Top US stocks: Oracle, Alibaba and Apple

Oracle earnings are due after the closing bell, reports suggest more trouble is brewing for Alibaba in China, Apple shares are in play after plunging on Friday, a Dutch court rules Uber drivers are employees, TransUnion buys Neustar, and Virgin Galactic delays its next test flight.

USA (1)

Oracle

Oracle headlines the earnings calendar today with first quarter results out after the markets close, with investors expecting the shift to the cloud to keep driving momentum.

Analysts are expecting revenue to rise to $9.77 billion from $9.36 billion the year before. Adjusted EPS is forecast to grow to $0.97 from $0.93 while reported EPS that includes one-off exceptionals is set to remain broadly steady at $0.71 from $0.72.

Oracle’s cloud unit will be the main focus as companies continue to move their databases to the cloud, with markets expecting pent-up demand for its NetSuite and Fusion enterprise software to continue. However, its infrastructure unit could struggle to improve from the 2% revenue growth posted in the fourth quarter as a result.

Alibaba

The Chinese government is aiming to break up Ant Group’s Alipay, the largest payments platform in China with over one billion users, and force it to separate its loans business, according to reports from the Financial Times.

The report said Chinese regulators have already forced Ant Group, which is 33% owned by Alibaba, to separate Huabei, its credit card unit, from Jiebei, which makes small unsecured loans, from the rest of its financial business. Now, they want the two businesses split into a separate app as well, which would see Ant hand over user data to a new, partly state-owned venture, according to two unnamed sources. The move is focused on data as the government believes that is the key to the monopolies it is cracking down on.

The news sent Alibaba’s Hong Kong shares down on Monday and this is expected to continue when US markets open today. The consequences could be significant considering CreditTech, which includes the two units being targeted, overtook Ant Group’s main payment processing unit for the first time last year and accounted for 39% of the company’s total revenue.

Apple

Apple shares are in play after suffering their biggest one-day fall since early May on Friday following a significant ruling from a US judge on its battle with Epic Games.

US district judge Yvonne Gonzalez Rogers said app developers should be allowed to filter their customers to alternative payment platforms, which would allow them to avoid the fess of up to 30% charged through Apple’s App Store. Notably, that will also impact sentiment for Alphabet’s Google, which has similar rules in place for its Android-based app store.

However, the judge also allowed other rules to remain, including the ability for Apple to charge 15% to 30% in fees. Although the fees deliver ‘extraordinary profits’ for Apple, there needs to be a reward for providing a secure platform for developers, the judge said. This saw Apple’s general counsel claim the company was ‘extremely pleased’ with the decision while Epic’s CEO Tim Sweeney said the ruling ‘isn’t a win for developers or for consumers’.

Separately, Apple is expected to unveil its new iPhone at its launch event tomorrow.

Uber

A Dutch court has ruled that Uber drivers are employees rather than independent contractors, which entitles them to more workers’ rights.

The Amsterdam District Court agreed with filings made by the Federation of Dutch Trade Unions that had claimed Uber drivers are employees and should be entitled to the same pay and benefits as other workers in the same sector, such as taxi drivers. That follows Uber’s decision to introduce a minimum wage and improve workers’ rights for its British drivers after losing a Supreme Court Case in February.

Uber said it plans to appeal against the decision and said it ‘has no plans to employ drivers in the Netherlands’, adding that it believes the majority of drivers want to remain independent.

TransUnion

TransUnion has agreed to spend $3.1 billion in cash to acquire Neustar, which focuses on identity resolution to allow trusted connections to be made between businesses and people and offers a number of data and analytics services.

Neustar is expected to generate $575 million in revenue and $115 million of adjusted Ebitda in 2021. TransUnion said it expects growth to accelerate once Neustar is integrated as it reaps the benefits of revenue synergies, and said cost synergies should be accretive to adjusted diluted EPS from 2023 onwards.  

‘The credit information and analytics that TransUnion provides make trust possible between consumers and businesses. As digital commerce continues to grow globally, TransUnion’s powerful digital identity assets, enhanced by Neustar’s distinctive data and digital resolution capabilities, will enable safer and more personalized online experiences for consumers and businesses,’ said president and CEO of TransUnion, Chris Cartwright.

Kansas City Southern

Kansas City Southern announced yesterday that it plans to accept the $27.2 billion takeover tabled by Canadian Pacific Railway as a superior offer to the $29.6 billion offer on the table from Canadian National Railway.

The decision means Canadian National Railway has until the end of play on Friday to put forward an improved offer, otherwise the deal between Kansas City Southern and Canadian Pacific Railway will go ahead in its current form. The deal has been closely-watched over recent months as either deal will create the first direct railway link spanning Canada, the US and Mexico.

Although the overall value of the offer from Canadian Pacific Railway is lower, the firm is further along the regulatory process, according to reports in Reuters. The deal will see each Kansas City Southern share be worth 2.884 shares in Canadian Pacific and $127.50 in cash.

ViacomCBS

ViacomCBS is planning to restructure its Paramount Pictures movie and television production unit, according to reports from the Wall Street Journal.

The report said the new structure is part of a broader shake-up of management and see the movie and television arms run as separate units, according to unnamed sources. David Nevins, who currently heads up the TV division, is expected to lead the new Paramount television business while Brian Robbins, who currently leads Nickelodeon, will lead the movie unit.

Disney

Disney has revealed that the remainder of its films due to be released in 2021 will be exclusively released in cinemas before becoming available on its streaming service, Disney+.

It said the upcoming release of Encanto will debut in theatres on November 24 and enjoy 30-day exclusive release in cinemas, while its other scheduled releases – comprised of The Last Duel, Ron’s Gone Wrong, Eternals, West Side Story, and The King’s Man – will all have at least 45 days in cinemas before being unleashed on streaming platforms.

The news helped support the share prices of the likes of AMC Entertainment on Friday as it strengthens the case for the big screen as streaming platforms gain traction.

Virgin Galactic

Virgin Galactic on Friday warned it has delayed the launch of its next test flight, Unity 23, after a supplier flagged a potential defect with one of the components of the flight control actuation system.

‘At this point, it is not yet known whether the defect is present in the company’s vehicles and what, if any, repair work may be needed. Out of an abundance of caution, and in line with Virgin Galactic’s established safety procedures, the company is in the process of conducting inspections in partnership with the vendor,’ the company said in a statement.

Virgin Galactic said the issue is unrelated to its Unity 22 flight or ongoing matters with the US aviation regulator. It said once the issue is resolved and the FAA matter is resolved, then it hopes to reopen the flight window for Unity 23 in ‘mid October’.

Freshworks

Business and customer engagement software firm Freshworks is looking to raise $912 million and earn a valuation of close to $9 billion through its US initial public offering, new regulatory filings have revealed.

The IPO is being closely-watched as Freshworks competes against Salesforce. Freshworks plans to sell 28.5 million shares at $28 to $32, which would allow it to raise $912 million at the top end of that range. It was last valued at around $3.5 billion during its last funding round back in November 2019.

Freshworks saw revenue rise to $168.9 million in the first half of 2021 compared to $110.5 million the year before, while its loss before tax narrowed to $8.2 million from $52.8 million. It has over 52,500 customers, including TV broadcaster ITV, Delivery Hero, buy now pay later firm Klarna, and ticketing firm Trainline.

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