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Apple iPhone XR and iPhone XS smartphones are displayed during an event at the Steve Jobs Theater in Cupertino, California, on Wednesday, Sept. 12, 2018. 

David Paul Morris | Bloomberg | Getty Images

Apple iPhone XR and iPhone XS smartphones are displayed during an event at the Steve Jobs Theater in Cupertino, California, on Wednesday, Sept. 12, 2018. 

Another Wall Street firm has cut expectations for Apple amid fears of soft smartphone and overall iPhone demand.

Canaccord Genuity analyst Michael Walkley reduced his 12-month price target to $225 from $250 over the next year. The new target is still 24 percent higher than Wednesday’s closing price.

Canaccord Genuity also lowered its 2019 and 2020 earnings per share estimates. It now expects EPS of $13.25 next year and $14.69 in 2020 versus $13.46 and $15.18 previously. Walkley slashed his iPhone units sales expectations to 213 million in 2018, 208 million in 2019 and 217 million in 2020.

“Our surveys indicated soft smartphone demand with disappointing initial XR sales,” Walkley wrote in a note to clients Thursday. “Given the soft start to the latest lineup of iPhones, we are lowering our iPhone estimates and forecast lower year-over-year unit sales in calendar 2019.”

The analyst said muted demand for the XR fell short of his high expectations. He added that survey feedback for “lackluster” initial sales included its inferior quality perception given its aluminum construction versus the XS and XS Max, as well as lack of an HD screen and lower-cost options in the older iPhone X and 8 models.

Despite the target cut, Walkley still has a buy rating on the company’s stock. Shares of Apple rose 0.9 percent in premarket trading Thursday.

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Biotech IPO performance pokes holes in Silicon Valley’s theory for waiting so long to go public



Start-ups’ fears of being strong-armed to focus on short-term profits is one reason some are opting to stay private. But those fears may be overblown, if the historical performance of money-losing biotechs is any indication.

Much like consumer tech companies going public in 2019 — biotech companies rarely make money going into their stock-market debuts. Public-market investors have historically embraced them anyway.

Between 2001 and 2017, only 6% of biotech companies were profitable at the time of their initial public offering, according to analysis by Jay Ritter, finance professor at the Warrington College of Business at the University of Florida. Yet, during the same time frame the average three-year buy-and-hold return for more than 350 biotech companies that went public was 36.3% — beating the market by 14.0%.

“We’ve had hundreds of biotech companies going public in recent years where everybody knows that they’re not going to have any revenue from product sales for years,” Ritter told CNBC. “And there’s no pressure for them to cut their short term losses — as long as they’ve got viable scientific research.”

For the biotech firms that went public between 1980 and 2017, on average, they rose 12.1% on the first trading day, according to Ritter’s analysis. Over the next three years, they then returned an average of 25.7%. While biotech IPOs still under-performed the broader market by 6%, they fared better than the average IPO. Public offerings in general under-performed broader markets by 19% in the 3 years after listing.

“I think a lot of it is talk rather than actual evidence that if a company doesn’t achieve short-term profitability quickly, corporate raiders and activist investors swoop in and boot out management,” Ritter said. “I just don’t see a lot of evidence of that occurring.”

The nation’s top tech investors have voiced frustration about the public market’s focus on near-term profits. A new Silicon Valley stock exchange, backed venture capitalist Marc Andreessen among others, was approved earlier in May. According to its website, the mission is to provide a “market that reduces short-term pressures and encourages a steady cycle of innovation and investment in long-term value creation would benefit companies and their investors alike.”

Firms listed on the so-called LTSE may be required to abide by certain rules, like a potential ban on tying executive pay to the short-term financial performance.

The rise of money-losers

Last year, more than 85 percent of tech companies that went public had negative earnings per share, according to Ritter’s analysis. This year, Uber and Lyft were the poster children for that money-losing business model.

Uber, the biggest IPO since Alibaba, reported an operating loss of $3 billion in 2018 after losing more than $4 billion the previous year. Its ride-hailing rival Lyft reported a net loss of about $1 billion last year. Its adjusted loss per share was $9.02 for the first-quarter. Shares of Uber have been under pressure since listing in May but have recovered most of those losses. The stock is down about 2% since listing in May, while Lyft has dropped by 25% since its IPO.

Billionaire investor Mark Cuban, and owner of the NBA’s Dallas Mavericks, told CNBC last week that Uber’s disappointing debut was “not a surprise” because the ride-hailing company waited too long to go public.

“I just think we’re seeing a reflection of the Silicon Valley ethos in the public market. The whole attitude was wait, wait, wait, wait, wait,” Cuban said.

Cuban said by waiting, they lost the momentum early companies typically have. Cuban invested $1 million in Uber’s main competitor Lyft, which Cuban said also stayed private too long.

“They just waited too long,” Cuban said. “I don’t think you could have expected anything different … the reality is you’re nine years in and you’re still having to buy your revenue. That’s not a good sign.”

Plenty of private funding

There are a few reasons these companies are staying private longer. A decade-long, low-interest rate environment has forced investors to look for returns elsewhere. And in 2012, the JOBS Act raised the threshold of private shareholders from 500 to 2,000, allowing companies to stay private until they reach that limit.

But the key reason they’re able to stay private is because of a seemingly endless honey pot of venture capital and private equity money. Softbank — Uber’s biggest investor —has flooded private markets with billions in funding. Its $100 billion Vision Fund has deployed about $80 billion in capital. That in turn has pushed valuations to record highs.

“SoftBank’s size is unprecedented and it surely contributes to visibility and validation of high-valuation late-stage private financing,” said Yale School of Management Associate Dean Kyle Jensen. “Because of the enormous amount of private capital available, most companies can stay private longer.”

However, Jensen said these start-ups will continue to face pressure to go public from employees who see the bulk of their net worth locked up in stock and options that would be easier to liquidate if the company were public.

As demand increases, prices for these private companies are steadily rising. The average valuation for venture-capital backed companies is up to $260 million in 2019, according to data from PitchBook. That’s more than double the value from 2011, and more than 8 times what these companies were valued in 2002. The total deal count also jumped to 3,718 last year — a 370% rise from 2002, according to PitchBook’s data.

Source: PitchBook

Price to sales ratios, which are calculated by taking a company’s market capitalization and dividing it by the company’s total sales or revenue over the past year, are also on the rise. By that metric, prices have more than doubled for these companies since 1980, according to Ritter’s analysis.

To be sure, biotech’s business model is starkly different from ride-hailing, social networks, or software companies. The reason they’re unprofitable often has to do with regulatory approvals. They can’t make money on new drugs until they’re approved by the U.S. government agencies.

They often feel the heat to go public for different reasons — like needing to raise money for those expensive clinical drug trials. Historically, the biotech sector has also been a gamble. Investors bid up the Nasdaq Biotechnology Index in the late 1990s, only to see it lose half of its value in 2000.

Regardless of the industry, Ritter said investors are still eager to pay for future profits.

“I think it is pretty clear that both private market investors and public market investors are willing to to fund growth in companies and have them focus on growth rather than short-term profitability — provided there’s a story there that continues to make sense,” he said.

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$2 billion from rockets last year, Jefferies estimate



A SpaceX Falcon Heavy rocket, carrying the Arabsat 6A communications satellite, lifts off from the Kennedy Space Center in Cape Canaveral, Florida, April 11, 2019.

Thom Baur | Reuters

SpaceX has hurtled to the top of the launch industry over the past decade, last year bringing in more revenue than any other rocket company, according to Jefferies on Sunday.

“While SpaceX is newer to the market, their lower price point has allowed them to outpace peers in estimated annual launch revenues,” Jefferies analyst Sheila Kahyaoglu wrote in a note to investors, in a “deep dive” report.

Jefferies broke out the estimated 2018 revenues for eight “heavy launch” companies, which compete in the most expensive part of the rocket market. The massive rockets, standing as tall as skyscrapers, cost anywhere between $62 million to $350 million. Jefferies charted last year’s launch revenues for SpaceX, United Launch Alliance (also known as “ULA,” a joint venture of Boeing and Lockheed Martin), Northrop Grumman, Europe’s Arianespace, Russia’s Khrunichev, India’s ISRO and Japan’s Mitsubishi Heavy Industries. Jefferies also included Blue Origin as a competitor, although its New Glenn rocket is not expected to launch before 2021.

SpaceX logged $2 billion in launch revenue last year, the report said. In total, Jefferies estimated these companies’ rockets brought in about $8 billion in revenue in 2018.

Jefferies said SpaceX, as a relatively new entrant, has helped introduce “a level of price competition, which is a positive for launch market customers.” These rockets largely cater to “a government market,” where ULA and the internationally-backed companies have previously dominated.

SpaceX is also the front-runner, in Jefferies’ view, for lucrative Air Force contracts expected in 2020. Under the military’s National Security Space Launch program, officials will name two companies to launch five years of government satellites. SpaceX, ULA, Northrop Grumman and Blue Origin are all competing for the contracts. The money means the winners will “also have a leg up in developing a new launch system that could have applications for commercial uses,” Jefferies said.

With 25 launches up for grabs, the Air Force has said one company will win 15 missions, while another will win the remaining 10.

“The biggest strength for SpaceX likely lies in its price and track record,” Jefferies said. “Given the current launch cadence, their business case is likely to be strongest given the ability for overhead absorption.”

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‘Game of Thrones’ hits record viewership in finale despite backlash



Actors Kit Harington and Emilia Clarke on the set of the eighth season of Game of Thrones.

Helen Sloane | HBO

Despite high criticism from fans, the final episode of “Game of Thrones” shattered single-night viewing records Sunday, with 19.3 million tuning in to watch the finale.

The final season of HBO’s television adaptation of George R. R. Martin’s “A Song of Ice and Fire” was widely criticized by fans who felt the pacing and its treatment of previous character developments were not up to par.

Still, the show continued to have record-breaking viewership. Each episode, save for one, toppled viewer counts from the season seven finale, which was the series high prior to season eight’s release.

Each year “Game of Thrones” has seen its audience grow, a rarity for television shows. Typically, a series will lose viewership over the course of a run. The eighth season drove high viewership because it was the show’s last. More than a decade of storytelling was coming to an end, and everyone wanted to know what happened.

While some fans of the long-running fantasy drama felt satisfied by the show’s final bow, others were quick to express their displeasure with how events unfolded. One of the chief complaints surrounding the eighth and final season was its pacing and its treatment of previous character developments.

While the first six seasons all contained 10 episodes, season seven was comprised of only seven installments and season eight had only six. The truncated nature of the final season seemed to have played a major factor in fan dissatisfaction. Plot lines that may have been developed further given more time fell flat for many long-time viewers of the show.

*Warning: Spoilers for the “Game of Thrones” finale to follow.*

“It’s clear the writers knew the story they wanted to tell, in retrospect,” Myles McNutt, of AV Club, wrote in a review of Sunday’s finale. “They were telling the story of the girl who grew up believing that her family had been wronged, and that it was her responsibility to right that wrong.”

“[Daenerys] struggles in Westeros felt arbitrary, driven by dumb military strategy more than anything else,” he added. “The thematic value of her struggle was always there, but in execution the show was moving at such a different pace than before that it had none of the pathos that had grounded her story to that point.”

It was always a coin toss for Daenerys to either become like her father the Mad King or shun that anger in favor of a more moderate, tempered justice. Throughout the show, Dany has used her power and her dragons to burn cities to the ground in the name of liberation. Only, in those instances, the men were slavers and tyrants and fans were able to put aside the high death toll because Dany’s motives were “good.”

In the eighth season, when she decimates King’s Landing with dragon fire, it’s not entirely out of character. It is only now that the people she is killing are considered more innocent than her past conquests that fans and characters within the series begin to balk at her actions.

“The finale wrapped a few elements up a tad too cleanly, perhaps going against the show’s original ‘good people don’t triumph’ edicts, but were you truly going to be happy with a defiant Dany standing over the charred bodies of everyone else, ruling a ruined realm?” James White, of Empire Magazine, asked in his review of the finale. “It’s not the end everyone would have wanted. It was never going to be.”

It didn’t help that starting in season five, Weiss and Benioff began to deviate from Martin’s source material because Martin hadn’t finished the final books in his series. So, fans that once knew how certain events would unfold were suddenly cast in shadow for the last few years, left wondering if what was on screen was really part of Martin’s vision.

One of the finale plot points that stuck with most people was that Bran Stark, aka Bran the Broken, became king of the six kingdoms, with his sister Sansa taking lead of the seventh kingdom, the North.

Many bemoaned that Bran had done little during the series to warrant this seat of power. He’d been relegated to being in the background for most of the last few seasons and, aside from his abilities as the Three-Eyed Raven to recall events of the past and see the future, has no real qualifications for leadership.

In fact, most of Bran’s scenes in the eighth season revolved around him disassociating from his family and every other character he encountered.

“Had Weiss and Benioff brought the show to a more satisfying conclusion, Martin would have had little incentive to finish the series,” Nancy Kaffer, of the Detroit Free Press, wrote. “It’s safe to say that fans are not satisfied, and Martin has a chance to tell the story he intended. So … how ’bout it, George?”

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