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Netflix analysts answer critical questions about the streaming giant and the future of the industry (NFLX)

Fri, 01/11/2019 - 2:20pm

  • Netflix jumped to a three-month high Friday following bullish commentary from UBS. The firm's analysts broke down several key questions surrounding Netflix and the future of streaming itself.
  • The analysts also outlined their long-term view that Netflix should achieve higher margins than Wall Street currently expects as its content spend is now at a scale of the "major media companies."
  • Watch Netflix trade live.

Netflix shares soared to a three-month high Friday on the back of a bullish UBS report that featured a breakdown of some of the most central questions surrounding the streaming giant.

The report offered shareholders some positive commentary at a time when Netflix is trading about 20% below its all-time high reached last June. Here's a summary of three questions UBS analysts, led by Eric Sheridan, addressed.

"Will original content drive subscriber upside, especially in international markets?"

Sheridan and his team said they expect Netflix's original content slate to drive accelerating growth internationally, particularly with more local, film, and non-fiction content on the platform. They also contend there's still low broadband usage in growing markets like India, where Netflix could expand. 

Last month, Netflix said over 45 million accounts watched the Netflix original movie, "Bird Box," in the first week it was released — a record, according to the company. 

"Will increasing competition threaten Netflix's market share or pricing power?" 

UBS said it expects subscription-streaming video will "come to dominate TV over time," creating opportunities for multiple players and rising competition. Hulu and Amazon Prime Video are gaining market share in the streaming space.

Still, the firm thinks Netflix is well-positioned because of its scale and slate of original content. That's also the driver behind their view Netflix can still command pricing power, or the ability to hold onto users while boosting prices.

"How are subscribers tracking in the US and key overseas markets?"

Domestic and international subscriber growth for the fourth-quarter will likely come in strong given a few factors, the analysts said, citing application downloads, Google search trends for its original content, and others. App-tracking analysis suggests country share of downloads is tilting away from the US, and toward international.

Notably, Sheridan said growth in the US and more matured international markets appears to be plateauing, and that emerging markets in Latin America and Asia, particularly India, are the "bright spots on local language content push."

More broadly, the firm outlined its long-term view that Netflix should achieve higher margins than Wall Street currently expects as its content spend is now at a scale of the "major media companies." The streaming giant's stable of original content was a decisive factor in UBS's rosy view.

Read more: 'Bird Box,' 'Black Mirror,' and Taylor Swift may not be enough to give Netflix a strong 4th-quarter finish, analyst says

"After six months of stock underperformance & key debates emerging about competition, margins & [free cash flow], we think these debates are better understood by investors and reflected in the current stock price," the analysts said.

In its investment recommendation, the firm upgraded its rating on the stock from "neutral" to "buy," and upped its price target from $400 to $410. On Friday, shares were up almost 4% and trading near $337.50, their highest since October 19.

 Netflix will report its fourth-quarter results on January 17, with analysts surveyed by Bloomberg expecting earnings of $0.24 a share on revenue of $4.2 billion. 

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Nvidia is a stand out in the semiconductor space amid uncertain US-China trade talks, analyst says (NVDA)

Fri, 01/11/2019 - 1:59pm

  • The US and China have agreed to go ahead with further trade talks, but the ongoing US government shutdown could derail trade negotiations, a report said.
  • The outcome of the trade talks is especially relevant for the semiconductor industry that relies heavily on manufacturing steps in multiple geographic regions, according to William Stein at SunTrust Robinson Humphrey.
  • Among the semis industry, Nvidia stands out as a structural grower, according to Stein. 
  • Watch Nvidia trade live.

Nvidia is a good bet in the semiconductor space amid the uncertainty of the trade talks between the US and China, an analyst said Friday.  

After ending a three-day trade negotiation in Beijing, the US and China have agreed to go ahead with a further set of talks at the end of January in Washington, DC,  The Wall Street Journal reported on Friday. But, the talks could be delayed due to the US government shutdown linked to a funding request by President Donald Trump to build a wall on the southern border, the report said. 

"We believe a constructive resolution will lift semis, but a delay or destructive resolution will take most lower," William Stein, an analyst at Sunset Robinson Humphrey, said in a note out on Friday. The outcome of the trade talks is especially relevant for the semiconductor industry, which relies heavily on the manufacturing steps in multiple geographic regions, Stein said in December.

Among the semis industry, Nvidia stands out as a structural grower, according to Stein. 

Nvidia on Sunday unveiled its new GeForce RTX 2060 gaming graphics card, which at $349-$450 can make the chipmaker's new Turing architecture accessible to laptop gamers. Like its previous Turing cards, the RTX 2060 also supports new features such as real-time ray tracing, Nvidia's niche technology that allows for more cinematic and realistic visual.

"We view the announcement as distinctly positive," said Stein. He added that when the card becomes available on January 13, it will help boost the company's fourth-quarter earnings, which will be out on February 14.

Stein also noted that Nvidia has looked past its GPU-inventory problem. Nvidia in November guided its fourth-quarter revenue 20% below the Wall Street consensus, pinning its problems on an excess of mining GPUs post the crypto-currency boom.

"Our anecdotal review of inventory from 3rd party GPU sellers indicates a significant decrease in GPU inventory relative to the levels we observed when NVDA reported third-quarter results," Stein said.

Stein has a "buy" position and a $237 price target for Nvidia— 60% above where shares were trading Friday.

Nvidia was down 34% in the past year.

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THE PAYMENTS ECOSYSTEM: A deep dive into the industry's biggest shifts and trends that will drive short- and long-term growth

Fri, 01/11/2019 - 1:06pm

This is a preview of a research report from Business Insider Intelligence. Current subscribers can read the report here.

The digitization of daily life is making phones and connected devices the preferred payment tools for consumers — preferences that are causing digital payment volume to blossom worldwide.

As noncash payment volume accelerates, the power dynamics of the payments industry are shifting further in favor of digital and omnichannel providers, attracting a wide swath of providers to the space and forcing firms to diversify, collaborate, or consolidate in order to capitalize on a growing revenue opportunity.

More and more, consumers want fast and simple payments — that's opening up opportunities for providers. Rising e- and m-commerce, surges in mobile P2P, and increasing willingness among customers in developed countries to try new transaction channels, like mobile in-store payments, voice and chatbot payments, or connected device payments are all increasing transaction touchpoints for providers.

This growing access is helping payments become seamless, in turn allowing firms to boost adoption, build and strengthen relationships, offer more services, and increase usage.

But payment ubiquity and invisibility also comes with challenges. Gains in volume come with increases in per-transaction fee payouts, which is pushing consumer and merchant clients alike to seek out inexpensive solutions — a shift that limits revenue that providers use to fund critical programs and squeezes margins.

Regulatory changes and geopolitical tensions are forcing players to reevaluate their approach to scale. And fraudsters are more aggressively exploiting vulnerabilities, making data breaches feel almost inevitable and pushing providers to improve their defenses and crisis response capabilities alike.

In the latest annual edition of The Payments Ecosystem Report, Business Insider Intelligence unpacks the current digital payments ecosystem, and explores how changes will impact the industry in both the short- and long-term. The report begins by tracing the path of an in-store card payment from processing to settlement to clarify the role of key stakeholders and assess how the landscape has shifted.

It also uses forecasts, case studies, and product developments from the past year to explain how digital transformation is impacting major industry segments and evaluate the pace of change. Finally, it highlights five trends that should shape payments in the year ahead, looking at how regulatory shifts, emerging technologies, and competition could impact the payments ecosystem.

Here are some key takeaways from the report:

  • Behind the scenes, payment processes and stakeholders remain similar. But providers are forced to make payments as frictionless as possible as online shopping surges: E-commerce is poised to exceed $1 trillion — nearly a fifth of total US retail — by 2023.
  • The channels and front-end methods that consumers use to make payments are evolving. Mobile in-store payments are huge in developing markets, but approaching an inflection point in developed regions where adoption has been laggy. And the ubiquity of mobile P2P services like Venmo and Square Cash will propel digital P2P to $574 billion by 2023.
  • The competitive landscape will shift as companies pursue joint ventures to grow abroad in response to geopolitical tensions, or consolidate to achieve rapid scale amid digitization.
  • Fees, bans, steering, or regulation could impact the way consumers pay, pushing them toward emerging methods that bypass card rails, and limit key revenue sources that providers use to fund rewards and marketing initiatives.
  • Tokenization will continue to mainstream as a key way providers are preventing and responding to the omnipresent data breach threat.

The companies mentioned in the report are: CCEL, Adyen, Affirm, Afterpay, Amazon, American Express, Ant Financial, Apple, AribaPay, Authorize.Net, Bank of America, Barclays, Beem It, Billtrust, Braintree, Capital One, Cardtronics, Chase Paymentech, Citi, Discover, First Data, Flywire, Fraedom, Gemalto, GM, Google, Green Dot, Huifu, Hyundai, Ingenico, Jaguar, JPMorgan Chase, Klarna, Kroger, LianLian, Lydia, Macy’s, Mastercard, MICROS, MoneyGram, Monzo, NCR, Netflix, P97, PayPal, Paytm, Poynt, QuickBooks, Sainsbury’s, Samsung, Santander, Shell, Square, Starbucks, Stripe, Synchrony Financial, Target, TransferWise, TSYS, UnionPay, Venmo, Verifone, Visa, Vocalink, Walmart, WeChat/Tencent, Weebly, Wells Fargo, Western Union, Worldpay, WorldRemit, Xevo, Zelle, Zesty, and ZipRecruiter, among others

In full, the report:

  • Explains the factors contributing to a swell in global noncash payments
  • Examines shifts in the roles of major industry stakeholders, including issuers, card networks, acquirer-processors, POS terminal vendors, and gateways
  • Presents forecasts and highlights major trends and industry events driving digital payments growth
  • Identifies five trends that will shape the payments ecosystem in the year ahead

SEE ALSO: These are the four transformations payments providers must undergo to survive digitization

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RECESSION WATCH: Goldman Sachs has created a 5-part checklist for investors looking to avoid the next economic meltdown

Fri, 01/11/2019 - 1:42am

  • Recession cries grew increasingly loud as the stock market endured a turbulent end to 2018, with many business leaders bracing for a meltdown by the end of 2019.
  • Goldman Sachs compiled a five-part checklist for investors who want to monitor recessionary risks.

As the market melted down at the end of 2018, cries for an imminent recession grew louder and louder.

Investors were clearly spooked by an economic slowdown in China, and they balked at revised guidance from tech giants like Apple that trimmed their sales forecasts in response. Fear that the weakness could spread globally escalated to the point where US stocks hung on the precipice of a bear market.

And if that weren't bad enough, the world's biggest business leaders got in on the action. According to a New York Times survey of 134 business leaders at the Yale CEO Summit, nearly half said they expected a recession to strike by the end of 2019.

Goldman Sachs, on the other hand, says people need to hold their horses. The firm's economics team staunchly believes that recession fears are overdone and that worried investors should instead be focused on the enticing prospect of continued economic growth through 2020.

"High personal savings rates, a sizeable private sector financial surplus, and strong real income growth suggest that the US economy should continue to grow at an above-trend pace this year," a group of Goldman strategists led by Arjun Menon wrote in a recent client note.

But don't let Goldman's near-term optimism fool you — the firm still has its eye firmly on the forces that could eventually send the US tumbling into a recession. To that end, it has formulated a checklist of five economic indicators investors would be wise to watch in the coming months. They are as follows:

1) A slowing of economic growth to below 1%, or the unemployment rate rises sharply

Third-quarter gross-domestic-product growth in the US was 3.4%, on an annualized basis, so that specific measure has a ways to go. Further, the unemployment rate is near its lowest level in 18 years.

2) A sharp rise in private-sector financial balances

Goldman has crunched the numbers and found that this is a reliable leading recessionary indicator.

3) A continued rotation into cash

Cash was surprisingly the best-performing asset class of 2018.

4) An ISM manufacturing index decline below 50

This measure came in at 54.3 in December.

5) Flat industrial production

The most recent reading showed a 0.6% gain for the month of November.

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Fed chair Jerome Powell says he's worried about rising US debt

Fri, 01/11/2019 - 1:32am

  • Federal Reserve Chairman Jerome Powell is concerned about rising US debt. The annual debt in 2018 topped $1 trillion, while the overall deficit was $21.9 trillion as of January 8, according to the US Treasury, $16 trillion of which is owed by the public.
  • "I’m very worried about it," Powell told those at The Economic Club of Washington, DC, on Thursday. "From the Fed’s standpoint, we’re really looking at a business cycle length: that’s our frame of reference."
  • Part of the cause of the rising deficit, PBS NewsHour corresponded Lisa Desjardins explains, is that 2018 was the first year of President Donald Trump's tax bill.

Federal Reserve Chairman Jerome Powell is concerned about rising US debt. The annual debt in 2018 topped $1 trillion, while the overall deficit was $21.9 trillion as of January 8, according to the US Treasury, $16 trillion of which is owed by the public.

"I’m very worried about it," Powell told those at The Economic Club of Washington, DC, on Thursday. "From the Fed’s standpoint, we’re really looking at a business cycle length: that’s our frame of reference."

"The long-run fiscal, nonsustainability of the U.S. federal government isn’t really something that plays into the medium term that is relevant for our policy decisions," Powell continued. "It’s a long-run issue that we definitely need to face, and ultimately, will have no choice but to face."

While the US has sustained annual debts higher than 2018's, the debts were high in 2009 and 2010 when the economy was recovering from the Great Recession. Currently, even though the economy is strong, the annual national debt is growing.

Analysis done by PBS NewsHour in October 2018, explained why the debt is rising — and why it could be a problem.

Part of the cause, PBS NewsHour correspondent Lisa Desjardins explains, is because 2018 was the first year of President Donald Trump's tax bill. Tax revenue, she said was nearly flat, while government spending — by both Democrats and Republicans — increased with the bipartisan budget bill.

"We also see, if you look at the numbers, corporate tax receipts fell 30 percent," David Wessel, director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution, told NewsHour. "And that's largely the result of the president's tax cut.

"So what we're seeing — you would expect at a time like this revenues rising faster than spending, because the economy is strong, more people working, paying taxes, fewer people collecting unemployment benefits and such, and the deficit would shrink," he continued. "We see the opposite, and that's largely because of the tax cut."

If current laws stay in place, Business Insider's Bob Bryan explained in October, the annual deficit is expected to hover at "just shy of $1 trillion for fiscal year 2019 and will eclipse the $1 trillion mark in the following four years, according to official Trump administration estimates."

And with a rise in interest rates, which the Fed raised four times in 2018, the interest on US debt grows. In December, Wall Street's "bond king" Jeffrey Gundlach said the Fed was on a "suicide mission," raising rates while the deficit grows. The Fed is projecting two interest-rate hikes in 2019.

Another worry is that strong economies don't always remain strong, there's concern about what would happen if the US hit another recession, CNBC reports.

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Nearly three-quarters of bills will be paid digitally by 2022 — this is how banks can stay ahead of the trillion-dollar opportunity

Thu, 01/10/2019 - 10:10pm

This is a preview of a research report from Business Insider Intelligence, Business Insider's premium research service. To learn more about Business Insider Intelligence, click here.

Between housing costs, utilities, taxes, insurance, loans, and more, US adults paid an estimated $3.9 trillion in bills last year.

That market is growing slowly, but it’s changing fast — more than ever before, customers are moving away from paying bills via check or cash and toward paying online, either through their banks, the billers themselves, or using a third-party app.

Thanks to rising customer familiarity with digital payments, an increase in purchasing power among younger consumers more interested in digital bill pay, and a rise in digital payment options, nearly three-quarters of bills will be paid digitally by 2022, representing a big opportunity for players across the space.

In theory, banks should be in a great position to capitalize on this shift. Nearly all banks offer bill payment functionality, and it’s a popular feature. Issuers also boast an existing engaged digital user base, and make these payments secure. But that isn’t what’s happening — even as digital bill pay becomes more commonplace, banks are losing ground to billers and third-party players. And that’s not poised to change unless banks do, since issuer bill pay is least popular among the youngest customers, who will be the most important in the coming year.

For banks, then, that makes innovation important. Taking steps to grow bill pay’s share can be a tough sell for digital strategists and executives leading money movement at banks, and done wrong, it can be costly, since it often requires robust technological investments. But, if banks do it right, bill pay marks a strong opportunity to add and engage customers, and in turn, grow overall lifetime value while shrinking attrition.

Business Insider Intelligence has put together a detailed report that explains the US bill pay market, identifies the major inflection points for change and what’s driving it, and provides concrete strategies and recommendations for banks looking to improve their digital bill pay offerings.

Here are some key takeaways from the report:

  • The bill pay market in the US, worth $3.9 trillion, is growing slowly. But digital bill payment volume is rising at a rapid clip — half of all bills are now digital, and that share will likely expand to over 75% by 2022. 
  • Customers find it easiest to pay their bills at their billers directly, either through one-off or recurring payments. Bank-based offerings are commonplace, but barebones, which means they fail to appeal to key demographics.
  • Issuers should work to reclaim bill payment share, since bill pay is an effective engagement tool that can increase customer stickiness, grow lifetime status, and boost primary bank status.  
  • Banks need to make their offerings as secure and convenient as biller direct, market bill pay across channels, and build bill pay into digital money management functionality.

In full, the report:

  • Sizes the US bill pay market, and estimates where it’s poised to go next.
  • Evaluates the impact that digital will have on bill pay in the US and who is poised to capitalize on that shift.
  • Identifies three key areas in which issuers can improve their bill pay offerings to gain share and explains why issuers are losing ground in these categories.
  • Issues recommendations and defines concrete steps that banks can take as a means of gaining share back and reaping the benefits of digital bill pay engagement.
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Jeff Bezos' impending divorce carries some big risks for Amazon shareholders (AMZN)

Thu, 01/10/2019 - 8:51pm

  • Amazon CEO Jeff Bezos' impending divorce from his wife, MacKenzie Bezos, carries at least two big risks for the company's shareholders, legal experts say.
  • Bezos could become distracted by the divorce proceedings, affecting his ability to run Amazon.
  • The divorce could also potentially lead to a mass sell-off of stock by either Bezos or his wife.
  • Legal experts think Bezos and his wife will work to minimize those risks, since it's in their interests to do so.
  • But divorces don't always go smoothly, and things could end up worse than they expect.

For the last 25 years, Jeff Bezos has been the steady hand on the tiller for Amazon, guiding the company through both rough patches and calm seas to ever-richer ports of call.

Now his personal life threatens to rock the company's boat.

Bezos announced Wednesday that he and his wife, MacKenzie, are getting a divorce. Investors will likely be watching closely to see how the dissolution of his marriage affects Bezos' running of the company and his stock holdings in it, said Mark Harrison, an advisor with consultancy Marcum, who has served as an expert witness in numerous financial disputes.

"Investors care mostly about uncertainty," he said. He continued: "The market will look for signs of emotional upheaval between the two of them."

For now, investors seem to be taking the news of the divorce in stride. Amazon's shares closed Thursday down well less than 1%, and the company retained its title as the world's most valuable corporation. But things could change if the proceedings become protracted or start to get ugly, Harrison said.

That may already be starting. In a statement on Twitter announcing their plans to divorce, Bezos and his wife portrayed it as a friendly parting. But subsequent reports in the National Enquirer and the New York Post that Bezos was carrying on an affair before he and his wife officially separated threatened to sully that narrative.

The Bezoses' divorce has two big risks for shareholders

The risk of the Bezoses' breakup to Amazon and its shareholders is two-fold.

As the company's founder and sole CEO since its launch, Bezos is widely seen as the driving force behind the tech giant, which dominates the e-commerce market, has become the leading player in the cloud-computing industry, and has become the number-3 player in digital advertising behind Google and Facebook. Many investors likely consider him to be critical to the company's continued success, and may rightly worry that Amazon's business could suffer if Bezos is distracted by the divorce.

Discussing the potential danger, Harrison paraphrased hedge fund manager Paul Tudor Jones' feelings on the topic.

A person going through a divorce is "worthless to him, because they're completely unfocused," Harrison said.

But the other danger comes from Bezos' vast holdings of Amazon stock. He owns about 79 million shares, or about 16% of the company. That stake, worth about $131 billion, represents about 95% of his total wealth.

Washington state, where Amazon is headquartered and the Bezoses have long made their primary residence, will likely be where they end up filing for divorce. The state's community property laws don't mandate that MacKenzie will get a 50% cut of his Amazon stake in the divorce, but they likely will result in her getting ownership of a sizable portion of it, potentially up to half, legal experts said.

Read more: Jeff Bezos' divorce could soon make MacKenzie Bezos one of Amazon's biggest shareholders

The concern for investors is what kind of control she will have over the shares she gets, how they get transferred to her, and what she does with them.

"Investors are going to be spooked if any member of the family starts selling significant amounts of stock," Harrison said.

The divorce won't cause a change of control at Amazon

Amazon representatives did not respond to emails seeking comment about the Bezoses' divorce. Representatives for Vanguard and BlackRock, the two largest Amazon shareholders after Bezos, declined to comment on the divorce proceedings or their impact on shareholders.

One thing that's not a concern in the Bezos divorce is how it will affect control of the company. Other tech CEOs, including Facebook's Mark Zuckerberg and Alphabet's Larry Page, hold shares that give them or a small cohort of insiders control over their companies because they come with super-sized voting rights.

But Bezos holds the same kind of shares as everyday Amazon investors. Although he's Amazon's largest shareholder, its CEO, and its chairman, he doesn't have unchecked sway over it. So, no matter how many shares MacKenzie ends up with, or how her holdings are structured, it won't affect the balance of power at the company. 

"I am very happy that Amazon has a one share, one vote structure," said Rosemary Lally, an editor at the Council of Institutional Investors, which advocates for stronger corporate governance and shareholder rights, in an email. "If McKenzie [sic] Bezos does become a major shareholder and tries to do something that other Amazon shareholders oppose, they can [hold] her accountable."

Legal experts expect them to keep shareholders in mind

To be sure, Harrison, who has worked on divorce cases among other affluent couples, and other legal experts expect the Bezoses to be very aware of investors' potential worries and to do whatever they can to alleviate them. Because so much of their wealth is tied up in Amazon's stock, it's in the best interests of both of them to do so.

"I think you're going to find that both parties here want to get the investor world comfortable that nothing's going on," Harrison said.

Indeed, he and some other legal experts expect the divorce process to go relatively smoothly, not just because it's in both sides' interest, but because the amount of wealth they have is so immense. In some divorces, even among wealthy individuals, one side or the other stands to be materially hurt by the division of their assets, particularly if most of their wealth is in their homes, said Ira Garr, a family-law attorney in New York who represented Rupert Murdoch and Ivana Trump in their respective divorce cases. Such cases can be particularly rancorous, just because of that.

But that's just not applicable with the Bezoses.

"When you're talking about numbers this vast, no matter what you get, you're set for the rest of your life," Garr said. In that respect, he continued, "cases like that are easier to settle."

The two will likely structure their divorce settlement so that they don't have to sell shares all at once and depress the market, legal experts said. Instead, they're likely to put provisions in place that limit MacKenzie's ability to sell stock — and perhaps even allow Jeff Bezos to retain control over the voting rights of her shares, Harrison said.

Indeed, Brian Weiser, a financial analyst who covers Amazon for Pivotal Research Group, doesn't think investors have anything to worry about when it concerns Bezos' divorce.

"I'm not aware of any reason why anyone should assume there's any meaningful risk of any meaningful problem," he said.

But emotions can sometimes get in the way

Much of this assumes that the Bezoses will act rationally and will be able to set their emotions aside. But many divorces don't work out that way. And if Bezos or MacKenzie starts acting out of emotion rather than rationality, all bets may be off in terms of the ease of the divorce, his state of mind in running Amazon, and what happens to his shares.

"When [a divorce] gets salacious and a little crazy ... all kinds of bad things can happen," Harrison said.


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MongoDB stock sinks 13% after Amazon encroaches on its turf — but an analyst says that MongoDB has two secret weapons (MDB, AMZN)

Thu, 01/10/2019 - 8:36pm

  • MongoDB stock closed 13% down after Amazon Web Services announced its own rival DocumentDB.
  • Analysts say this needs to be taken seriously because of Amazon's scale and reach — but it's too early to tell if it will affect MongoDB in the long term.
  • MongoDB has two key advantages more capabilities and a loyal developer following — so loyal that when Microsoft offered a competing database called CosmosDB, it had little impact on MongoDB.

MongoDB's stock was down 13% at the close of the first day of trading after Amazon Web Services launched DocumentDB, a direct competitor to its own database business. The company, which went public in 2017, is now valued at just over $4 billion.

On Wednesday, Eliot Horowitz, CTO and co-founder of MongoDB, told Business Insider that he's not worried about Amazon DocumentDB — rather, he said, it was a sign of "how desperate Amazon was" to do what MongoDB does. Wall Street, however, does not seem to agree, evidenced by the dropping share price. 

Read more: The CTO of $4.4 billion MongoDB explains why he's 'not terribly worried' that Amazon's cloud is encroaching on its turf with a new database

"Amazon released a product that is not only competitive and directly targeted at MongoDB," Edward Parker, director and data and cloud infrastructure analyst at analyst firm BTIG, told Business Insider. "Given Amazon's cloud size and technical confidence, we have to take this very seriously. It has competitive implications for MongoDB."

Notably, DocumentDB is compatible with certain older versions of MongoDB, potentially making it easier for customers to move from one to the other. For its part, DocumentDB is tightly integrated with the rest of the Amazon Web Services empire, and customers pay only for what they use. 

Not all hope is lost for MongoDB, though, says Parker. What makes MongoDB stand out is its enthusiastic developer following. That enthusiasm might mean that AWS has trouble swiping these customers away from MongoDB, no matter how easy Amazon makes it. Besides, MongoDB has been around longer, and is more fully-featured.

"MongoDB has a very capable document database with a very passionate and large developer base," Parker said. "Amazon has advantages over MongoDB in terms of scale and overall resource preponderance. The question is the extent to which Amazon can attract MongoDB developers."

In an interview with TechCrunch, MongoDB CEO and president Dev Ittycheria was more confident, saying that "imitation was the sincerest form of flattery" and that "developers are technically savvy enough to distinguish between the real thing and a poor imitation."

"MongoDB will continue to outperform any impersonations in the market," Ittycheria told TechCrunch.

MongoDB has a secret weapon

In a note to clients, BTIG analysts pointed out that MongoDB has weathered similar storms before — a competing database from Microsoft Azure, called CosmosDB, failed to make a significant dent on MongoDB's momentum.

"CosmosDB is a document database from Microsoft which is the de facto number 2 hyperscale cloud provider," Parker said. "In theory, you would have expected that to be viable competition, but it hasn't really been able to slow down MongoDB. Microsoft has likely not been able to capture the same kind of developer mindshare that MongoDB has."

Instead, MongoDB says, it's common for customers to install MongoDB itself on their Microsoft Azure cloud infrastructure. MongoDB's Horowitz expects that there will be a similar dynamic at play with Amazon DocumentDB.

"We have had zero problems with MongoDB adoption on Azure," Horowitz told Business Insider. "I don't think [Amazon DocumentDB] going to have a terribly large effect on our business. It will bring MongoDB to the forefront to people's minds. It shows people who haven't used MongoDB before just how powerful the MongoDB API is."

Ultimately, BTIG believes that while the introduction of Amazon DocumentDB may not hurt MongoDB in the short run, it remains to be seen if it'll have long-term effects on the business. At the same time, MongoDB's killer advantage is really that developer enthusiasm, giving Amazon a high bar to clear, say the analysts. 

"Time will tell the extent to which [Amazon] is able to successfully emulate [MongoDB]’s virtues while overcoming some of its shortcomings, but it’s hard to conclude that this development doesn’t have negative competitive implications," BTIG analysts wrote.

Also of note is that MongoDB was one of the companies that went on the defensive against cloud providers, like Amazon or Baidu, that take open source software like its own and package it up as a service for profit. To do so, MongoDB changed its software licensing agreements — a a controversial move with ripple effects still playing out.

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Peter Thiel-backed digital bank N26 is now Europe's most valuable fintech

Thu, 01/10/2019 - 8:25pm

  • N26, a German fintech startup backed by venture capitalist Peter Thiel, raised $300 million in a series D funding round.
  • The latest financing values the company at $2.7 billion. 
  • The financing comes just 10 months after N26's last funding round and will be used to facilitate the company's expansion into the US market.

N26, a German digital banking company backed by venture capitalist Peter Thiel, is now the most valuable fintech in Europe. 

The company on Thursday said it had raised $300 million in a series D funding round that values it $2.7 billion. That's more than red hot $1.7 billion UK-based fintech Revolut.

Venture firm Insight Venture Partner is leading the latest funding round alongside Singapore’s sovereign wealth fund GIC. 

The financing comes just 10 months after N26's last funding round, in which the company raised $160 million from Tencent and Allianz.

Nicolas Kopp, the US chief executive officer of N26, said the fundraising is to facilitate the company's global expansion, including into the US.

Read more: A Peter Thiel-backed fintech that aims to be 'a mixture of Venmo, Zelle, Mint and Chase' is launching next year in the US

Business Insider previously reported that N26  is building a banking product for US customers in the first half of 2019 and is partnering with an unnamed American bank for its offering. The company is aiming to launch a banking app that offers an aggregation of services provided by popular financial apps, like Venmo, Zelle, Mint, and a bank account. 

N26 is also looking to launch in other markets after the US, Kopp said. The company has a long-term goal of becoming a global bank and aims to serve 100 million users over the coming years, he said.

Launched in January 2015, N26 currently operates in 24 European markets and has tripled its active users to 2.3 million over last year. The company has over 700 employees and has opened a New York office that houses 25 to 30 employees, Kopp said.

N26 is just the latest fintech to raise funding at a hefty valuation. Fintech Plaid just raised funding at a $2.65 valuation. 

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As TSA agents go unpaid, Travis Scott and Kanye West songs are blasting through JFK's loud speakers

Thu, 01/10/2019 - 6:44pm

  • The sixth-busiest airport in the world is taking on an unusual vibe.
  • As TSA agents go unpaid, Travis Scott and Kanye West songs are blasting through JFK's loudspeakers, some passengers reported on Twitter.
  • "We're living in a simulation," one passenger tweeted.

The US dealing with the second-longest government shutdown ever.

Most of the effects have been unsavory. Some 800,000 federal workers are furloughed, meaning they are not working and receiving no pay, or working without pay (though those workers are due back pay when the government reopens) until the shutdown ends. The Food and Drug Administration has ceased food inspections. And the 40 million Americans who receive SNAP benefits won't receive food assistance after February, if the shutdown continues.

Lines at airports nationwide have also become incredibly long as Transportation Security Administration (TSA) employees call in sick at work and go unpaid. Air-traffic controllers have also gone unpaid since December 22.

Read more: The government shutdown is being blamed for turning TSA lines in a New York airport into a 'mad house'

However, there's one little-known effect of the shutdown that has turned things up at New York City's John F. Kennedy International Airport (JFK). Loudspeakers have been blasting music that's not the typical, milquetoast offerings at the nation's sixth-busiest airport.

Multiple passengers flying out of JFK have shared on Twitter that they've heard the uncensored versions of "Sicko Mode" by Travis Scott featuring Drake. Such sentiments weren't shared before the government shutdown began on December 22.

JFK is playing sicko mode we’re living in a simulation

— cesar millan (the dog whisperer) (@postmetaboi) January 7, 2019

TSA has officially stopped giving a fuck. SICKO MODE (dirty version) is playing on the speakers at JFK lmfaooo

— Mezzo Rigatoni (@LSDiPalma) January 9, 2019

they are currently blasting an uncensored sicko mode at jfk

— Rayyan (@RayyanRKhan) December 31, 2018

Other song choices have been reported on Twitter at JFK's eight terminals, which host of more than 29 million departures a year.

I was in JFK at 6:30am the other day and they were playing that poopty scoop Kanye song and I felt like I was in the twilight zone

— Tracee Ellis Ross Jr (@virghoe_) January 9, 2019

JFK airport carousel blasting “No Sleep Til Brooklyn” at 10:30 PM is kinda alright with me.

— RL Barnes, Ph.D. (@DigitalHistory_) January 7, 2019

the extremely weird feeling when the airport PA is blasting Paramore’s “Misery Business” like it’s a super hot 2007 Friday night at old JFK

— Molly Templeton (@mollytempleton) January 5, 2019

JFK Airport blasting Ludacris at 5:45 am is a vibe

— Caroline Kenny (@carolinerkenny) December 28, 2018

A spokesperson from the Port Authority of New York and New Jersey, which operates JFK, told Business Insider that TSA employees have discretion over the music at some terminals, while airline employees choose songs at other terminals.

The American Federation of Government Employees did not immediately respond to Business Insider's inquiry.

SEE ALSO: TSA employees working unpaid because of the government shutdown are quitting — and this could create a 'massive security risk' for travelers

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NOW WATCH: Bernie Madoff was arrested 10 years ago — here's what his life is like in prison

9 reasons you shouldn't automatically ignore a credit card just because it has an annual fee

Thu, 01/10/2019 - 6:00pm

The Insider Picks team writes about stuff we think you'll like. Business Insider may receive a commission from The Points Guy Affiliate Network.

Not paying for things if you don't have to is both common sense and a fundamental tenet of personal finance.

At first glance, this makes credit cards with annual fees seem like a losing proposition when there are credit cards that don't have annual fees. However, an annual fee isn't necessarily a reason to turn down an otherwise compelling credit card offer — especially since in some cases, rewards, bonuses, and benefits you’ll receive are worth more than the fee you’ll pay.

Here are a few reasons you shouldn't automatically ignore a credit card just because it has an annual fee.

1. Significant welcome bonuses

Credit cards that offer huge welcome bonuses — think 50,000-100,000 points or more just for signing up and meeting a minimum spending requirement — are pretty much guaranteed to have an annual fee. Their no-fee counterparts typically have much smaller bonuses, if they offer anything at all.

For example, the no-fee Chase Freedom usually offers $150 in cash back (or 15,000 points) after you spend $500 on purchases in your first three months of opening an account, while the more expensive Chase Sapphire Preferred Card and Chase Sapphire Reserve each offer a bonus of 50,000 points after you spend $4,000 on purchases in the first three months.

Read more: The best credit card rewards, bonuses, and perks of 2019

2. Better rewards for spending

Cards with annual fees are generally more rewarding than their no-fee counterparts. For example, the Chase Sapphire Reserve earns 3 points per dollar spent on dining and travel, while the no-fee Chase Freedom Unlimited offers just 1.5 points per dollar spent on all your purchases.

3. No foreign transaction fees

Depending on how much you travel — and how much money you spend abroad — this could be significant. With a few exceptions, most credit cards without annual fees charge extra (around 3%) when you make a purchase in a foreign currency; these days, virtually all annual-fee cards don't have such fees (though make sure you double check to avoid a nasty surprise!).

Read more: The 5 best 'no foreign transaction fee' credit cards that will save you money on international trips

4. Extra credit card benefits

Many of the most attractive credit card benefits are only available on cards with annual fees — think free checked bags, discounts on in-flight purchases, airport lounge access, and hotel elite status.

5. Improved purchase and travel protection

Many credit cards with annual fees come with protection benefits for the things you buy with the card — extended warranties, trip delay and cancellation coverage, return protection, purchase protection, rental car insurance, and more. Many of these benefits are not available on no-annual-fee cards, or if they are they are more limited. Cards with annual fees typically have higher per-claim and annual reimbursement limits, and/or protect you for a longer period of time.

6. Travel credits can offset high fees

For premium credit cards with the highest annual fees — think $450-$550 — the actual cost often isn't as high as it first appears.

For example, the Starwood Preferred Guest® American Express Luxury Card has a $450 annual fee, but you get a $300 credit toward purchases at participating SPG and Marriott Rewards hotels every year. So if you use that credit, the annual fee is effectively $150, before accounting for other card benefits.

Similarly, the Hilton Honors Aspire Card from American Express gets you a $250 annual hotel or resort credit, a $250 airline fee credit, an annual free weekend night at any Hilton property, a $100 on-property credit any time you stay for two nights or more and book through, free Hilton Honors Diamond status, and more. The first two benefits alone are worth $500, and the card's annual fee is $450 — if you just used those two benefits and nothing else, you'd already come out ahead.

The same is true for cards like the Chase Sapphire Reserve ($450 annual fee, $300 travel credit) and the Citi Prestige ($495 annual fee, $250 travel credit).

The Platinum Card® from American Express has a more diverse set of annual credits: its $550 annual fee is offset by a $200 airline fee credit, up to $200 per year in Uber credits ($15 per month January-November and $35 in December), and up to $100 in Saks Fifth Avenue credits ($50 in each half of the calendar year). So if you use all of those benefits, you're effectively paying just $50/year for everything else that comes with the AmEx Platinum!

Read more: I pay $1,000 in annual fees for the Chase Sapphire Reserve and the AmEx Platinum — and as far as I’m concerned, the math checks out

7. Anniversary rewards

Many credit cards with annual fees also offer annual bonuses that can be worth as much or more than the annual fee itself.

Hotel cards like the IHG Rewards Club Premier Credit Card and The World of Hyatt Credit Card from Chase and the Starwood Preferred Guest cards from American Express (find a breakdown of them here) give you a free night certificate every year after you pay the annual fee. Others, like the Radisson Rewards credit cards from US Bank, offer an annual rewards points bonus.

Chase and Southwest Airlines' cobranded credit cards also come with anniversary reward points ranging from 3,000 to 7,500 points depending on the card. 

8. Unlock the full potential of your rewards

In addition to credit cards that earn frequent flyer miles with an airline or rewards points with a hotel loyalty program, many banks offer credit cards that earn points in their own rewards programs — Chase Ultimate Rewards, Citi ThankYou Points, and American Express Membership Rewards are the most well-known of these.

All of these programs have both annual-fee cards and no-annual-fee cards that accrue points. However, without an annual fee, you'll often find yourself unable to use your points in certain ways. For example, no-annual-fee cards from Chase like the Chase Freedom, Chase Freedom Unlimited, and Ink Business Cash Credit Card earn Chase Ultimate Rewards points, but you can't transfer those points to Chase's airline and hotel partners unless you have a card with an annual fee, like the Chase Sapphire Reserve, Chase Sapphire Preferred, or Chase Ink Business Preferred Credit Card.

9. An annual fee isn't a lifetime commitment

You can always downgrade or cancel a card in the future if the annual fee is no longer worth it. A credit card should be a mutually beneficial relationship between you and your bank. If you aren't getting enough value out of a card to justify the annual fee, call your bank and tell them — they may be able to offer you a one-time bonus (commonly referred to as a "retention offer"), or help you exchange your credit card for a different one with no annual fee.

Otherwise, you can close your account. But if you're going to do this, we recommend waiting for at least a year after you open the card. Closing a card shortly after receiving a welcome bonus makes banks less likely to give you bonuses in the future, and in some cases can even result in a reversal of the points you've already received.

The bottom line

Keep in mind that all this doesn't mean every credit card you have should have an annual fee — in fact, using a combination of cards is often the most rewarding strategy. But if you're looking to maximize the rewards you earn from your spending — and you pay off your credit cards every month — an annual fee isn't necessarily a reason to say no to a new credit card.

Click here to learn more about the AmEx Platinum from American Express from Insider Picks' partner: The Points Guy. Click here to learn more about the Chase Sapphire Reserve from Insider Picks' partner: The Points Guy. Click here to learn more about the Chase Sapphire Preferred from Insider Picks' partner: The Points Guy.

SEE ALSO: The best credit card rewards, bonuses, and perks of 2019

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Elon Musk may be trying to cut a deal with China that could give it a huge advantage, according to a Tesla analyst (TSLA)

Thu, 01/10/2019 - 5:33pm

  • Morgan Stanley analyst Adam Jonas thinks Tesla CEO Elon Musk might be taking matters into his own hands to dodge the immediate effects of a Trump trade war.
  • Musk could be looking to cut a deal with China on imported Tesla vehicles while the carmaker is building a new factory in Shanghai.

If there's one thing that the Age of Trump seems to have taught everybody in politics and business, it's that transactionalism is in. If longstanding rules are being reworked, ignored, or outright broken every day, then you need to make your own luck.

This might have been the secret mission of Tesla CEO Elon Musk during a recent no-so-secret visit to China, where he broke ground on a new Tesla factory in Shanghai and also met with Chinese Premier Li Keqiang. The factory will take years to complete — but what is Tesla getting out of the deal right now?

Read more: I've driven every Tesla model you can buy. Here are my favorite features.

In a research note published Thursday, Morgan Stanley analyst Adam Jonas offered an intriguing take on Elon in China. 

"Tesla has proprietary EV and battery technology and is willing to transfer its valuable physical production assets to assemble its vehicles in a wholly owned plant in Shanghai," he wrote.

"In our opinion, Tesla may have some negotiating power to secure more favorable (or less unfavorable) trading parameters for the import and sale of its EVs in China while the plant is being ramped up."

Musk is already cutting China deals

In the midst of a US-China trade war that compelled Tesla to lower prices on vehicles it makes in the US and sells in the Middle Kingdom, Musk could stand to cut some deals — especially, as Jonas noted, if Musk wants to sell a lot of Model 3 vehicles in the country.

In fact, he already has cut one good deal. The Shanghai Gigafactory will be the first Western plant in China that isn't the product of a joint venture with a Chinese manufacturer. So if Musk is angling for an open-ended tariff break, regardless of what the Trump administration does, then he might have realized that Tesla is better off going it alone.

Tesla shares were trading up by 2% on Thursday, to $345.

SEE ALSO: Elon Musk said Tesla is retiring the cheapest types of Model S and X, and there's a deadline to get one

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NOW WATCH: What would happen if Elon Musk left Tesla

Rolls-Royce's CEO reveals how his company just set a new all-time record for sales of its ultra-luxury cars

Thu, 01/10/2019 - 5:27pm

  • On Wednesday, Rolls-Royce Motor Cars reported annual sales of 4,107 vehicles in 2018. It's the most in the ultra-luxury brand's 115-year history. 
  • This marks a 22% increase over the 3,362 cars sold by the BMW Group subsidiary in 2017. 
  • Rolls-Royce Motor Cars CEO Torsten Müller-Ötvös attributes the growth to the arrival of the new eighth-generation flagship Phantom sedan.

On Wednesday, Rolls-Royce Motor Cars reported annual sales of 4,107 vehicles in 2018. It's the most in the ultra-luxury brand's 115-year history. 

BMW Group's Goodwood, England-based subsidiary beat out the previous record of 4,063 cars set back in 2014. 

This marks a 22% increase over the 3,362 cars "commissioned" by the company's clients in 2017. 

Much of the growth was driven by the debut and production ramp-up of the eighth generation of the company's flagship Phantom sedan, Rolls-Royce Motor Cars CEO Torsten Müller-Ötvös told Business Insider in an interview on Wednesday. 

(Rolls-Royce Motor Cars is not affiliated with Rolls-Royce Holdings plc, which is an aviation engine maker and defense contractor.) 

Read more: We drove the all-new $644,000 Rolls-Royce Phantom and were blown away by its opulence. Take a look inside.

North America remains Rolls-Royce's largest market and accounts for roughly one-third of the company's total sales, Müller-Ötvös said. 

Europe and Asia each accounted for 20% of worldwide sales. China proved to be a particularly bright spot with a 40% surge in sales in 2018 on the back of strong Phantom and Ghost sedan sales, the CEO explained.

The UK also saw sales jump 10% in spite of economic and political instability. 

As for 2019, Müller-Ötvös expects Rolls-Royce to have another banner year with full-scale production of the new Cullinan SUV coming online.

According to the company's longtime CEO, the order backlog of the Cullinan has reached the third quarter of 2019 and will be the brand's best selling model. 

SEE ALSO: We drove an all-new $644,000 Rolls-Royce Phantom that's the pinnacle of automotive luxury. Here are its coolest features.

FOLLOW US: On Facebook for more car and transportation content!

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Nvidia's CEO reportedly slams rival AMD's new 7-nanometer gaming graphics card (NVDA, AMD)

Thu, 01/10/2019 - 4:45pm

  • AMD on Wednesday unveiled Radeon VII, the first 7-nanometer gaming graphics card available to consumers.
  • Right after AMD's announcement, Nvidia CEO Jensen Huang reportedly slammed the new chip, saying its "performance is lousy."
  • Nvidia recently unveiled GeForce RTX 2060, the company's cheapest graphics card that can provide ray tracing.
  • AMD CEO Lisa Su fired back, saying AMD isn’t all in on ray tracing just yet simply because other parts of the ecosystem are not ready.

Nvidia CEO Jensen Huang slammed rival AMD's first 7-nanometer gaming graphics card right after it was unveiled.

Huang described the performance of AMD’s latest Radeon VII graphics processing unit as "lousy," according to Gizmodo, which was at the roundtable attended by media outlets. AMD says the new chip can provide up to 36% higher performance than its previous top-of-the-line graphics cards.

Huang described the announcement as "underwhelming" and said Nvidia's RTX 2080 would "crush" the Radeon VII in benchmarks. 

On Sunday, Nvidia said it was bringing its RTX 2080 graphics processing unit to gaming laptops and also introduced the GeForce RTX 2060, its cheapest graphics card that can provide ray tracing, a niche technology that it has been touting in its GPUs. Ray tracing allows for more cinematic and realistic visuals.

AMD's latest GPUs do not support ray tracing, and will cost $699 when they're available February 7. For comparison, Nvidia's RTX 2060 sports a starting price of $346. Its top GPUs cost at least $1,000.

AMD CEO Lisa Su responded to Huang's comments, suggesting he probably hasn't seen the new GPU before revealing why AMD isn't all in on ray tracing just yet.

"The consumer doesn't see a lot of benefit today because the other parts of the ecosystem are not ready," She said, according to Gizmodo. "I think by the time we talk more about ray tracing the consumer's gonna see the benefit."

And analysts have also noted Nvidia's struggles with its transition to ray-tracing chips.

"When you turn on the ray tracing, it affects the overall performance of the GPU pretty substantially," Christopher Rolland, a semiconductor analyst at Susquehanna International Group recently told Markets Insider.

"Nvidia promises people real-time ray tracing, but you practically can't use it. That's definitely a disappointment."

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These are the four transformations payments providers must undergo to survive digitization

Thu, 01/10/2019 - 4:32pm

This is a preview of a detailed slide deck from Business Insider Intelligence, Business Insider's premium research service. Click here to learn more. Current subscribers can view the deck  here.

Rising smartphone penetration, regulations pushing users away from cash, and globalization demanding faster and new ways to transact are leading to a swell in noncash payments, which Business Insider Intelligence expects to grow to 841 billion transactions by 2023.

This shift has created a greenfield opportunity in the space. Legacy providers are working to leverage their scale as they update their infrastructure and adapt their business models. But at the same time, upstarts are using their strengths in user experience to try to disintermediate or beat out those at the forefront of the space — a dichotomy that’s creating crowding and competition.

Digitization and crowding in the payments space will force companies that want to emerge atop the ecosystem to undergo four critical digital transformations: diversification, consolidation and collaboration, data protection, and automation. Those that do this effectively, and use these shifts as a means of achieving scale without eroding the user experience, will be in the best position to use ongoing digitization in their payments space to their advantage.

In The Future Of Payments 2018, Business Insider Intelligence takes a look at some of the biggest problems digitization and crowding are causing for payments firms, outlines the key transformations players can make going forward to resolve them, and explores areas where firms have already begun to use these transformations to their advantage.

Get The Future of Payments

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Amazon is reportedly building a Netflix-like service for video games

Thu, 01/10/2019 - 4:29pm

  • Amazon is working on a video game streaming service, like Netflix but for video games, according to a new report in The Information.
  • Amazon's competition at Microsoft and Google are already openly preparing similar services.
  • And Sony is out ahead of everyone else: The company has been operating the PlayStation Now streaming service for years.

Amazon's already a major video game retailer, and it operates the largest video game livestreaming service in the world with Twitch.

The company's next move into gaming, though, is even more ambitious: Amazon is working on a Netflix-like service for playing games, according to a new report from The Information.

Like Sony's PlayStation Now, the new service from Amazon will reportedly allow players to stream games rather than having to buy and download individual titles. The company is said to be discussing potential games for the new service with game publishers, but it sounds like plans are still early; the streaming service isn't expected to arrive until 2020 "at the earliest."

Amazon has yet to officially announce such a service, and a representative didn't return a request for comment as of publishing.

But even without official confirmation or an announcement, multiple jobs listings spotted by The Verge point to Amazon building just such a service. One such listing even explicitly says, "This is a rare opportunity to take a technical leadership role to shape the foundation of an unannounced AAA games business." 

Logic also points toward Amazon making such a service.

Amazon is one of the few tech companies with a cloud computing infrastructure already in place, worldwide, to pull off such a challenging technological issue. It's called "Amazon Web Services" (AWS for short), and it's the type of infrastructure required to pull off video game streaming on a mainstream consumer scale.

Sony's PlayStation Now largely obtained its infrastructure from two companies that Sony purchased: OnLive and Gaikai. In the case of Microsoft's Project xCloud, Microsoft is relying on its Azure cloud infrastructure. Google, similarly, has a cloud infrastructure built out for use with its Project Stream initiative.

Both services promise high-end video game streaming on low-end tech, and that idea comes with a lot of potential: No more buying expensive game consoles. Instead, the heavy lifting would be offloaded to a cloud server somewhere and beamed into your home. 

Though several services have attempted such a feat, none have upended the video game industry in the way that Netflix and other streaming services upended the film and TV business.

Read the full report over at The Information.

SEE ALSO: Microsoft's Project xCloud will let you stream Xbox games straight to your smartphone or tablet

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December's blowout jobs report could actually be a sign the US is headed for a recession

Thu, 01/10/2019 - 3:39pm

  • Market watchers breathed a sigh of relief following the December jobs report, which some saw as a sign recession fears have been overdone.
  • But some still see warnings of a downturn.
  • Economists think the next recession, whenever it occurs, will be less severe than in 2008.

The latest labor market figures painted a standout picture of the US economy, soothing markets after months of recession talk from Wall Street to Washington.

But some think a downturn is actually more likely in light of the employment report, which showed the US added the most jobs since February and that wage gains accelerated at their fastest pace in nearly a decade.

“The surprisingly robust 312,000 rise in US non-farm payrolls in December soothed market jitters about an imminent recession,” said Albert Edwards, a Societe Generale strategist, in a research report. “But a quick look at history reveals accelerating payroll data is not untypical just ahead of recessions.”

Employment jumped sharply just ahead of the recent recessions that started in 2007 and 2001, he noted. This could be the case because employment reports point to current and past business conditions, according to economists, as opposed to future performance.

Some see the steepening yield curve — seen as a potential recession indicator — as a signal that a slowdown might be less likely. But after partially inverting for the first time in more than a decade in December, Edwards said that too could be a warning.

“This curve steepening, after a period of pronounced flattening, is a good indication of imminent recession despite continued strength in the labour market,” Edwards added.

Following sharply lower consumer confidence and manufacturing figures out in the US last week, he’s far from alone in his recession predictions.

A Wall Street Journal survey out Thursday showed an increasing number of economists see a downturn on the horizon. More than half of those polled said they expect a downturn to begin in 2020, while about a quarter forecast one would start in 2021.

Regardless of when it might begin, market watchers widely agree the next recession will be more mild than the one a decade ago. While the financial crisis in 2008 was driven by record levels of debt, according to Russell Investments strategist Erik Ristuben, Americans today are not over-leveraged.

“Will the next US recession be as severe as the last? Highly unlikely,” he said. “From a recession standpoint, the Great Recession of 2008 was much more of an anomaly than a norm. The parallels between today’s economic backdrop and 2008 look to be few and far between.”

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Retailers are getting slammed after reporting holiday sales. Here's why

Thu, 01/10/2019 - 3:35pm

  • Shares of retailers fell on Thursday after Target, Kohl's, and Macy's reported holiday sales guidance. Nordstrom shares plunged 8% in sympathy, and Best Buy fell 3%.
  • Macy's led the group to the downside, with an 18% drop. The company lowered its sales and earnings guidance after a weak holiday period.
  • The XRT, a popular retail-tracking ETF, fell 2%.

Shares of retailers were hit hard on Thursday after a handful of stores offered holiday sales guidance that disappointed investors.

Macy's was a notable decliner, plunging nearly 19% after lowering its sales and earnings guidance after a weak holiday period. Kohl's fell by over 6% after its comparable sales growth was smaller than the same period last year.

Target, meanwhile, reported solid comparable sales growth, but held its full-year sales and earnings per share steady, which Deutsche Bank analysts said was likely behind the stock's decline. Some investors hoped a strong holiday season would translate to lifting full-year guidance, analysts led by Mike Baker told clients on Thursday.

"While the sales were strong, we think that product mix and digital fulfillment could have added pressure to margins and as such, we think the implied guidance suggests the possibility that margins could be down slightly in 4Q," the analysts wrote.

Here's what some of the major retailers said today about how they fared during the 2018 holiday season.

  • Target: Comparable sales grew 5.7% in November and December, compared with a rise of 3.4% over the same period last year. For the entire fourth quarter, Target said it still expected comparable sales growth of around 5%, and left its full-year sales and earnings per share guidance unchanged.
  • Kohl's: Comparable sales in November and December rose 1.2%, compared to a nearly 7% rise during the same period last year. The company also said it lifted its full-year guidance on diluted earnings per share.
  • Macy's: Comparable sales increased by 0.7% during the holiday season. The company lowered both its full-year sales and profit guidance after disappointing holiday sales; Macy's now forecasts flat annual revenue growth, compared to its prior estimate of a 0.3% to 0.7% rise.

Macy's, specifically, pointed to a holiday season that started off well, but languished. 

"The holiday season began strong – particularly during Black Friday and the following Cyber Week, but weakened in the mid-December period and did not return to expected patterns until the week of Christmas," Jeff Gennette, Macy's chairman and CEO, said.

Read more: Macy's is getting clobbered after slashing guidance due to a disappointing holiday season

The retailers' reported weakness did not look like a broader warning sign for the US consumer at this point, said Matt Maley, equity strategist at Miller Tabak, a Massachusetts-based institutional trading firm.

"From what I can see, nobody is blaming the consumer for these results," Matt Maley told Business Insider in an email on Thursday.

He pointed specifically to strong employment and solid wage growth, so the issue he said appeared to be a more sweeping challenge faced by brick-and-mortar stores.

Bed, Bath & Beyond was one retailer bucking the trend on Thursday. Its stock rose 5%, extending a 20% surge in after-hours trading on Wednesday, after reporting quarterly earnings.

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Here's the most affluent town in every state

Thu, 01/10/2019 - 3:16pm

  • Using data from the Census Bureau, we found the town in each state with the highest median household income.
  • There's a large amount of overlap between income and educational attainment.

Incomes vary widely across the United States.

The American Community Survey is an annual survey run by the Census Bureau to allow the government, corporate and academic researchers, and anyone who is curious about demographics to better understand the US population. Among many other subjects, the ACS includes questions about respondents' total household incomes.

Read moreAll 50 states and Washington, DC, ranked from least to most average

Using the ACS estimates from 2013 to 2017 for places with at least a 1,000-person population, Business Insider made a map showing the town in each state with the highest median household income.

The Census Bureau top-codes median household incomes, which means that for places where that median is above $250,000 per year, they do not give a precise estimate in order to protect the privacy of survey respondents. In four states — California, New York, Maryland, and Texas — there were multiple places with populations over 1,000 that fell into the over $250,000 bracket. To break the tie, we chose the town in the over-$250,000 median income bracket with the highest average household income.

There is a large overlap between towns with high incomes and high educational attainment. In 19 states, the most affluent town was also the town with the highest educational attainment as defined by share of the over-25 population with at least a bachelor's degree, according to our recent analysis.

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The 10 most important things in the world right now

Thu, 01/10/2019 - 1:45am

Hello! Here's what you need to know for Thursday.

1. Jeff Bezos is reportedly dating former TV anchor Lauren Sanchez. Jeff and MacKenzie Bezos announced that they were divorcing after 25 years together. Sanchez is reportedly separated from her husband, a high-powered Hollywood agent.

2. Jeff Bezos' divorce could make MacKenzie Bezos one of Amazon's biggest shareholders. Jeff Bezos owns 16% of the e-commerce giant. MacKenzie could be entitled to up to half of those shares, however, it's still unclear how everything will shake out.

3. Trump's threat of a national-emergency declaration to fund the border wall is leaving Capitol Hill in shock. President Donald Trump has reportedly mulled over declaring a national emergency to build his desired wall along the US-Mexico border, but Republicans and Democrats on Capitol Hill are unsure if he even has that authority.

4. 'Bye-bye': Trump reportedly issued terse farewell as he abruptly left his meeting with Democrats. Trump later repeated his "bye-bye" on Twitter when explaining why he left negotiations withe Democratic leaders over the government shutdown.

5. Drugs and syringes have become a problem in Starbucks bathrooms. The company is testing out solutions including syringe-disposal boxes, thicker trash bags, and removing trashcans from some bathrooms, after workers reported health concerns.

6. The family of a teenager killed in a 116 mph Tesla crash is suing the company, alleging it makes 'unreasonably dangerous' cars. In a lawsuit, the victim's family alleged that a speed governor was removed by a Tesla technician without owner permission and accused the company of not doing enough to prevent battery fires.

7. Chinese tech giant Baidu is making a play for the next big thing after cloud computing. At the Consumer Electronics Show on Wednesday, the "Google of China" announced OpenEdge, the first open source edge computing platform out of the country.

8. The government shutdown is now the second-longest on record. The current shutdown, which began in late December, is the 21st time the federal government has had a funding lapse since the modern budgeting process began.

9. Here's what Rod Rosenstein's reported departure from the Justice Department means for the Mueller probe. Multiple news outlets reported that Deputy Attorney General Rod Rosenstein plans to leave the Department of Justice after a permanent replacement for former Attorney General Jeff Sessions is confirmed by the Senate. Experts weigh in.

10. After a long delay, a winner has been declared in Congo's presidential election. Opposition leader Felix Tshisekedi was declared the winner, and it could be it the first peaceful, democratic transfer of power since the country's independence in 1960.

And finally ...

If you can’t be at the 2019 Consumer Electronics Show, our reporters have an inside look at everything from robots, to cars, to wearable technology.

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