened at $3.49 on Monday. The company has a debt-to-equity ratio of 0.53, a current ratio of 1.04 and a quick ratio of 0.98. Groupon has a 1-year low of $2.80 and a 1-year high of $5.52. The firm has a market cap of $1.99 billion, a price-to-earnings ratio of 38.78, a price-to-earnings-growth ratio of 8.12 and a beta of 1.37.

In other news, Director Eric P. Lefkofsky sold 1,500,000 shares of the business’s stock in a transaction on Thursday, December 6th. The shares were sold at an average price of $3.04, for a total transaction of $4,560,000.00. The sale was disclosed in a filing with the Securities & Exchange Commission, which is available at the SEC website. Insiders own 16.90% of the company’s stock.

Several institutional investors and hedge funds have recently made changes to their positions in the company. Alps Advisors Inc. boosted its holdings in shares of Groupon by 20.7% during the fourth quarter. Alps Advisors Inc. now owns 25,991 shares of the coupon company’s stock valued at $83,000 after acquiring an additional 4,464 shares during the period. Bank of Montreal Can boosted its holdings in shares of Groupon by 130.6% during the fourth quarter. Bank of Montreal Can now owns 9,326 shares of the coupon company’s stock valued at $30,000 after acquiring an additional 5,281 shares during the period. Public Employees Retirement System of Ohio boosted its holdings in shares of Groupon by 34.4% during the fourth quarter. Public Employees Retirement System of Ohio now owns 25,035 shares of the coupon company’s stock valued at $80,000 after acquiring an additional 6,407 shares during the period. Quinn Opportunity Partners LLC acquired a new position in shares of Groupon during the fourth quarter valued at $41,000. Finally, Legal & General Group Plc boosted its holdings in shares of Groupon by 8.1% during the fourth quarter. Legal & General Group Plc now owns 179,201 shares of the coupon company’s stock valued at $573,000 after acquiring an additional 13,351 shares during the period. 66.96% of the stock is owned by institutional investors.

Groupon Company Profile

Groupon, Inc operates online local commerce marketplaces that connect merchants to consumers by offering goods and services at a discount in North America and internationally. The company provides deals in various categories, including events and activities, beauty and spa, health and fitness, food and drink, home and garden, and automotive; and deals on various product lines, such as electronics, sporting goods, jewelries, toys, household items, and apparel, as well as provides discounted and market rates for hotel, airfare, and package deals.

Further Reading: Why are gap-down stocks important?

Will SpaceX Shut Europe Out of the Space Launch Market?

"A few years ago I was over [visiting Arianespace in France and they] weren't worried about [United Launch Alliance but asked] could I get rid of SpaceX, because they were going to drive them out of business?" -- Rep. Loretta Sanchez (D-Calif.)

In 2015, sitting in on a House Armed Services Committee hearing on the cost of spaceflight, then-Congresswoman Loretta Sanchez got a few laughs with this quip -- but four years later, nobody's laughing in Europe. France's independent state auditor, the Cour des comptes (CDC), just reported that Elon Musk's use of reusable rockets to lower the cost of space launch poses a very real risk of driving Ariane out of the space business.

France's Ariane builds beautiful rockets -- but can they compete with SpaceX on price? Image source: ArianeSpace.

How do you say "we're losing the space race" in French?

For years, France's Arianespace space launch company, a subsidiary of Airbus (NASDAQOTH:EADSY), has struggled to compete with SpaceX in the market for commercial rocket launches. Here's the problem: Your average Ariane launch costs some $200 million, whereas SpaceX famously advertises Falcon 9 rocket rides for as little as $62 million.

Obviously, it's hard for Ariane to compete with prices that low. So to improve its competitive positioning, Ariane has spent the last few years developing a new family of rockets, dubbed "Ariane 6". Its goal: to bring Ariane's average launch cost down to about $77 million (for a payload capacity similar to Falcon 9's) or $126 million (for something closer to what a SpaceX Falcon Heavy will haul).

That sounds like a good idea. But as France's CDC opines, Ariane 6 may be too little, too late.

Slow and steady loses the race

In a 31-page "tome" incorporated in its rapport public annuel 2019, CDC notes that Ariane "lost global leadership in the commercial market to the American company SpaceX" way back in 2017. CDC directly links this loss to SpaceX's "breakthrough model of reusable rockets," and to Ariane's "failure to believe in" the concept of reusable rockets -- and build them.

Indeed, the audit chamber particularly criticizes Ariane's decision to make the Ariane 6 expendable, rather than reusable like SpaceX's Falcon 9 and Falcon Heavy. France's CNES may be "studying" a reusable "Prometheus" engine, and developing a prototype "Callisto" reusable rocket, but little progress has been made on either front. Meanwhile, SpaceX already has its Falcon operational and flying missions. Unlike Ariane 6s, each of which will have to be discarded once used, SpaceX's Block 5 Falcon 9 rockets are designed to be reused as many as ten times.

Ariane's "cautious" approach, says CDC, may turn out to be "not ... competitive over the long term." Rather, CDC believes that Ariane will ultimately need to "evolve Ariane 6 toward reusability" -- at the cost of "additional financing." All Ariane has accomplished with its first effort, therefore, was wasting time.

And given that even an expendable Ariane 6 isn't expected to go into service before 2020, time is not something Ariane has to waste. By the time Ariane 6 starts flying, SpaceX may have further refined its reusable rocket designs, tailored its business model to reap the full benefits of reusability, and lowered its prices even more, rendering any cost reduction in Ariane 6 moot.

Why did Ariane choose this moot route?

Perhaps the saddest part about all this, however, is that Arianespace knew exactly what it was doing when it chose to develop the Ariane 6 as an expendable rocket. It did this on purpose.

We know this because, in an interview with Germany's Der Spiegel last year, ArianeGroup CEO Alain Charmeau said as much (ArianeGroup is the parent company of ArianeSpace).

Describing Ariane's desperate need to secure "guaranteed launches" from its government sponsors in order to provide cashflow to fund its overhead, Charmeau argued that European governments should buy their space launches from Ariane rather than SpaceX, regardless of price. They should do this, said Charmeau, not simply to ensure that Europe has a reliable space program of its own (though that was certainly one goal), but because when Germany buys space launches from Ariane, "it creates jobs in Germany" (remember, this was an interview with a German magazine).

It's in the interest of maintaining jobs, furthermore, that Ariane has chosen to build lots of expendable rockets, rather than a few reusable rockets that could be used many times. As Charmeau explained: "Let's say we have ten guaranteed launches a year in Europe, and would have a rocket that you can reuse ten times -- then we would be building exactly one rocket a year. That does not make sense. I cannot tell my teams: 'Bye, then see you next year'" after building just one rocket!

So instead, Ariane builds lots of rockets -- and thereby provides its workers job security.

An epitaph for Ariane

But here's the great tragedy of Ariane: By attempting to secure full employment for its workers, Charmeau may have doomed his company. Shelving projects to build a reusable rocket of its own, ArianeSpace instead bet its future on an expendable Ariane 6, which it will now need to upgrade and convert into a reusable Ariane 6. As CDC opines: "This new launcher does not [in its current form] constitute a sustainable response in order to be competitive in a commercial market in stagnation."

Unless it makes the switch to reusability -- and soon -- this means Ariane itself may be unable to compete with cheaper, more efficient, more advanced rocket launchers such as SpaceX (and soon Blue Origin as well). When that happens, Ariane's workers may lose their jobs anyway.

Canopy Growth vs. Aurora Cannabis: Who Had the Better Quarter?

Canada's two largest cannabis companies unveiled their quarterly results this week, and the results show that Canopy Growth (NYSE:CGC) and Aurora Cannabis (NYSE:ACB) remain locked in a battle to dominate what could become a $200 billion marketplace someday. The quarterly reports are particularly important because they give investors the first glimpse at how recreational marijuana use may affect future sales and profitability. Let's take a closer look to see which of these companies is making the most of this tantalizing market so far.

1. Powering up production

Investors are giving a lot of attention to planned annual marijuana production capacity, but the number that really matters is how many kilograms of product each of these companies is pushing out the warehouse door every quarter.

IMAGE SOURCE: GETTY IMAGES.

Canopy Growth has pegged its medical-marijuana market share above 30% in the past, making it Canada's top medical-marijuana provider. However, Aurora Cannabis has been acquiring competitors like crazy, and that has it nipping at Canopy Growth's heels. However, Aurora Cannabis' splashy acquisitions of CannaMed and MedReleaf last year weren't enough to allow it to sell as much marijuana as Canopy Growth when Canada's recreational market opened on Oct. 17.

In the quarter, Canopy Growth remained king, selling 10,102 kilograms of marijuana and marijuana equivalent products, including oils, while Aurora Cannabis sold nearly 7,000 kilograms. Although Canopy Growth retains the title as the bigger of the two in terms of selling product, it's hard to knock the 502% year-over-year increase at Aurora Growth. The two companies are both plowing big money into their grow facilities to increase yield, though, so it's too soon to say Aurora Cannabis can close the gap. 

Advantage: Canopy Growth.

Company Kilograms Sold, Most Recent Quarter Kilograms Sold, Prior-Year Quarter Year-Over-Year Change

Canopy Growth	10,102	2,330	334%
Aurora Cannabis	6,999	1,162	502%

Data source: quarterly corporate filings. 

2. Sizzling-hot sales

The increase both companies have seen in kilograms sold means each of them delivered significant top-line sales growth during the quarter. What's worth watching, though, is pricing power and product mix, because that could be what separates these two stocks in the future.

Canopy Growth's net sales, after backing out excise taxes, jumped 282% year over year to $83 million Canadian last quarter, giving it a CA$332 million annualized sales run rate. Meanwhile, Aurora Cannabis' net sales skyrocketed 363% to CA$54.2 million because of its acquisitions, giving it a CA$216 million annual run rate. 

Aurora Cannabis grew more quickly, but its selling prices per gram fell more than Canopy Growth's in the past year. Aurora Cannabis didn't reveal its overall average price per gram, but with dried cannabis and extract prices falling more than 20% in the period, it's safe to assume a 20%-plus drop across all products sold. 

One reason Canopy Growth's prices may have held up better than Aurora's last quarter is product mix. Higher-priced extracts, including oils and softgels, represented 33% of Canopy Growth's revenue last quarter, up from 23% in the same quarter last year. At Aurora Cannabis, oils and extract sales were only 22% of net sales last quarter.

As more dried cannabis becomes available because of industrywide investments in grow capacity, it will become increasingly important for these companies to boost sales of value-added products that shore up pricing power. 

Advantage: Canopy Growth.

Company Net Revenue, Most Recent Quarter Net Revenue, Prior-Year Quarter Year-Over-Year Change

Canopy Growth	$83.0	$21.7	282%
Aurora Cannabis	$54.2	$11.7	363%

Data source: quarterly corporate filings. Revenue figures in millions of Canadian dollars.

Company/Product Selling Price Per Gram, Most Recent Quarter Selling Price Per Gram, Prior-Year Quarter Year-Over-Year Change

Aurora Cannabis, dried cannabis	$6.23	$7.86	(21%)
Aurora Cannabis, extracts	$10.00	$13.35	(25%)
Canopy Growth, average	$7.33	$8.30	(12%)

Data source: quarterly corporate filings. Dollar figures in Canadian.

3. Performance toward profitability

Canada's marijuana market could grow to CA$12 billion, and that has Canadian cannabis companies spending mountains of money to build up their operations. Canopy Growth and Aurora Cannabis are no exception. To make sure they remain the world's two largest marijuana companies, they're adding people, grow space, and processing facilities, and they're investing in research. In short, soaring expenses are far outstripping sales at both companies.

Aurora's total operating expenses increased 398% year over year. As a result, they were 207% of net sales in the fourth quarter, up from 193% of net sales last year. Canopy Growth's total operating expenses increased 299% from one year ago, which worked out to 204% of net sales in the fourth quarter, up from 196% of net sales in the same quarter last year.

Company Operating Expenses, Most Recent Quarter Operating Expenses, Prior-Year Quarter Year-Over-Year Change

Canopy Growth	$169.7	$42.6	299%
Aurora Cannabis	$112.3	$22.5	398%

Data source: quarterly corporate filings. Expense figures in millions of Canadian dollars.

Spending to establish a leadership in this market is the right move, but that doesn't mean we shouldn't consider how these companies are spending investors' money and whether one may be better able to translate future sales into net income. One way we can do that is by comparing how much of net sales they're spending on different operating expenses and their gross margin, or the percentage of revenue left over after subtracting cost of goods sold from sales.

For instance, Aurora Cannabis' spending on general and administrative expenses increased to 81% of revenue from 65% of revenue in the same quarter last year, but its sales and marketing expenses fell to 42% from 44% of sales over the period, and although its share-based compensation expense more than doubled, it declined to 35% of net sales from 64% of net sales year over year. 

By comparison, Canopy Growth spent 56% of its net revenue on general and administrative expenses, up from 51% one year ago, and 54% of net sales on sales and marketing expenses, up from 43% one year ago, while share-based compensation was 77% of net sales last quarter, versus 82% last year.

Clearly, both companies match up pretty evenly in terms of overall operating expenses to net sales, but a greater amount of net sales are going to general and administrative costs at Aurora and more net sales are going to sales and marketing at Canopy Growth.

Another way to compare these companies' potential for profitability is to focus on their gross margin, which may offer better insight into which company has a marijuana production cost advantage. Canopy Growth's gross margin before fair value expenses was 22% last quarter, and Aurora Cannabis' was 52%. In the same quarter last year, Canopy Growth's gross margin was 55%, and Aurora Cannabis' was 59%.

Canopy Growth is blaming its low gross margin last quarter on expenses associated with expansion efforts that weren't "fully commissioned" yet, but even if we factor out those costs, Aurora Cannabis' gross margin is still higher. Because they're committing a similar amount of revenue to total operating expenses, but Aurora Cannabis has the better gross margin, I have to give it the edge this time.

Advantage: Aurora Cannabis, by a nose.

So what's the verdict?

This was a transformative quarter for Canopy Growth and Aurora Cannabis. Sales skyrocketed with the start of recreational sales in Canada, but so did expenses. Overall, I think they're both long-term buys for growth investors, but if I had to pick the one I felt put up the better report last quarter, I'd have to go with Canopy Growth. Yes, Canopy Growth's gross margin stumbled, but one quarter doesn't make a trend, and its total sales, market share, and pricing power solidify its position as the cannabis company everyone else has to catch up to.

 

Accumulate Sterling Tools; target of Rs 369: Dolat Capital

Dolat Capital's research report on Sterling Tools

Sterling Tools (STRT) numbers were below estimates on profitability parameters as OEM slowdown and cost rationalization by OEMs impacted margins. Revenue were in line at ` 1,233mn. Gross margin declined by 390 bps on YoY basis. Higher other expenditure further impacted operating margins – declined by 680 bps. However, there is some easing of RM prices on a sequential basis. We believe that this trend can continue. With OEM sales expected to recover slowly, STRT will also face top-line growth challenge. Operating margin should recover on a sequential basis aided by decline in RM prices. We rollover valuations to FY21E earnings. With recent correction of nearly 10% in the last few days, we do not expect significant downside from these levels. Bigger risk here will be the delay in revenue growth recovery and that will be the key to watch over next 2 quarters.

Outlook

We had a BUY rating earlier but downgrade to Accumulate considering the revenue growth challenges and limited expansion in margins. Recommend Accumulate with a target rice of ` 369.

For all recommendations report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Read More First Published on Feb 15, 2019 03:43 pm

Brady’s (BRC) “Buy” Rating Reiterated at Northcoast Research

Northcoast Research reissued their buy rating on shares of Brady (NYSE:BRC) in a report released on Wednesday. Northcoast Research also issued estimates for Brady’s Q2 2019 earnings at $0.53 EPS, Q3 2019 earnings at $0.61 EPS, FY2019 earnings at $2.34 EPS, Q1 2020 earnings at $0.64 EPS, Q2 2020 earnings at $0.60 EPS, Q3 2020 earnings at $0.66 EPS and Q4 2020 earnings at $0.68 EPS.

A number of other equities analysts have also recently weighed in on the stock. SunTrust Banks reissued a hold rating and issued a $43.00 price objective on shares of Brady in a research report on Monday, November 19th. Zacks Investment Research cut shares of Brady from a buy rating to a hold rating in a research report on Wednesday, January 16th. One investment analyst has rated the stock with a sell rating, three have issued a hold rating and two have given a buy rating to the company. The stock has a consensus rating of Hold and an average price target of $44.00.

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NYSE:BRC opened at $46.99 on Wednesday. The company has a debt-to-equity ratio of 0.07, a current ratio of 2.72 and a quick ratio of 2.09. The stock has a market capitalization of $2.40 billion, a price-to-earnings ratio of 23.03, a PEG ratio of 2.67 and a beta of 0.93. Brady has a 1-year low of $35.95 and a 1-year high of $47.36.

Brady (NYSE:BRC) last posted its quarterly earnings data on Thursday, November 15th. The industrial products company reported $0.58 earnings per share for the quarter, beating analysts’ consensus estimates of $0.52 by $0.06. The company had revenue of $293.20 million during the quarter, compared to analysts’ expectations of $295.67 million. Brady had a net margin of 8.15% and a return on equity of 15.01%. During the same period in the prior year, the company posted $0.49 EPS. As a group, sell-side analysts expect that Brady will post 2.28 earnings per share for the current fiscal year.

In other news, VP Russell Shaller sold 10,000 shares of the stock in a transaction dated Monday, November 26th. The shares were sold at an average price of $43.00, for a total transaction of $430,000.00. Following the transaction, the vice president now owns 55,851 shares of the company’s stock, valued at $2,401,593. The sale was disclosed in a filing with the Securities & Exchange Commission, which is accessible through the SEC website. Also, VP Thomas J. Felmer sold 31,667 shares of the stock in a transaction dated Friday, January 18th. The stock was sold at an average price of $46.00, for a total transaction of $1,456,682.00. Following the transaction, the vice president now directly owns 72,040 shares in the company, valued at approximately $3,313,840. The disclosure for this sale can be found here. Company insiders own 15.60% of the company’s stock.

Several hedge funds have recently modified their holdings of BRC. Legal & General Group Plc raised its stake in Brady by 7.1% during the third quarter. Legal & General Group Plc now owns 111,573 shares of the industrial products company’s stock worth $4,874,000 after acquiring an additional 7,397 shares during the period. Pacer Advisors Inc. raised its stake in Brady by 125.1% during the third quarter. Pacer Advisors Inc. now owns 6,049 shares of the industrial products company’s stock worth $265,000 after acquiring an additional 3,362 shares during the period. MetLife Investment Advisors LLC raised its stake in Brady by 55.4% during the third quarter. MetLife Investment Advisors LLC now owns 33,758 shares of the industrial products company’s stock worth $1,477,000 after acquiring an additional 12,035 shares during the period. Bank of New York Mellon Corp raised its stake in Brady by 2.6% during the second quarter. Bank of New York Mellon Corp now owns 772,353 shares of the industrial products company’s stock worth $29,774,000 after acquiring an additional 19,475 shares during the period. Finally, Victory Capital Management Inc. raised its stake in Brady by 17.4% during the third quarter. Victory Capital Management Inc. now owns 35,555 shares of the industrial products company’s stock worth $1,556,000 after acquiring an additional 5,272 shares during the period. 79.67% of the stock is currently owned by institutional investors and hedge funds.

Brady Company Profile

Brady Corporation manufactures and supplies identification solutions (IDS) and workplace safety (WPS) products to identify and protect premises, products, and people in the United States and internationally. The IDS segment offers safety signs, pipe markers, labeling systems, spill control products, and lockout/tagout devices for facility identification and protection; materials and printing systems for product identification, brand protection labeling, work in process labeling, and finished product identification; and hand-held printers, wire markers, sleeves, and tags for wire identification, as well as software and services for safety compliance auditing, procedure writing, and training.

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Hawaiian Holdings Inc (HA) Files 10-K for the Fiscal Year Ended on December 31, 2018

Hawaiian Holdings Inc (NASDAQ:HA) files its latest 10-K with SEC for the fiscal year ended on December 31, 2018. Hawaiian Holdings Inc provides air transportation for passengers and cargo. Routes are principally focused on transportation between the Hawaiian Islands, United States, and the South Pacific regions of Asia and Australia. Hawaiian Holdings Inc has a market cap of $1.52 billion; its shares were traded at around $30.73 with a P/E ratio of 6.67 and P/S ratio of 0.55. The dividend yield of Hawaiian Holdings Inc stocks is 1.58%. Hawaiian Holdings Inc had annual average EBITDA growth of 18.40% over the past ten years. GuruFocus rated Hawaiian Holdings Inc the business predictability rank of 3-star.

For the last quarter Hawaiian Holdings Inc reported a revenue of $697.5 million, compared with the revenue of $703.1 million during the same period a year ago. For the latest fiscal year the company reported a revenue of $2.8 billion, an increase of 5.3% from last year. For the last five years Hawaiian Holdings Inc had an average revenue growth rate of 5.5% a year.

The reported diluted earnings per share was $4.62 for the year, a decline of 32.3% from the previous year. Over the last five years Hawaiian Holdings Inc had an EPS growth rate of 47.5% a year. The Hawaiian Holdings Inc had a decent operating margin of 11.08%, compared with the operating margin of 18.82% a year before. The 10-year historical median operating margin of Hawaiian Holdings Inc is 9.84%. The profitability rank of the company is 8 (out of 10).

At the current stock price of $30.73, Hawaiian Holdings Inc is traded at 67.8% premium to its historical median P/S valuation band of $18.31. The P/S ratio of the stock is 0.55, while the historical median P/S ratio is 0.33. The intrinsic value of the stock is $49.23 a share, according to GuruFocus DCF Calculator. The stock lost 18.35% during the past 12 months.

For the complete 20-year historical financial data of HA, click here.

Will This Oil Stock Keep Its Foot on the Accelerator in Q4?

Marathon Oil (NYSE:MRO) delivered strong operational and financial results through the third quarter of last year, which had the company on track to end 2018 on a high note. Investors will find out whether that's the case when the company reports its fourth-quarter results. That's one of several things they should keep their eye on when reviewing that report.

See if production exceeded expectations again

Marathon Oil's drilling machine generated a gusher of production through the first nine months of last year as the company exceeded its expectations in each quarter. Because of that, anything less than a high-end result in the fourth quarter would likely disappoint the market.

Image source: Getty Images.

After producing an average of 419,000 barrels of oil equivalent per day (BOE/D) during the third quarter, Marathon sees its production averaging between 400,000 and 420,000 BOE/D during the final period, which is lower at the midpoint due in part to recent asset sales. However, achieving that forecast would enable the company to produce between 405,000 to 415,000 BOE/D for the full year, which would be 15% to 19% higher than 2017's average. Ideally, the company will achieve the high end of both ranges.

There's a good reason to believe it could deliver another strong quarter. One factor driving that view is Marathon's announcement in December that its four-well test in the Ajax area of North Dakota's Bakken shale achieved strong initial production results, which marked a continuation of the company's drilling success in that region. As long as it didn't disappoint elsewhere, then there's an excellent chance Marathon produced another gusher in the fourth quarter.

Check if it kept a lid on capital spending

As oil prices rose through the first nine months of last year, it caused several of Marathon's peers to boost their capital spending plans. ConocoPhillips (NYSE:COP), for example, increased its budget twice, going from an initial level of $5.5 billion up to $6.1 billion by year-end. Meanwhile, Anadarko Petroleum (NYSE:APC) set its budget range between $4.2 billion and $4.6 billion but ended up spending $4.8 billion. Marathon, on the other hand, had resisted the temptation to boost spending, keeping a tight lid on its budget at $2.3 billion.

Because of that, investors should see if the company maintained its capital discipline during the fourth quarter. There's a high probability that was the case since oil prices crashed 40% during the period, which caused many drillers to slow down their activities and spending level. Further, the company noted in December that it repurchased another $150 million in stock during the quarter, which it likely wouldn't have done if capital spending was running above budget. While those two factors suggest that the company did achieve its aim of sticking to its budget last year, investors should still make sure that was the case. If not, they should see if the company had a good reason to go over budget. 

Take a close look at its plans for 2019

Marathon Oil expects to unveil its 2019 capital plans when it reports fourth-quarter results. The company has made it clear in the past that its strategy is to keep spending to the cash flows it can generate on $50 oil, which last year was $2.3 billion. As such, investors should see if the company plans to stick to that same strategy this year, which would line up with what rivals ConocoPhillips and Anadarko Petroleum are planning to do.

In addition to checking out its capital plans, investors should see if the company intends on sending them any more money this year. While Marathon has joined both ConocoPhillips and Anadarko Petroleum in buying back its shares, it has yet to start increasing its dividend. Because of that, the company's yield has fallen behind those two rivals, which have raised their payouts several times over the past few years. As such, word of an upcoming dividend increase would be excellent news. 

Anticipating a strong result

Marathon Oil has a history of under-promising and over-delivering. Because of that, it would be rather disappointing to see the company miss its production guidance and spend above its budget. However, it could partially offset any disappointment by remaining disciplined in 2019 and aiming to return more cash to shareholders, because those actions would keep it among an elite group of oil stocks.

Why Gilead's Pain Is Intercept's Gain

It’s another disappointing day for one of America’s top biotech companies. Gilead Sciences Inc.’s (NASDAQ: GILD) selonsertib failed to improve fibrosis in the Phase 3 STELLAR-4 trial, and its shares traded lower as a result. While this is more bad news for Gilead, it may prove to be great news for Intercept Pharmaceuticals Inc. (NASDAQ: ICPT).

Tuesday’s review of top analyst upgrades and downgrades showed that multiple analysts had downgraded Gilead after the disappointing news. Its shares closed up 0.2% at $67.62 on Monday but were down 4.2% at $64.79 early Tuesday. Wells Fargo downgraded Gilead to Market Perform from Outperform and cut the target to $68 from $89. Citigroup downgraded it to Neutral from Buy and cut its target to $75 from $100.

Merrill Lynch only has a Neutral rating on Gilead, and the firm feels the stock may continue to trade lower with more disappointment. As for the future, with a new CEO coming shortly, the Merrill Lynch team said:

Given the lack of placebo control, small number of patients, and the relatively short 24-week duration of the Phase 2 trial, we are not that surprised by the disappointing STELLAR-4 results. However, potential upside from the STELLAR-4 has probably contributed to the recent run-up in stock. As such, we would expect GILD to trade down on the news… With another loss of late stage pipeline asset, investors likely will demand M&A to reinvigorate long-term growth. We maintain Neutral awaiting new CEO's strategy when Daniel O'Day takes the helm on March 1.

Credit Suisse reiterated Intercept as Outperform with a $167 price target (versus a $117.34 prior close), and the firm only initiated coverage at the end of July. It noted that Gilead's selonsertib failure to improve fibrosis removes the largest competitive threat for Ocaliva. Tuesday’s report said:

Gilead’s selonsertib failed to improve fibrosis in the phase III STELLAR-4 trial, with improvement rates of only 14.4% and 12.5% for the 18mg and 6mg doses versus a placebo rate of 12.8% in patients with F4 fibrosis levels (cirrhosis) with non-alcoholic steatohepatitis (NASH). Investors have been skeptical of selonsertib’s potential to succeed in NASH, but the degree to which the drug failed this trial (P values of 0.56 and 1.0) is surprising. We see no negative read-through to Intercept’s Ocaliva as the drugs work via different mechanisms of action. This result supports our Outperform thesis that Ocaliva will lead the NASH market, with serious competition at least 4-5 years away.

On February 4, Raymond James raised Intercept to Strong Buy from Outperform. And on January 28, Jefferies reiterated its Buy rating and raised its target price to $150 from $135.

As of last look, Intercept had a consensus target price of $144.47 and a $3.5 billion market cap. The Thomson Reuters consensus estimate projected just $179 million in 2018 sales, and that is expected to rise to $255 million for 2019.

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Nielsen could be the next big leveraged buyout, sources say

Nielsen could be the next big leveraged buyout, sources tell CNBC.

Potential bidders could be Hellman & Friedman with Blackstone, or Goldman Sachs Private Equity with Advent International, the sources say. The market research firm, which had its initial public offering in 2011, has been quietly pursuing a take-private deal and a round of bids was due in January, the sources said.

Any deal would follow an $11 billion buyout announced earlier this week for Ultimate Software Group, which agreed to be acquired by Hellman & Friedman. Ultimate is a maker of cloud-based human resources management software.

A take-private of Nielsen could fetch $10 billion, about the same as a previous buyout more than a decade ago by Blackstone and a group of big private equity firms, including Carlyle, KKR and Hellman & Friedman.

Last year, Elliott Management took a sizable stake in Nielsen and pushed for a sale, and Nielsen said in September it had hired bank and legal advisors to explore strategic alternatives. The company named a new CEO, David Kenny, who came on board in December, and after that it began meeting with various private equity firms.

Apple Should Shift Focus From China To India

&l;p&g;&l;img class=&q;dam-image bloomberg size-large wp-image-43236045&q; src=&q;https://specials-images.forbesimg.com/dam/imageserve/43236045/960x0.jpg?fit=scale&q; data-height=&q;640&q; data-width=&q;960&q;&g; Photographer: Anthony Kwan/Bloomberg

Apple should begin paying more attention to the Indian market and less attention to the Chinese smartphone market.

Why? Because Apple has a growth problem in China. The iPhone maker came with a big downward&a;nbsp;&l;a href=&q;https://www.wsj.com/articles/apple-revises-guidance-sees-lower-revenue-in-fiscal-1st-quarter-11546465050&q; target=&q;_blank&q;&g;revision&l;/a&g;&a;nbsp;in sales, which surprised Wall Street.

Apparently, Chinese consumers aren&a;rsquo;t as thrilled in buying Apple&a;rsquo;s products as they used to be.

Perhaps it&a;rsquo;s the slowing economy blamed by the company. But it could be growing competition from Chinese makers like Xiaomi, too. And it could be a backlash form the on-going US-China trade war.

&l;img class=&q;size-large wp-image-19440&q; src=&q;http://blogs-images.forbes.com/panosmourdoukoutas/files/2019/02/koyfin_20190210_104428296-1200x600.jpg?width=960&q; alt=&q;&q; data-height=&q;600&q; data-width=&q;1200&q;&g; Apple&s;s Revenues

In either case, Apple must look at other countries to re-ignite its overseas growth. Like India, a country with a big fortune at the bottom of the pyramid, to use a term C.K.&a;nbsp;&l;a href=&q;http://www.amazon.com/Fortune-Pyramid-Revised-Updated-Anniversary/dp/0133829138/ref=sr_1_1?ie=UTF8&a;amp;qid=1412523626&a;amp;sr=8-1&a;amp;keywords=Prahalad&q; target=&q;_blank&q;&g;Prahalad&l;/a&g; a couple of decades ago.

That&a;rsquo;s the trillions in disposable income&a;nbsp;waiting&a;nbsp;in the hands of the masses of poor at the bottom of India&a;rsquo;s income pyramid.

And that spells&a;nbsp;potential &a;ndash; the kind of potential which many managers and marketers routinely overlook or write off altogether, including Apple.

The reason? These markets are either too small in terms of revenue potential or too costly in terms of the operating expenses required to tap into them.

&l;span&g;Tapping into this market won&a;rsquo;t be easy for Apple, according to &l;/span&g;Haris Anwar, Senior Analyst at&a;nbsp;Investing.com. &q;Apple is facing two big challenges in India, a massive untapped market for the company in need of finding other growth avenues to counter a China slowdown,&a;rdquo; says Anwar&l;span&g;.&l;/span&g;

&a;ldquo;First, it has to come up with a cheap version of its product and a price point which is acceptable to the local customers. At $1,500, the iPhone X is an extremely tough sell in a country where people love technology but can&a;rsquo;t afford it. &l;span&g;And second, Apple needs to have a large physical presence in India by opening up its stores in big cities and devising a retail strategy which works for the local market. Its relationship with the local retailers isn&s;t producing the kind of customer experience that will keep it ahead in this highly competitive market.&a;rdquo;&l;/span&g;

Anwar&l;span&g; believes that Apple has failed on both these fronts and that it needs to do its homework in apps and other services to cater to the peculiarities and specificity of the local market.&l;/span&g;

&a;ldquo;Apple also needs to improve its apps and other services to align more closely with local needs. India is a great opportunity for Apple if it can crack the local code and overcome these issues in the next two to three years,&q; he said.

And deal with India&a;rsquo;s big government regulations, I would add.

&l;/p&g;