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J.P. Morgan: 3 Strong Value Stocks That Could Soar Over 30%

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It’s safe to say investors had a lot of options this past spring. According to J.P. Morgan strategist John Normand, excluding emerging market currencies and agricultural products, every market has recovered by at least 50% from COVID-19-induced lows.“When the business cycle is turning higher, policy hyper-stimulative and downside risks manageable, the obvious investment strategy might be to own anything but cash… This indiscriminate approach would not have damaged absolute returns over the past few months,” Normand commented.That said, the strategist thinks this “everything wins” strategy might not be as reliable in the second half of the year, recommending a more selective approach. This means focusing on stocks in the tech, communications and healthcare industries poised to emerge as COVID-19 “endgame winners.” Normand added, “Liquidity cannot paper over specific weaknesses indefinitely.”Bearing this in mind, we used TipRanks’ database to get the rest of the Street’s take on three names J.P. Morgan believes represent great stock market values. Taking an even more bullish stance, the firm’s analysts bumped up all three’s price targets, indicating that each could surge by at least 30% in the year ahead.ViacomCBS (VIAC)As one of the top producers of premium entertainment content that includes television, streaming and digital content, studio production, publishing and live events, ViacomCBS is able to connect billions of people from around the world. Following its impressive rebound from a bottom in March, J.P Morgan thinks there’s still plenty of fuel left in the tank.Representing the firm, analyst Alexia Quadrani argues that this rally reflects “the market move, recognition of April as a bottom for advertising and a PayTV ecosystem that has held relatively stable during this period.” She also believes that its strong performance recently can largely be attributed to real long buying. “In the low $20 range – and certainly in the teens – ViacomCBS is simply not priced appropriately for the ultimate value of its content and brands,” the analyst stated.Further contributing to Quadrani’s confidence, the firm recently hosted multiple meetings with the leadership of several entertainment names. The analyst highlights the fact that the universal theme of these meetings was the large demand for content, which bodes well for VIAC.Expounding on this, Quadrani said, “ViacomCBS is well positioned in this environment with two studios – Paramount and CBS Television – to sell into this strength. While a cost-plus model for third party sales limits upside, this is partly offset by high volume as many streamers are unable to meet their needs with in-house production arms.” When it comes to international demand, specifically from OTT and broadcast, VIAC can capitalize on the opportunity in cases in which it doesn’t license global rights.Against the backdrop of the streaming wars, library content, including older programming that's getting put to AVOD on a non-exclusive basis, is becoming increasingly valuable. This is good news for VIAC as it can sell to third parties and support Pluto, in Quadrani’s opinion.“As the streaming wars are only getting started, we believe the heightened demand can persist beyond the near-term. We don't expect all content to go external, and where there is a jump-ball or the content fits in the ViacomCBS brand, the programming is likely to stay in-house,” the analyst noted.Based on all of the above, it’s no wonder Quadrani reiterated her Overweight (i.e. Buy) rating. Lifting the price target from $27 to $32, the analyst believes shares could surge 39% in the next twelve months. (To watch Quadrani’s track record, click here)   Judging by the consensus breakdown, opinions from the broader analyst community are split almost evenly down the middle. 8 Buys, 8 Holds and a single Sell add up to a Moderate Buy consensus rating. The $25.67 average price target puts the upside potential at 11%. (See ViacomCBS stock analysis on TipRanks)Keysight Technologies (KEYS)As for J.P. Morgan’s next pick, Keysight Technologies offers innovative technology that’s capable of solving tough measurement challenges. With its recent acquisition creating new opportunities, the firm sees significant gains on the horizon.KEYS recently revealed that it had inked a deal to acquire Eggplant, which provides functional test automation products as a subscription to software developers working to design customer experience interfaces across applications for diverse end-markets.Weighing in on the move for J.P. Morgan, analyst Samik Chatterjee tells clients it “marks a change for Keysight relative to its traditional customers that design and test hardware, and will allow the company to address an emerging market opportunity around software testing by application developers.” Eggplant’s product offerings include a Digital Automation Intelligence platform that can allow tests for a broad range of technologies to be conducted, with its current clientele inhabiting the automotive, aerospace and defense and retail industries.Speaking to the importance of AI-based testing platforms, Chatterjee points out they are becoming more “relevant for testing user interfaces through simulation of synthetic users.” In addition, it’s necessary to make the platform easy to navigate as well as to abstract the software developer from the technology itself, both of which Eggplant has been able to do, making it a top player in the space, according to the analyst.It should also be noted that Eggplant doesn’t directly compete with traditional APM vendors, but rather a more “fragmented” group of names including Tricentis, Parasoft and ACCELQ, as well as IBM, Broadcom, mabl, Micro Focus, Sauce Labs and Perforce Software.While some investors have expressed concern regarding Eggplant’s relatively modest revenue contribution, Chatterjee anticipates it being modestly accretive, with it potentially able to demonstrate earnings ramp given a combination of favorable growth/margins.Everything KEYS has going for it prompted Chatterjee to stay with the bulls. Along with an Overweight rating, he added $2 to the price target, with it now landing at $129. This new figure implies shares could climb 31% higher in the next year. (To watch Chatterjee’s track record, click here) Do other analysts agree with Chatterjee? As it turns out, most do. The stock’s Strong Buy consensus rating breaks down into 5 Buys and only 1 Hold. At $122.40, the average price target indicates 25% upside potential. (See Keysight stock analysis on TipRanks)Dana Inc. (DAN)Last but not least we come across Dana, which provides driveline components, including axles, for the light and commercial vehicle industries and the off-highway vehicle market, with its product lineup also featuring a range of engine components and heat transfer products. While shares have taken a tumble year-to-date, J.P. Morgan believes big things are in store for this name.Singing a different tune now, analyst Ryan Brinkman had previously recommended that investors focus on quality when it comes to auto parts suppliers. That being said, based on the industry’s faster pace of recovery, he is now recommending a more “risk on” approach. It should be noted, though, that DAN is less levered than its peer, American Axle & Manufacturing.Looking at the company’s client base, Brinkman likes the fact that it is more exposed to non-light vehicle markets, which he thinks should “exhibit moderating growth but to levels that are still on the whole greater than for light vehicle end markets.”On top of this, the increasing electrification of commercial vehicles bodes well for DAN. According to Brinkman, the content per vehicle opportunity is 2x higher when compared to traditional internal combustion powered commercial vehicles.If that wasn’t enough, Brinkman pointed out, “Dana also has a solid track record of generating synergies from acquired companies in recent years, such as Brevini, and we expect additional cost synergies as a result of its acquisition of Oerlikon.”It should come as no surprise, then, that Brinkman stands squarely in the bull camp. In addition to keeping an Overweight rating on the stock, he increased the price target from $15 to $16, which brings the upside potential to 31%. (To watch Brinkman’s track record, click here) Turning now to the rest of the Street, 5 Buys and 3 Holds have been assigned in the last three months. As a result, the analyst consensus rates DAN a Moderate Buy. Based on the $13.75 average price target, shares could gain 12% in the next year. (See Dana stock analysis on TipRanks)To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.



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Fannie-Freddie Profit Sweep Draws U.S. Supreme Court Review

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(Bloomberg) — The U.S. Supreme Court agreed to decide whether investors can challenge the 2012 agreements that let the federal government collect hundreds of billions of dollars of Fannie Mae and Freddie Mac’s profits.The justices said they will hear an appeal by President Donald Trump’s administration of a ruling that would force the government to defend against a shareholder lawsuit. The investors say the agreements exceed the authority of the Federal Housing Finance Agency, which regulates the two mortgage giants.Fannie jumped 5.7% to close at $2.22 in New York trading, while Freddie rose 6.7% to $2.23.A ruling in the investors’ favor would give them a chance to collect a massive settlement. Fannie and Freddie have paid more than $300 billion in dividends to the Treasury under the so-called net-worth sweep.The administration told the court the dispute “is of immense practical importance.” The justices will hear the case in the nine-month term that starts in October.The Supreme Court on Thursday also agreed to hear an appeal from shareholders challenging the profit sweep under a different legal theory.Fannie Mae and Freddie Mac keep the U.S. housing market humming by buying mortgages from lenders and packaging them into bonds that are sold to investors with guarantees of interest and principal.‘Cloud of Uncertainty’After the housing market cratered in 2008, the companies were put into federal conservatorship and sustained by taxpayer aid. They have since returned to profitability and paid $115 billion more in dividends to the Treasury than they received in bailout funds. Since 2013, most of their profits have been sent to the Treasury under the net-worth sweep.The administration contends the 2008 law that set up the FHFA precludes lawsuits that challenge the profit sweep. The law bars courts from doing anything to “restrain or affect the exercise of powers or functions of the agency as a conservator.”A splintered New Orleans-based federal appeals court let the lawsuit go forward, saying the FHFA wasn’t acting as a conservator when it agreed to the net-worth sweep.The suing shareholders said the appeals court reached the right conclusion. But they nonetheless urged the Supreme Court to hear the Trump administration appeal, saying all sides would benefit from clarity.“So long as there is a credible threat that litigation will invalidate the net-worth sweep, a cloud of uncertainty will hang over the companies’ capital structure,” the shareholders told the Supreme Court. “Investors will not be willing to supply the tens of billions of dollars in new capital that are essential to Treasury’s reform plan.”Shareholders in the New Orleans court said that the FHFA, which has a single director who can’t be fired without cause, has an unconstitutional structure, making its decision to enter the profit sweep invalid. While the divided New Orleans court agreed with shareholders that the FHFA’s structure is unconstitutional, it said that fact alone could not invalidate the sweep, leading to the shareholder appeal.“FHFA looks forward to the U.S. Supreme Court taking up” the case and clarifying the issues involved, the agency said in a statement.Trump administration officials, including Treasury Secretary Steven Mnuchin, have long stated that they want to end federal control by releasing Fannie and Freddie from conservatorship. Wall Street analysts have said they are skeptical of that happening before the November election, meaning the administration’s goal largely depends on Trump winning a second term.The government’s appeal is Mnuchin v. Collins, 19-563, and the shareholders’ appeal is Collins v. Mnuchin, 19-422.(Closes shares, adds FHFA statement starting in 3rd paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.



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TikTok teens target the Trump campaign, again

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The TikTok-tivists are at it again.

Thousands of users of the popular video app flocked to the Apple App Store in the last few days to flood President Donald Trump’s 2020 campaign app with negative reviews. On Wednesday alone 700 negative reviews were left on the Official Trump 2020 app and 26 positive ones, according to tracking firm Sensor Tower.

TikTok fans are retaliating for Trump’s threats of banning the app, which is owned by China’s Bytedance Ltd. and is hugely popular in the U.S., especially among teens. The thought of taking away a key social and entertainment hub in the midst of the Covid-19 pandemic has led to outrage.

“For Gen Z and Millennials, TikTok is our clubhouse and Trump threatened it,” said Yori Blacc, a 19-year-old TikTok user in California who joined in the app protest. “If you’re going to mess with us, we will mess with you.”

Blacc said the movement gained steam Wednesday when a popular TikTok user, DeJuan Booker, called on his 750,000 followers to seek revenge. He posted a step-by-step primer on how to degrade the app’s rating, notching 5.6 million views. “Gen Z don’t go down without a fight,” said Booker, who goes by @unusualbeing on TikTok. “Let’s go to war.”

The efforts to push the app low enough so that Apple will remove it from the app store may be misguided. Apple doesn’t delete apps based on their popularity. The App Store may review those that violate its guidelines or are outdated, but not if their ratings sink. A similar tactic was tried in April to protest Google Classroom by kids frustrated with quarantine home-schooling.

But young people are looking for ways to make their voices heard, even if some of them can’t yet vote. Last month, many young people organized through TikTok to sign up to attend Trump’s first post-shutdown campaign rally in Tulsa, Oklahoma, but then didn’t show up. The Trump campaign denied the online organizing effort contributed to lower-than-expected attendance.

The Trump campaign and Apple didn’t immediately respond to a request for comment. TikTok was experiencing connectivity issues on Thursday, according to Downdector, which measures web traffic.

Trump’s re-election smartphone app is a big part of the president’s unrivaled digital operation and was meant to circumvent tech companies like Facebook Inc. and Twitter Inc. and give the campaign a direct line to supporters. The app has helped the campaign engage Trump’s die-hard supporters, especially in the midst of the coronavirus pandemic, by feeding them his latest tweets and promoting virtual events. Supporters can donate to the president’s campaign or earn rewards for recruiting friends like VIP seats to rallies or photos with the president.

The Official Trump 2020 app has been downloaded more than 500,000 times on Google’s Android store as of June 15. Apple doesn’t publish information on downloads.

Reviews with titles such as “Terrible App” or “Do Not Download!” have been flooding the App Store since late June. Official Trump 2020 now has more than 103,000 one-star reviews for an overall rating of 1.2.

But the uptick of activity has also caused the app to rise in rankings. Users have to download the app to review it, vaulting it to second place on the Apple store from No. 486 on Tuesday, according to Sensor Tower.

“Do I think that this is going to fundamentally change the election? No,” said Tim Lim, a veteran Democratic digital strategist. “But it goes to show that they are just as susceptible to these mass actions as anyone else. Trump is starting to see what it feels like to have a massive online army committed to defeating him.”

Trump earlier this week said his administration is considering banning TikTok as one way to retaliate against China over its handling of the coronavirus. Trump’s comments came after Secretary of State Michael Pompeo told Americans not to download the app unless they want to see their private information fall into “the hands of the Chinese Communist Party.” Bytedance is also facing a U.S. national security review for its acquisition of startup Musical.ly. It has denied allegations that it poses a threat to U.S. national security.

Trump didn’t offer specifics about a potential decision and Pompeo seemed to walk back the idea of a ban in a later statement, saying that the U.S. efforts to protect American consumers’ data don’t relate to any one particular company.

Many TikTok users say they care less about potential Chinese snooping and more about Trump taking away their digital hangout. In the U.S., TikTok has been downloaded more than 165 million times, according to Sensor Tower.

“I don’t believe Trump is trying to take TikTok away because of national security, but more to retaliate against activism on the app and all the videos about him that drag him through the mud,” said Darius Jackson, an 18-year-old TikTok user in Champagne, Illinois, who asked his followers Wednesday to give Trump’s app a one-star rating.

“This is the first year I’ll be able to vote and I think activism on TikTok is going to make a big difference,” Jackson said.

More must-read tech coverage from Fortune:



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Airport upgrade faces uncertainty

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By Arjay L. Balinbin, Reporter

THE government has revoked the original proponent status given to the consortium seeking to rehabilitate the Ninoy Aquino International Airport (NAIA), after rejecting the latter’s move to revise the project’s terms in light of the pandemic’s effect on the travel industry.

The consortium claimed it will have difficulty obtaining financing for the P102.12-billion NAIA rehabilitation project under the current approved terms and conditions, the Department of Transportation (DoTr) and the Manila International Airport Authority (MIAA) said in a statement late Wednesday, citing the group’s July 6 letter submitted to the National Economic and Development Authority (NEDA).

The DoTr and MIAA said the consortium expressed it could only proceed with the NAIA project if “such terms and conditions are revised in accordance with its proposal as contained in the letter.”

“In view of this, and upon the recommendation of the NAIA Government Negotiating Panel, the MIAA, on 7 July 2020, has terminated negotiations with the NAIA consortium and withdraws/revokes its original proponent status (OPS),” they said.

In a statement issued on July 7, the consortium said “far-reaching and long-lasting consequences of the coronavirus pandemic on airline travel, airline operations and airport passenger traffic necessitated a review of the assumptions and plans to ensure that the NAIA project will be viable in the new normal.”

The proposed changes to the project’s framework would ensure its bankability, the consortium said.

The NAIA consortium is composed of Aboitiz InfraCapital, Inc; AC Infrastructure Holdings Corp.; Alliance Global Group, Inc.; Asia’s Emerging Dragon Corp.; Filinvest Development Corp.; and JG Summit Holdings, Inc.

Antonio A. Ligon, law and business professor at De La Salle University, said the government should be willing to renegotiate the terms of the deal, considering how the pandemic wreaked havoc on the global tourism industry.

“The compelling reason must justify the discontinuance of the negotiations, because it will not be good for the image of the government,” Mr. Ligon said in a phone interview.

“Both parties should consider what’s going on right now. Negotiations should consider the challenges that the world is facing now. It should not be one-sided. The supervening event is global, so it should be easy for both parties to consider based on this supervening event.”

For UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion, the government should not be faulted for trying to get a “better” deal.

“At this juncture, the government has the right to whom it may choose to deal, and it should, of course, be within the set and fair rules. With the pandemic and its ill-impacts on government revenues and consequently its spending on infrastructure, the government will be on the lookout for smarter and better deals. This is now evidenced by new negotiations they are currently having,” he said in an e-mailed reply to a question on Thursday.

“With international travel saddled with many uncertainties, the government may also be thinking about other issues needing more attention at this point,” he added.

Despite the collapse of talks with the NAIA consortium, the government appears unfazed.

Finance Secretary Carlos G. Dominguez III on Wednesday said there are two other proponents interested in the project at the terms the government has indicated.

“We’re not worried about it… We have two other proponents who are very willing to step into the shoes of the consortium,” he said in a virtual briefing.

In September 2018, the NAIA consortium obtained the original proponent status from the DoTr to rehabilitate, upgrade, expand, operate and maintain the country’s main gateway for 15 years.

The original proposal submitted in February 2018 cost P350 billion and included the construction of an additional runway over a 35-year concession period, but this was reduced eventually per the DoTr’s request.

Metro Pacific Investments Corp. was originally part of the consortium, but withdrew from the project due in part to the unresolved issue of tax payments.

The rehabilitation of the NAIA, whose main terminal opened in 1981, is expected to increase its capacity to 47 million passengers a year in the first two years and further expand this to 65 million passengers after four years.

The NAIA, which has four terminals, has been operating beyond its 30.5 million annual passenger capacity. It recorded 45.3 million passengers in 2018.



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