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WeWork is ditching a major Manhattan office, and it's the first big step in a turnaround that's put its entire real-estate portfolio under review

Thu, 06/25/2020 - 4:10pm

  • WeWork is cutting ties with a 115,000 square foot Manhattan location it leased almost two years and that it was set to occupy before the end of the year. 
  • The struggling coworking company has been in talks to renegotiate its rents and potentially dispose of locations for months, but this is the first major location shed so far by the firm. 
  • The deal could be an ominous sign that WeWork is readying to finally cull its vast portfolio in a way that could sink the office market with large blocks of vacant space. 
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WeWork won't move into a large New York City office it leased nearly two years ago at 149 Madison Avenue and that it was scheduled to occupy before the end of the year, multiple sources with direct knowledge of the space confirmed.

The lease, for the Midtown South building's entire 115,000 square feet, could cost the struggling coworking giant millions of dollars to sever ties with, sources said.

Both a spokeswoman for WeWork and a spokesman for Columbia Property Trust, the owner of 149 Madison Ave., declined to comment.

Two leasing executives told Business Insider that Columbia Property Trust had begun in recent days making it known to the city's office leasing industry that the space is available to other takers and that WeWork will not take possession of the office.

Read More: WeWork's US head of real estate is leaving the coworking giant as the firm works through a major turnaround attempt.

WeWork has been in negotiations with building owners for months to reduce the rent it pays at locations, or even cut ties with spaces altogether, as it grapples with the aftereffects of the coronavirus crisis, which has sapped demand for offices and prevented tenants from occupying the workplace.

IBM, for instance, will vacate a roughly 70,000 square foot space it has leased for the past three years from WeWork at 88 University Place in Manhattan sometime after Labor Day.

The computing firm previously told Business Insider that the decision to leave was not prompted by the Covid-19 pandemic. Still, its exit highlights the vulnerability of the flexible-workspace business model during periods of economic strain, where tenants have the leeway to abandon space even as providers such as WeWork remain on the hook for long term leasing commitments.

WeWork's decision to exit 149 Madison Ave. marks one of the first major US spaces to be shed outright by the coworking company and a potentially ominous sign it could be close to culling other locations within its sprawling office footprint.

The company had grown in recent years into New York City's largest office tenant and a dominant occupier in other leading office markets across the country, including San Francisco. If it casts spaces on the market, those availabilities could add to a growing inventory of vacancies that could rapidly sink occupancy and rental rates, causing market conditions to deteriorate for landlords.

Read More: IBM is ditching a big WeWork office in NYC, revealing the risks of the popular flex-space model as the pandemic prompts Blue Chip companies to rethink real estate.

The space at 149 Madison Ave. was a prime target for a disposition by WeWork, sources say.

WeWork would have had to lavish millions of dollars outfitting the building's interiors to create the hip, amenity-filled offices the brand was known for. Such an investment no longer makes sense as the company has sought to cut costs and as the office market faces a potentially prolonged slowdown that might make the payback on such an outlay unachievable in the near term.

"They're trying to meet the twin demands right now of rightsizing their business and containing their spend on operations locations and capital expenditures," said Jamie Hodari, the CEO of Industrious, a flexible-workspace firm that has appeared to better weather the downturn because it has focused on profit-sharing agreements with landlords and rather than committing to leases. "So it makes sense that where there's a lot of cap expenditures, those would be the first deals on the chopping block."

In a public filing, Columbia Property Trust had recently disclosed that it had reserved $15.9 million as part of WeWork's deal to occupy 149 Madison Ave. Some or all of that outlay would likely come as a contribution to the cost of building out the interior spaces and potentially making other building improvements at the location - a disclosure that provides a glimpse of how costly it can be to prepare spaces both for tenant occupancy.  

Other flexible workspace firms have also struggled. As Business Insider previously reported, Knotel, a workspace firm that once had ambitions to challenge WeWork's dramatic growth, lost $49 million in the first quarter of 2020 and had $238 million of liabilities against current assets and owed payments of $110 million.

Read more: As WeWork and its rivals stumble, 18 million square feet of space in NYC is at risk. Here's how that could intensify a real-estate market downturn.

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SEE ALSO: IBM is ditching a big WeWork office in NYC, revealing the risks of the popular flex-space model as the pandemic prompts Blue Chip companies to rethink real estate

SEE ALSO: WeWork's US head of real estate is leaving the coworking giant as the firm works through a major turnaround attempt

SEE ALSO: WeWork is rolling out global layoffs over Zoom and has kicked off talks to slash jobs in the UK as the coworking giant struggles to cope with coronavirus fallout

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Bank stocks surge after regulators ease financial crisis-era Volcker Rule (JPM, GS, BAC, C, WFC)

Thu, 06/25/2020 - 4:10pm

  • Bank stocks surged on Thursday after financial regulators announced they would ease the financial crisis-era Volcker Rule.
  • The Volcker Rule generally prohibited banks from engaging in proprietary trading and from having certain relationships with hedge funds and private equity funds.
  • The rule change will provide banks greater flexibility in sponsoring funds that provide loans to companies, allowing investments in qualifying venture capital funds.
  • JPMorgan, Bank of America, Goldman Sachs, Citigroup, and Wells Fargo all traded up more than 3% on the news.
  • Visit Business Insider's homepage for more stories.

Bank stocks surged as much as 3% on Thursday after federal regulators rolled back the Volcker Rule, a financial crisis-era rule that restricted banks from operating proprietary trading units and from acquiring or retaining ownership stakes in hedge funds or private equity funds.

The Federal Deposit Insurance Corporation, Federal Reserve Board of Governors, Office of the
Comptroller of the Currency, Securities and Exchange Commission, and Commodity Futures Trading
Commission issued a final rule on Thursday "to modify and clarify the covered fund provisions" of the rule, according to the news release.

The rule change, according to the regulators, will do three things:

Read moreMorgan Stanley handpicks 10 stocks to buy now for the richest profits as travel and outdoor activities transform in the post-pandemic world

1. Facilitate capital formation by providing banking entities greater flexibility in sponsoring funds that provide loans to companies so banks can allocate resources to a more diverse array of long-term investments.

2. Protect safety, soundness and financial stability by not allowing banks to engage in any activity that is not currently permissible if conducted on their balance sheets.

3. Provide greater clarity and certainty about what activities are permitted, which will improve supervision and implementation of the Volcker Rule. 

According to Bloomberg, the rule change will free up as much as $40 billion for the banks.

In a statement on the rule change, Rob Nichols, president and CEO of the American Bankers Association said, "We welcome the measured steps taken today by the FDIC, which will allow banks to further support the economy at this challenging time for the nation."

Shares of JPMorgan, Bank of America, Goldman Sachs, Citigroup, and Wells Fargo all traded up more than 3% on the news in Thursday afternoon trades.

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Dow climbs 300 points in volatile trading as investors weigh virus impact on economic reopening

Thu, 06/25/2020 - 4:08pm

  • US stocks gained on Thursday as investors weighed the effect of surging coronavirus cases on economic-reopening efforts.
  • Bank stocks led a midday reversal into positive territory after the Federal Deposit Insurance Corporation rolled back post-financial-crisis rules.
  • Meanwhile, states such as Texas, Florida, and Arizona have seen spikes in COVID-19 cases, spurring concerns of a slower-than-expected economic reopening.
  • US weekly jobless claims totaled 1.5 million in the week that ended on Saturday, roughly in line with the previous week and slightly above economists' forecasts.
  • Read more on Business Insider.

US stocks closed higher on Thursday, capping a volatile trading session that saw investors weigh spiking coronavirus cases against a rollback of banking regulations.

Bank stocks led a midday reversal into positive territory after the Federal Deposit Insurance Corporation approved changes to the Volcker rule that would make it easier for banks to invest in funds such as venture capital.

Meanwhile, coronavirus cases have spiked in states such as Texas, Florida, Arizona, and California, threatening to slow economic-reopening efforts across the US. Global cases of COVID-19 are also on the rise.

"Whether we're seeing a second wave or just a continuation of the first wave, the outbreak may reverse actions taken by governments to re-open their economies, hence curbing hopes of a smooth recovery," said Hussein Sayed, the chief market strategist at FXTM.

US weekly jobless claims totaled 1.5 million in the week that ended on Saturday, roughly in line with the previous week and slightly above economists' forecasts. It was the second week in a row that weekly claims came in higher than forecasts.

Here's where US indexes stood at the 4 p.m. ET market close on Thursday:

Read more: From a late-night infomercial to a 1,040-unit empire worth $188 million: Here's how Jacob Blackett perfected his real-estate-investing strategy after losing $70,000 on his first deals

Shares of Wirecard fell 75% after the German payments company filed for insolvency, the latest in the fintech's $2 billion accounting-scandal saga.

Oil prices gained along with equities. West Texas Intermediate crude rose as much as 3%, to $39.15 per barrel. Brent crude, the international benchmark, gained 2.9%, to $41.46 per barrel, at intraday highs.

The so-called reopening trade suffered on fears of surging coronavirus cases, with shares of cruise lines and airlines falling throughout the choppy trading session.

Read more: A high-growth fund manager is tripling her peers' returns in 2020 while targeting nontech industries like beer and restaurants. She breaks down how she picked out 5 of the most innovative companies.

Apple on Wednesday announced that it would close more of its stores in the Houston area following a spike in cases. Additionally, Disney said it would delay the opening of its parks in California beyond July 17.

Texas Gov. Greg Abbott on Thursday paused the state's reopening plan to help contain a recent spike in coronavirus cases and hospitalizations. Texas was one of the first states to begin to reopen from lockdowns in early May.

Read more: Aram Green has crushed 99% of his stock-picking peers over the last 5 years. He details his approach for finding hidden gems — and shares 6 underappreciated stocks poised to dominate in the future.

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Visa is pledging to help 50 million small businesses worldwide recover financially from the COVID-19 pandemic. These programs will help make it possible.

Thu, 06/25/2020 - 3:30pm

Around the world, individuals and businesses are experiencing real hardship as a result of the economic challenges presented by the COVID-19 pandemic. Organizations like Visa, with scale, resources, expertise and infrastructure, can and should play an important role as everyone adapts to these challenges.

At the heart of the current economic crisis1 are the millions of small and microbusinesses that account for more than 90% of global businesses and half of global employment. The economy will not bounce back until small businesses do.  In the aftermath of the pandemic, 43% of small business owners say they only have money to last six months2 and less than half have any online business. Digital commerce has skyrocketed overnight. It's vital for small businesses to adopt a digital-first approach as they rebuild.

Visa is taking action – committing to elevate 50 million small businesses worldwide with locally designed programs and solutions to help SMBs to drive efficiency and sales through acceptance of digital payments, building online businesses, and transforming back office operations.

"We are putting our network to work to help 50 million businesses not only survive, but also to thrive, along with the communities they serve," says Suzan Kereere, head of global merchant sales and acquiring, Visa.

Through a series of new initiatives, Visa is leveraging its network to help the world adapt, rebuild, and get back to business, focusing on four key areas:

Empowering digital-first businesses

New online resource centers localized for more than 20 countries provide tools, partner offers, and information on how to start, run, and grow digital-first small businesses. In Latin America, we launched the fourth edition of the Visa Everywhere Initiative with a challenge of reactivating small businesses through innovative digital solutions. In the US, we are expanding our partnership with IFundWomen providing grants and digital training to US-based Black women-owned small businesses.

Encouraging digital payments

Deploying easy-to-adopt touchless payment technology — rapidly, and at scale — is critical for faster, more secure commerce. Tap-to-pay stands alongside facemasks, hand sanitizer and glass screens as a new part of the safe shopping experience. Visa is working with its partners to increase locations where consumers can tap their contactless card or mobile phone. Starting in July, Visa street teams will visit merchants to provide "back to business" kits with new point-of-sale materials, branding, educational resources, and special offers. The program will kick off in the 50 largest US cities and expand globally, including Italy and South Africa.

Incentivizing neighborhood support

Visa partnerships encourage consumers to shop local. The Visa Back to Business Project — an online tool that connects local residents with open businesses — is live in New Zealand, Australia and the US, and further expanding globally. In Europe, the Middle East, and Africa, Visa has launched small-business initiatives to encourage consumers to support small businesses. Visa is teaming up with eCommerce platforms like Shopify, and restaurant delivery companies like  Deliveroo, to reward consumers for spending their money locally.

Developing positioning and policy

The new Visa Economic Empowerment Institute will tap Visa experts and partner with leading organizations on policy topics that include pandemic challenges to small businesses and economic and societal issues such as closing racial and gender opportunity gaps.

These initiatives follow a global commitment from the Visa Foundation to provide $210 million in COVID-19 relief funding to address the longer-term needs of the small and microbusiness community over the next five years.

Learn more about Visa's initiatives to help small businesses.

This post was created by Visa with Insider Studios.

[1] SMB Group's study: "Impact of COVID-19 on Small and Medium Businesses," April 2020
[2] U.S. Chamber of Commerce & MetLife Special Report on Coronavirus and Small Business, April 3, 2020

 

SEE ALSO: Consumers are switching to a digital-first shopping mindset. Businesses can follow these steps to keep up with them.

SEE ALSO: Demand for digital transactions is on the rise. Here's how Visa's Fast Track program is helping fintechs handle this new environment.

Join the conversation about this story »

Spotify surges 9% after Goldman sets Street-high price target on podcast potential (SPOT)

Thu, 06/25/2020 - 3:10pm

  • Spotify surged as much as 9% on Thursday after Goldman Sachs raised its price target from $205 to a Street-high of $280 on the potential podcasts can have on Spotify's business.
  • "Exclusive podcast deals, acquisitions, and new podcast monetization functionality" will help Spotify drive share gains of the global podcast audience and serve as a differentiator to attract music subscribers to the company, Goldman said in the note.
  • The firm believes recent moves by Spotify set the company up for a favorable risk/reward profile as it signs exclusive deals with Joe Rogan and Kim Kardashian West.
  • Visit Business Insider's homepage for more stories.

Spotify surged as much as 9% to an all-time-high on Thursday after Goldman Sachs published a note on the company and raised its price target from $205 to a Street-high $280, representing potential upside of 21% from Wednesday's closing price.

Goldman said that Spotify's recent acquisition of exclusive podcast deals with heavyweights like Joe Rogan and Kim Kardashian West should "drive share gains of the global podcast audience, advance the development of Spotify's audio advertising technology platform, help reverse declining average revenue per user trends, and serve as a differentiator to drive music subscribers to Spotify," according to the note.

Goldman acknowledged that there are considerable risks to Spotify's strategy of acquiring high-profile exclusive podcasts, but given the nature of the underdeveloped podcast market, the risk-reward profile for investors who own Spotify is favorable.

Read more: From a late-night infomercial to a 1,040-unit empire worth $188 million, how Jacob Blackett perfected his real-estate-investing strategy after losing $70,000 on his first deals

In addition to acquiring Joe Rogan's podcast, which has around 9 million YouTube subscribers, and striking a deal with Kim Kardashian West for an exclusive criminal justice podcast, Spotify has inked several podcast-related deals including The Ringer, Anchor, and Gimlet Media.

Goldman said that Spotify's podcast strategy "may take years to generate meaningful financial returns."

Still, the firm raised its second quarter monthly-active-user growth estimates to 19 million, adding that Sensor Tower aggregate app downloads for the period suggest around 18 million new monthly active users.

Read more: A high-growth fund manager is tripling her peers' returns in 2020 while targeting nontech industries like beer and restaurants. She breaks down how she picked out 5 of the most innovative companies.

Goldman raised its 2020 to 2022 revenue and adjusted Ebitda estimates by 3% and 5%, respectively.

Downside risks to Spotify include competition, supplier concentration, and unfavorable label re-negotiations, according to Goldman.

Spotify surged as much as 9% to $264.87 in Thursday trades, and is up more than 75% year-to-date.

Read moreAram Green has crushed 99% of his stock-picking peers over the last 5 years. He details his approach for finding hidden gems — and shares 6 underappreciated stocks poised to dominate in the future

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Job losses are 4 times worse for the lowest-paid workers so far in the coronavirus pandemic, study shows

Thu, 06/25/2020 - 2:49pm

  • More than 35% of all workers in the lowest wage group lost a job through mid-April compared to 9% of workers in the highest-earning group, economists led by Tomaz Cajner of the Federal Reserve Board wrote in a recent paper.
  • Employment declines were also four percentage points lower for women than men, the study showed. 
  • The study confirms that the weight of the coronavirus pandemic is falling hardest on those least able to bear it.
  • Visit Business Insider's homepage for more stories.

Coronavirus-related job losses in the US are thus far four times worse for the lowest-paid workers, according to a recent study prepared for the Brookings Papers on Economic Activity. 

More than 35% of all workers in the lowest quintile of wage earners were laid off through mid-April, compared to only 9% of all workers in the highest quintile, economists led by Tomaz Cajner of the Federal Reserve Board wrote in a recent paper.

"The employment losses during the Pandemic Recession are disproportionately concentrated among lower wage workers," the economists wrote. 

Even as the US economy reopens and some people are able to return to work, the gap between the lowest and highest paid workers persists, according to the study. 

"By mid-May, employment for workers in the bottom quintile was still depressed by 30 percent," the economists wrote, adding "only about 5 percent of these top earning workers remain out of work through mid-May." Job losses for women were about four percentage points higher than they were for men, according to the report. 

Read more: A high-growth fund manager is tripling her peers' returns in 2020 while targeting non-tech industries like beer and restaurants. She breaks down how she picked out 5 of the most innovative companies.

The study confirms fears that the weight of the coronavirus pandemic and the ensuing recession has fallen on those most vulnerable, or as Federal Reserve Chairman Jerome Powell said, those "least able to bear its burdens." It also underscores the notion that the pandemic is exacerbating inequality in the US. 

Some of the gap between low and high wage earners and employment may be attributed to business size and industry — early coronavirus layoffs were concentrated in low-pay industries such as retail, restaurants, and leisure services.

Still, the study concluded that only a "small amount" of the differences between low and high wage earners in the early stages of the pandemic can be attributed to variations in industry, business size, and age. 

The economists used administrative data from ADP to measure the detailed changes in the US labor market during the first few months of the pandemic recession. 

Join the conversation about this story »

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A high-growth fund manager is tripling her peers' returns in 2020 while targeting nontech industries like beer and restaurants. She breaks down how she picked out 5 of the most innovative companies.

Thu, 06/25/2020 - 1:31pm

As Big Tech has come to dominate Wall Street and the world, the idea of innovation has come to feel synonymous with the technology companies themselves and with the kind of returns investors crave.

But the truth is more complicated, and Prabha Ram is proof. As a mutual-fund manager, she looks for companies that have developed a new way of doing things that they can turn into a vital, profitable edge.

"Our focus has been on a small number of dynamic-growth names where the growth, we believe, can be sustainable over long periods of time, and the growth is led by innovation," she said.

She's had enormous success in finding those companies. As comanager of the American Century Focused Dynamic Growth Fund, Ram had returned 28.8% to investors this year as of Tuesday. That's more than triple the 8.8% return of the typical growth fund, and it's more than double the fund's benchmark, the Russell 1000 Growth Index.

The fund has been a mainstay near the top of Kiplinger's annual return rankings throughout Ram's four years of management.

A focus on digital strategy

Ram mentioned a years-old inspiration in her work: a 2011 essay by the famed venture-capital investor Marc Andreessen on "why software is eating the world." She said his prediction came true, and it's informed her investments.

"In other words, software was not just for software companies, but pretty much every industry has to have a digital strategy in place," she said. "I cannot believe it's been that many years already since he wrote that, but it's actually playing out."

While her portfolio includes the kinds of tech companies you'd expect, Ram also told Business Insider about a handful of surprising innovators in other areas.

One of her largest positions is in Boston Beer, and it's been a big winner, with a 51% return over the past year. She and her comanagers have continued pouring money into the stock in 2020.

"This is a company that took on the big players and led through innovation," Ram said. "They created the category of craft beer, which is all the rage right now. ... Then from there, they moved on to hard tea and now hard seltzer."

Each of those categories has been a winner, and she said some of the credit goes to Boston Beer's innovative marketing strategies. Combined, that's sent the stock up 300% in the past three years.

Burritos aren't considered high-tech either, but she said Chipotle Mexican Grill has been a laudable innovator as well, and it's helped the stock recover from a series of food-safety crises from 2015 to 2018 — sending the stock 150% higher over the past three years.

She said much of the credit goes to CEO Brian Niccol.

"He came from Taco Bell and created this whole new digital strategy, not just the digital ordering but the back end that goes with it: a second line just for digital ordering and something called Chipotlanes," Ram said. "So if you were driving to pick up, it only took you 12 seconds, having ordered the food ahead of time."

With companies like Nike and Constellation Brands dotting the portfolio, Ram added that a company that changes the way an industry works could innovate even if the public isn't seeing it. The key is that these businesses add value for their customers by making them more efficient or profitable.

"There are a lot of examples of companies that are not necessarily tech but are using tech to transform what are — for lack of a better word, old-school industries," she said.

Another one of those is Cognex, a manufacturing-technology company she doubled her position in during the first quarter. 

"What they've done is created machine vision," she said. "Everything from the hardware, which is just a little camera, to the software, the trend along with machine intelligence has automated a lot of things that required a lot of precision."

In a somewhat more traditional look at technology, she added that robotic-surgery-device company Intuitive Surgical and online education company Chegg made the cut for similar reasons, as they both take an existing idea, improve efficiency, and make it work better.

Ram said that before investing in a company, she'll talk to experts in its industry to make sure that the products and services it's developed are going to be useful to its customers because that's the only thing that will lead to wide adoption. 

"Innovation for the sake of innovation is not going to cut it because then it's not sustainable," she said.

Read more:

SEE ALSO: Aram Green has crushed 99% of his stock-picking peers over the last 5 years. He details his approach for finding hidden gems — and shares 6 underappreciated stocks poised to dominate in the future.

Join the conversation about this story »

Wall Street firm says Apple could surge another 18% — and even be the first company to hit a $2 trillion market value next year (AAPL)

Thu, 06/25/2020 - 12:47pm

  • Wedbush on Wednesday increased its Apple price target to $425 from $375, citing a demand snapback and the upcoming 5G cycle.
  • That implies that Apple stock could surge another 18% from where it traded at Wednesday's close.
  • Shares of Apple dipped slightly in early trading on Thursday.
  • "We believe during 2021 Apple has strong potential to be the first $2 trillion valuation given the 5G tailwinds and services momentum potential over the coming years," the Wedbush analyst Daniel Ives said in a note.
  • Watch Apple trade live on Markets Insider.
  • Read more on Business Insider.

Apple is poised to surge and may even hit a major market-capitalization milestone in the next year, according to Wedbush.

On Wednesday, the firm upgraded its Apple price target to $425 from $375, citing a demand snapback and the 5G cycle. That implies an 18% jump from where shares of the technology company closed on Wednesday.

"We believe during 2021 Apple has strong potential to be the first $2 trillion valuation given the 5G tailwinds and services momentum potential over the coming years," the Wedbush analyst Daniel Ives said in a note.

Apple's market cap was about $1.5 trillion on Thursday.

Wedbush maintained its outperform rating on Apple and raised its bull case to $500 per share. Shares of Apple dipped slightly in early trading on Thursday.

There are signs of a "continued demand snapback" in China, setting the stage for a "massive pent up iPhone 12 cycle heading into the Fall in this key region as well as globally," the note said.

Read more: From a late-night infomercial to a 1,040-unit empire worth $188 million: Here's how Jacob Blackett perfected his real-estate-investing strategy after losing $70,000 on his first deals

This is important as China is a key region for Apple; Wedbush estimated that it would represent roughly 20% of iPhone upgrades in the coming year.

In addition, Ives said, "the supply chain getting back to normalization ahead of expectations has been impressive and now ultimately puts Cook & Co. back in the drivers seat to launch this 5G cycle in its typical mid-late September timeframe."

The firm estimated that roughly 350 million of Apple's 950 million iPhones worldwide are in an upgrade window, which remains the linchpin of the "longer-term bullish thesis and 5G super cycle for Cupertino over the next 12 to 18 months," the note said.

Apple has gained roughly 23% this year.

Read more: Aram Green has crushed 99% of his stock-picking peers over the last 5 years. He details his approach for finding hidden gems — and shares 6 underappreciated stocks poised to dominate in the future.

Read more: Morgan Stanley handpicks 10 stocks to buy now for the richest profits as travel and outdoor activities transform in the post-pandemic world

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Accenture backtracked on cutting its real-estate footprint — and now it's warning companies about ditching offices and going all-remote

Thu, 06/25/2020 - 12:46pm

  • As millions of white-collar employees continue to work remotely, companies are reassessing their real estate needs for the long term. 
  • Accenture could provide one precedent for the unintended consequences companies may find when they cut their real estate. 
  • CEO Julie Sweet explained that the company moved to more remote work in the 1990s and cut its real estate, but then added offices back in recent years to bring employees together.
  • Sign up here for our Wall Street Insider newsletter.

As millions of white-collar employees work from home offices and kitchen tables, companies are reassessing what the mass move to remote work means for corporate offices.

Some companies, including Twitter, are already allowing employees to work remotely forever, while others that have prioritized in-person work, like WeWork, are newly giving staff one day a week to work from home. Coupled with public health concerns about packing thousands into a corporate headquarters, companies are rethinking their real estate needs, which could include slashing their real-estate footprint, relying more on flexible-office solutions, and adding more satellite offices. 

Accenture, which has 55,000 employees in the US, offers a case study in the unintended real-estate consequences of moving to more remote work, its CEO highlighted on a Thursday earnings call.

See more: Accenture is cutting US staff and top execs just warned of more pain to come as the consulting giant promotes fewer people and looks to control costs

In the 1990s, the company, along with some of its peers, adopted "hoteling" – more recently called hot-desking – in which employees reserve workspaces, rather than having assigned desks. Because consultants often work at client sites, they may not need a fixed desk or office, and the company can have fewer desks than employees.

"Particularly in the US, we took out a lot of real estate because we said 'Oh, our people are at client sites or they could be at home,'" CEO Julie Sweet said on Thursday's earnings call. 

In 2001, Accenture said it saved $10 million in the first two years of the hoteling program. 

She said CEOs, often "excited" about the idea of getting rid of real estate, are asking her for advice, since Accenture did what many executives are assessing now. But Accenture's experience shows the move to all-remote work and fewer offices could be more complicated than leaders expect. 

"What we found, in fact, over the last five years when I was running North America, we started gradually to expand that footprint again because there is a benefit of bringing people together as well," Sweet said. 

Accenture currently has 84 offices in the US. 

In a recent webinar with Reuter's Breakingviews, the CEO of Brookfield Asset Management, which owns billions of dollars of offices, said companies need offices for culture, Business Insider reported earlier this month. 

"Our view is that it is ludicrous to think that companies will not return to offices," Flatt said. "You can maintain by video conference a business for a while, but you can't build a culture, and over the longer term you can't maintain a company by video conference." 

Read more: 

SEE ALSO: Companies from banks to tech giants are looking to shed huge chunks of office space. Here's a look at 8 key sublease offers — and what they mean for rents in big-city markets.

SEE ALSO: Deloitte just laid off 200 people in Toronto, with cuts to AI, consulting, and auditing — showing the knock-on effects as clients reassess their budgets for big projects

SEE ALSO: IBM is ditching a big WeWork office in NYC, revealing the risks of the popular flex-space model as the pandemic prompts Blue Chip companies to rethink real estate

Join the conversation about this story »

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Citi just poached a top operations and anti-fraud exec from Wells Fargo as it continues to build out its consumer bank

Thu, 06/25/2020 - 12:30pm

  • Citigroup poached a top exec from Wells Fargo as it continues to shake up its consumer bank and chase growth.
  • Titi Cole is joining Citi in August as head of global operations and fraud prevention in Global Consumer Banking. 
  • Cole previously headed up operations in the consumer and small business division at Wells. 
  • It's the latest in a string of changes implemented by Citi president and GCB CEO Jane Fraser to spur growth in the consumer division since she was promoted in October. 
  • For more stories, sign up for our Wall Street Insider newsletter.

Citigroup has poached a top exec from Wells Fargo to run operations and anti-fraud within its Global Consumer Banking division — a unit that has been remodeled over the past year with ambitions of growing revenues and better competing with other top US banks. 

Titi Cole, previously EVP and head of operations and contact centers for the consumer and small business division at Wells Fargo, will join Citi in August as head of global operations and fraud prevention in the consumer bank, according to memo from Jane Fraser, president of Citi and CEO of GCB. 

"Titi is a dynamic, results-driven leader and 27-year industry veteran with a breadth of Consumer Banking and Operations experience across products, lending and customer-centric transformation," Fraser said in the memo. "Importantly, Titi is a skilled people leader with a track record of developing and leading high performing teams."

Prior to joining Wells in 2015, Cole spent five years at Bank of America, departing as an SVP leading retail products and underwriting. She worked at BMO Harris Bank and McKinsey & Company before that. 

Cole will report to Fraser, who has been shaking up the firm's consumer bank to spur growth since taking the No. 2 role at Citi last October. 

The most recent appointment follows a slew of changes in the consumer bank announced by Fraser in March — including the hiring of Pam Habner, and ex-JPMorgan Chase and mastermind of the Sapphire Reserve credit card, as its head of US branded cards. 

Read more: 

SEE ALSO: Citigroup just poached the mastermind behind JPMorgan Chase's Sapphire Reserve to run its credit-card division

SEE ALSO: Wells Fargo CEO Charlie Scharf just hired another JPMorgan alum — this time, to run wealth management. Here's how Jamie Dimon's one-time protege has been building up his team.

SEE ALSO: We identified the 70 most powerful people at JPMorgan. Here's our exclusive org chart.

Join the conversation about this story »

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At a virtual town hall, a top UBS Americas wealth exec shed light on how white the firm's adviser force is and promised to hire hundreds of Black FAs (UBS)

Wed, 06/24/2020 - 7:23pm

  • 1% of the nearly 6,500 financial advisers in UBS's wealth management business in the Americas are Black or African American, division co-head Tom Naratil said at an internal town hall on June 18. 
  • Less than 2% of employees at the director level or above in the Americas are Black or African American, Naratil said. 
  • Naratil said the business was now accelerating its investment in diverse talent in the workplace.
  • For more stories like this, subscribe to our Wall Street Insider newsletter.

1% of the nearly 6,500 financial advisers in UBS's wealth management business in the Americas are Black or African American, division co-head Tom Naratil said at a virtual internal town hall held on June 18, a company spokesperson told Business Insider. 

Naratil, who is also president of the Americas and co-heads the wealth division with Iqbal Khan, said that less than 2% of employees at the director level or above in the Americas are Black or African American.

The figures, which have not been previously reported, come as financial services firms and companies across industries commit themselves to more diverse workplaces amid a global outcry over racism. 

Business Insider reported earlier on Wednesday that the largest US wealth managers, which are UBS, Morgan Stanley, Wells Fargo, and Bank of America's Merrill Lynch unit, would not publicly disclose the racial diversity of their advisers.

UBS has been holding weekly virtual town hall meetings each Thursday during remote work in recent months.

The virtual town hall last week came two days after lawyers representing Marilyn Booker, Morgan Stanley's former global head of diversity from 1994 until 2011, filed suit against her former employer and a wealth management executive there for racial discrimination and retaliation. Morgan Stanley rejects Booker's claims. 

People of color represent some 19% of Americas employees at the director level or above, which encompass executive director, managing director, and group managing director, Naratil also said at the internal meeting. Advisers who are people of color comprise some 10% of financial advisers in the Americas. 

Naratil also said the business is accelerating its investment in diverse talent in the workplace, a spokesperson said.

He is also aiming to achieve a representation of 26% among people of color at the director level and above by 2025 in the Americas, with a goal of about 19% representation among financial advisers.

That includes a net increase in headcount of 300 Black or African American employees at the director level or higher, and adding 200 more Black or African American advisers. 

UBS advisers in the Americas manage some $1.2 trillion, and its force of nearly 10,000 advisers globally manage some $2.3 trillion in assets as of March 31. 

"Black Americans are clearly the ones that are least represented and that is where we clearly see opportunity to improve," Naratil told Reuters at the time of a diversity report the firm released in February

At the time, he said the bank hoped it would hold itself more accountable on matters of internal and external diversity if it voluntarily disclosed its figures at the firm level. He also said more work was required to improve diversity among its force of some 10,000 advisers, who are "primarily" white and male. 

SEE ALSO: Morgan Stanley, UBS, and Merrill Lynch execs explain how to nab a spot in their next-gen adviser programs and make it through the ultra-competitive, years-long training process

SEE ALSO: 6 up-and-coming financial advisers managing hundreds of millions explain how they nabbed wealthy clients in a fiercely competitive field

SEE ALSO: UBS is rolling out the red carpet for ultra-rich people and family offices who want in on private-market deals

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These are the winning strategies for AI in banking

Wed, 06/24/2020 - 6:02pm

Artificial intelligence (AI) applications are estimated to save banks $447 billion by 2023, and front- and middle-office AI improvements could represent more than 90% of these savings.

Leveraging AI tools like chatbots, voice assistants, and personalized insights can transform the customer experience by enabling frictionless, 24/7 interactions. Additionally, in middle-office banking, AI can be used to improve anti-money laundering efficiency and payments fraud prevention.

A recent OpenText survey found that 80% of banks are highly aware of the potential benefits presented by AI, but much fewer have taken the dive into implementation. When mindfully executed, AI can enable cost cuts, risk mitigation, and a better user experience, but what does winning execution look like?

In the Winning Strategies for AI in Banking report, Business Insider Intelligence looks at several effective strategies used to capture AI's potential in banking, and details how financial institutions like Citi and US Bank have successfully implemented some of these strategies.

This exclusive report can be yours for FREE today.

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The 6 biggest US banks granted over 5,000 H-1B visas last year. Here's how firms like Goldman Sachs and Wells Fargo are reacting to Trump's shutdown.

Wed, 06/24/2020 - 4:58pm

  • President US Donald Trump suspended a variety of visa programs, one of which big banks use for hiring, particularly on tech teams.
  • In 2019, JPMorgan, Morgan Stanley, Goldman Sachs, Bank of America, Wells Fargo, and Citigroup were approved for over 5,000 H-1B visas.
  • Sign up here for our Wall Street Insider newsletter.

Big banks have leaned on a visa that has now been suspended as part of an executive order signed by President Donald Trump this week. 

On Monday, Trump suspended a variety of visa programs for the remainder of the year, an extension of what was a 60-day freeze on work visas established back in April. The move elicited strong reactions from executives in the tech industry, where the "highly-skilled" H1-B visas are relied on to recruit talent. 

Tech companies, however, aren't the only ones likely to be impacted by the suspension of the program. Big banks, which have continued to put more resources toward their tech teams, have also granted thousands of H-1B visas. 

Read more: Trump's shutdown of H-1B visas is a huge hit to the Silicon Valley tech giants that employ tens of thousands of affected workers

According to data from the US Citizenship and Immigration Services, JPMorgan, Goldman Sachs, Bank of America, Wells Fargo, Morgan Stanley, and Citigroup accounted for over 5,000 new or renewed H-1B visas in 2019. In total, there are only 85,000 H-1B visa spots open in the US each year. 

To be sure, these numbers don't indicate the total number of employees on H-1B visas at the banks, only the ones that either received or renewed visas in 2019. 

JPMorgan, the second-largest of the six banks by headcount, had the highest total number H-1Bs approved in 2019, totalling 1,697 between new (433) and renewed (1,264) visas. A spokesperson for the bank declined to comment. 

Despite being the smallest bank of the six in terms of number of employees, there was a total of 1,036 H-1B visas approved in 2019 at some Goldman Sachs entities.

"We consider all qualified candidates for positions at Goldman Sachs regardless of whether they may need a visa for their work authorization," a Goldman Sachs spokesperson told Business Insider via email.  "The firm and our advisors are providing assistance and advice to any employees impacted by the latest Executive Order."

See also: Amazon criticizes Trump's temporary ban of immigrant working visas: 'We oppose the Administration's short-sighted action'

Citigroup and Bank of America had 748 and 733 approved H-1B visas in 2019, respectively. Spokespeople at both banks declined to comment.

Morgan Stanley had 619 approved H-1B visas in total in 2019. A spokesperson for the bank declined to comment. 

Wells Fargo, the largest of the five banks, had the lowest number of H-1B visas approved in 2019, totalling 217.

"Wells Fargo sponsors a limited number of employees with specialized skill sets on H-1B and L-1 visas," a spokesperson for the bank said via email. "Where applicable, we are working with those employees to help them understand and limit the impact of travel restrictions resulting from the executive order."

To be sure, Wall Street's use of the H-1B visa still pales in comparison to Silicon Valley. Google and Amazon were granted 9,078 and 8,937 H-1B visa applications in 2019, respectively. Microsoft, meanwhile, had 5,925 applications, while Facebook had 2,657. 

Read more:

Amazon, Google, Apple, and other tech companies are speaking out against Trump's freeze on immigrant work visas

Elon Musk says he 'very much' disagrees with Trump's suspension of H-1Bs and other temporary work visas

SEE ALSO: Goldman Sachs' top tech exec explains how a fresh slew of senior hires are transforming the bank's approach to building products

SEE ALSO: Read the memo Goldman's new tech chief sent to 9,000-plus engineers explaining why they should ditch PowerPoint in favor of Amazon's famous narrative memos

SEE ALSO: Goldman Sachs' summer internship is going virtual, joining the likes of Bank of America and Morgan Stanley who are running remote programs

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Goldman Sachs CEO warns of even more job losses across industries through the next year (GS)

Wed, 06/24/2020 - 4:25pm

  • David Solomon, CEO of Goldman Sachs, says the US economy still has jobs to shed. 
  • The comments come after May unemployment figures showed a slight uptick in employment after mass layoffs due to the coronavirus. 
  • "All businesses are learning and seeing ways where there are efficiencies," he said, speaking of companies broadly and not just banks. 
  • Visit Business Insider's homepage for more stories

The May jobs report was a bright spot for the United States as it struggles with the ongoing coronavirus outbreak, but the head of one of the largest Wall Street banks says the job losses may not yet be over.

David Solomon, chief executive of Goldman Sachs, said Wednesday that there are likely two main time periods for the pandemic: "a period of crisis and then a period of normalization."

"One of the things that's going to be a drag on the economy broadly," he told a virtual conference hosted by Bloomberg, "and one of the reasons I think there's going to be a headwind, is all businesses are learning and seeing ways where there are efficiencies.

"I think that's going to have a toll," he continued, "and an adjustment on workforces more broadly as we get into 2021. That's not something that's specific to financial services, I think that's across industry broadly. I do think this is something that as an economy we'll have to manage as we go forward."

Earlier this month, unemployment numbers for May surprised economists by adding 2.5 million jobs and decreasing the unemployment rate to 13.3%. In previous years pre-pandemic, the unemployment rate had sunk as low as 3.6%.

There are already rumblings that Solomon's likely correct, too.

A survey of small businesses that received funding from the federal government's Paycheck Protection Act by the National Federation of Independent Businesses found as many as 14% of PPP loan borrowers anticipate having to lay off employees after the funds run dry. Congress and the White House have yet to signal any agreement for a follow-up round of business relief or an extension of unemployment funds.

Goldman Sachs' research division has also warned that the stock market recovery that's helped equity prices return to barely below their January levels could get hit with a second selloff if there's a resurgence of the virus.

As for the firm specifically, it's also slowing down certain investments to protect its bottom line too.

"We have some longer term or medium term goals that we laid out at our investor day where we think there are opportunities to run the firm more efficiently," Solomon said, "and we're still committed to those, but obviously the timeline has changed a little but on some of that."

Carmen Reinicke contributed to this report.

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Hertz skyrockets more than 100% after Jefferies suggests CarMax or AutoNation could 'swoop in' (HTZ)

Wed, 06/24/2020 - 4:19pm

  • Jefferies analyst Hamzah Mazari suggested that auto dealers such as Avis, CarMax, and AutoNation may be eyeing bankrupt Hertz in a Wednesday note. 
  • Shares of Hertz skyrocketed more than 100% in intraday trading Wednesday, before paring some gains. 
  • The most obvious way for auto dealers to swoop in on Hertz would to be to bid for 150,00 of the company's used cars, which are likely to be sold off to shore up cash, according to the note. According to Mazari, selling the cars could raise $3 billion for Hertz. 
  • Watch Hertz trade live on Markets Insider. 
  • Read more on Business Insider. 

Hertz shares spiked as much as 101% Wednesday following a Jefferies note that suggested other auto dealers could "swoop in" on the battered company. 

"Our channel checks suggest that KMX and AN among others could be eyeing HTZ in bankruptcy," wrote analyst Hamzah Mazari in a Wednesday note.

Hertz shares jumped following the report, snapping a four-day streak of losses for the company. Later in the day, shares pared some of their gains but still were up roughly 40%. 

The most obvious way for auto dealers to swoop in on Hertz would to be to bid for 150,00 of the company's used cars, which are likely to be sold off to shore up cash, the note said. According to Mazari, selling the cars could raise $3 billion for Hertz. 

Read more: Aram Green has crushed 99% of his stock-picking peers over the last 5 years. He details his approach for finding hidden gems — and shares 6 underappreciated stocks poised to dominate in the future.

According to the note, the $1 billion in liquidity Hertz held at the end of March likely fell to $365 million by June 30, meaning that the company needs at least $900 million of debtor-in-possession financing. 

"We think the longer HTZ takes to re-emerge from bankruptcy with a cleaner capital structure, the more opportunity there is for rivals to pick up share," said Mazari. Bankruptcies typically last six months to two years, according to Jefferies — the Hertz one "could end up being toward the longer end of that range."

Join the conversation about this story »

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Dow plunges 710 points amid surging COVID-19 cases and oil-market skid

Wed, 06/24/2020 - 4:05pm

  • US equities slid on Wednesday as rising coronavirus case counts around the world renewed fears of a slow economic recovery.
  • COVID-19 cases have increased in California, Texas, and Florida, driving concerns that economic reopenings will fuel a second wave of the pandemic.
  • Investors also braced for a new tariff announcement after a late-Tuesday notice said the Trump administration was mulling duties on $3.1 billion worth of European exports.
  • Oil fell, with West Texas Intermediate crude sliding back well below $40 per barrel at intraday lows.
  • Watch major indexes update live here.

US stocks slid on Wednesday as surging COVID-19 case counts in the US fueled concerns of a protracted economic downturn.

California, Arizona, Texas, Florida, and other states have recently seen large coronavirus outbreaks, leading some to question whether economic reopenings will be extended or reversed. Rising case counts in Germany and China suggest economic pain will last abroad as well.

Investors also braced for a new tariff announcement from the White House. The Trump administration is mulling duties on $3.1 billion worth of exports from France, Spain, Germany, and the UK, according to a notice from the Office of the US Trade Representative published Tuesday evening. Such action could place fresh pressure on US trade relations and spark a new conflict.

Here's where US indexes stood at the 4 p.m. ET market close on Wednesday:

Read more: Aram Green has crushed 99% of his stock-picking peers over the last 5 years. He details his approach for finding hidden gems — and shares 6 underappreciated stocks poised to dominate in the future.

"I imagine there will be significant resistance to restrictions being reimposed but the fear is that they are left with no other option and the recent trends we're seeing in the data is a worry," said Craig Erlam, a senior market analyst at Oanda Europe.

Travel stocks were among the session's biggest losers. Airlines declined, led by Delta, Southwest, and United. Carnival Cruise Line and Royal Caribbean plunged further. Retailers including Gap and Macy's also declined.

The International Monetary Fund added to investors' stressors. The organization forecast an even deeper global recession than it did in April, calling for a 4.9% contraction in global gross domestic product in 2020. It had previously forecast a 3% slide through the year.

Read more: A CEO overseeing $147 million outlines his 4-part strategy for identifying which stocks to buy — and shares 2 he sees primed to explode higher right now

The IMF also expects the recovery to be worse than initially expected, cutting its 2021 growth estimate to 5.4% from 5.8%. The coronavirus pandemic will leave behind severe economic scarring, particularly in marginalized communities, the organization said.

"The adverse impact on low-income households is particularly acute, imperiling the significant progress made in reducing extreme poverty in the world since the 1990s," the IMF said.

Oil fell amid concerns of prolonged demand weakness and rising inventories. The American Petroleum Institute reported an increase of 1.75 million barrels in US inventories last week, bringing the total to 545 million barrels. Economists had expected a buildup of just 299,000 barrels, Reuters reported. An oversupply shock could flood the market with unwanted oil and drive prices sharply lower.

Read more: Morgan Stanley handpicks 10 stocks to buy now for the richest profits as travel and outdoor activities transform in the post-pandemic world

West Texas Intermediate crude fell as much as 7.6%, to $37.31 per barrel. Brent crude, the international benchmark, slipped 7%, to $39.63, at intraday lows.

Wednesday's decline came after moderate gains on Tuesday. Soaring tech names pushed the Nasdaq composite to a record high. Bank stocks followed close behind as investors received positive signs from new home sales data and IHS Markit's US purchasing managers' index.

Now read more markets coverage from Markets Insider and Business Insider:

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Goldman Sachs CEO David Solomon sees V-shaped recovery into 2021 before comeback slows

Wed, 06/24/2020 - 3:31pm

  • The US economy is still on track for a V-shaped recovery at least through 2020, Goldman Sachs CEO David Solomon said Wednesday.
  • The nation is "somewhere in the middle" of its rebound and reopenings are slated to sharply boost economic activity, he said during the Bloomberg Invest Global virtual conference.
  • Yet as the V-shaped bounce ends sometime next year, "it's very open-ended as to what kind of economic friction we're going to see as we get through the end of the year and into 2021," the chief executive added.
  • Visit the Business Insider homepage for more stories.

Goldman Sachs CEO David Solomon still sees a V-shaped recovery ahead even as coronavirus cases are increasing throughout the US.

It just might not bring the economy back to its pre-pandemic levels as quickly as hoped.

Appearing in the Bloomberg Invest Global virtual conference, Solomon said the US is "somewhere in the middle" of its turnaround. Just as economic activity nosedived in the second quarter, the CEO sees reopenings driving a similar turn higher through the end of the year.

"This crisis has had a profound impact on the economic environment that we're operating in," he said on Wednesday. "My guess is when you look at the shape of the recovery, the initial shape is going to look quite like a V."

Read more: A CEO overseeing $147 million outlines his 4-part strategy for identifying which stocks to buy — and shares 2 he sees primed to explode higher right now

Solomon added that uncertainty still clouds such forecasts and second shocks could endanger the nation's long-term trajectory. The healthcare industry represents a major variable, as an effective coronavirus vaccine is largely viewed as the best bet for boosting consumer confidence. Human behavior can also deviate from expectations and either accelerate or halt reopening measures.

These factors will likely slow the US economic bounce-back after 2020 and push a full rebound further down the road, Solomon said.

"I do think we're going to see a sharp V to start with, but it's very open-ended as to what kind of economic friction we're going to see as we get through the end of the year and into 2021," the CEO said.

"I think it's going to take quite a while for us to get back to where we were before this started"

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Morgan Stanley sees Tesla falling 35% from current levels, says rally to $1,000 ignores a host of risks (TSLA)

Wed, 06/24/2020 - 2:55pm

  • Tesla at more than $1,000 per share is plausible but ignores a host of market and execution risks, Adam Jonas of Morgan Stanley wrote in a Monday note. 
  • Shares of Tesla have been trading around the key level since closing at an all-time high of $1,025 per share on June 10. On Tuesday, Tesla again closed above the level, at $1,001 per share. 
  • Morgan Stanley's price target of $650 implies a 35% drop from that level. 
  • Watch Tesla trade live on Markets Insider.
  • Read more on Business Insider.

Tesla might be overvalued at $1,000 per share, according to Morgan Stanley. 

"We understand the attraction of the Tesla story," Adam Jonas of Morgan Stanley wrote in a Monday note, adding "we think investors may have a chance to revisit the stock at a more attractive price." 

He continued: "We believe $1,000/share discounts outcomes that, while plausible, may ignore a host of execution/ market risks." 

Shares of Tesla have been trading around the key $1,000 level since June 10, when the stock closed at an all-time high of $1,025. On Tuesday, Tesla closed at $1,001 per share, beating the level again before paring some gains Wednesday. 

There could be further pain ahead for Tesla stock, according to Morgan Stanley. The firm reiterated its $650 price target, which implies the stock could fall 35% from the key $1,000 level. Morgan Stanley also has the equivalent of a "sell" rating on Tesla. 

Read more: Aram Green has crushed 99% of his stock-picking peers over the last 5 years. He details his approach for finding hidden gems — and shares 6 underappreciated stocks poised to dominate in the future.

Tesla interest is coming from tech-oriented investors that see the Elon Musk-led company's valuation as "reasonable and in the framework of discussion amongst large/ tera-cap tech names" such as Amazon, Google, and Apple, said Jonas. 

"However, one would have to consider (or ignore) significant inherent differences in Tesla's business model and capital intensity" compared to other tech names, according to Jonas.

In addition, "one must also take into account many of Tesla's business objectives face a degree of execution risk that may be significantly higher than many of the more proven/ mature companies in this analysis." 

Morgan Stanley's Tesla target price is based on slightly more than 2 million units of annual deliveries by 2030 at a roughly 16.5% Ebitda margin, according to the note. At $1,000 per share and the same margin forecast, Tesla is discounting roughly 4 million units  — double its estimate, said Morgan Stanley. 

Read more: Morgan Stanley handpicks 10 stocks to buy now for the richest profits as travel and outdoor activities transform in the post-pandemic world

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Oil plummets 8% on 2-pronged threat from COVID-19 resurgence and inventory increase

Wed, 06/24/2020 - 2:51pm

  • Oil prices slumped on Wednesday as investors stared down a larger-than-expected jump in US crude inventories and surging COVID-19 case counts in several states.
  • The American Petroleum Institute said inventories last week leaped by 1.75 million barrels, to 545 million barrels, Reuters reported. Economists had expected a buildup of just 299,000 barrels over the period.
  • Meanwhile, a surge in coronavirus cases in several US states threatens to halt travel activity and stifle a demand rebound.
  • West Texas Intermediate crude futures sank as much as 7.6%, to $37.31.
  • Brent crude, the international benchmark, plunged 7.1%, to an intraday low of $39.62.
  • Watch oil trade live here.

Oil futures plummeted on Wednesday after new industry data and coronavirus case counts pointed to an aftershock in the critical commodity market.

The American Petroleum Institute said inventories jumped by 1.75 million barrels in the week ended on Friday, to 545 million barrels, Reuters reported on Tuesday. Economists had expected an increase of just 299,000 barrels. The larger-than-expected buildup threatens to flood the market with unwanted inventory as demand remains well below pre-pandemic levels.

West Texas Intermediate crude contracts slid as much as 7.6%, to $37.31 per barrel, before paring some losses. Brent crude, oil's international standard, fell 7.1%, to $39.62 at intraday lows.

Read more: Aram Green has crushed 99% of his stock-picking peers over the last 5 years. He details his approach for finding hidden gems — and shares 6 underappreciated stocks poised to dominate in the future.

The three straight weeks of inventory increases echoed a trend that ultimately pushed oil prices into negative territory in late April. WTI contracts nosedived in their last days before expiration as oil storage reached its limit and demand failed to offset the buildup. The moves haven't been repeated since, though Wednesday's price action pulled contracts sharply lower from their three-month highs.

Soaring COVID-19 case counts throughout the US further rattled investors hoping for a smooth oil-market rebound. Several states including California, Florida, and Arizona have reported spikes in cases throughout the week as reopenings continue. A surge in cases could further tank oil demand as lockdown measures drag on.

Read more: A CEO overseeing $147 million outlines his 4-part strategy for identifying which stocks to buy — and shares 2 he sees primed to explode higher right now

Growing fears of a new trade conflict also hammered the market. The White House is weighing fresh tariffs on $3.1 billion worth of exports from the UK, France, Spain, and Germany, the Office of the US Trade Representative said late Tuesday. Any slowdown in global trade stands to stifle a bounce-back in crude prices.

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Bank of America says these stocks will be supported as people opt for 'staycations' during the coronavirus crisis

Wed, 06/24/2020 - 2:47pm

  • As the coronavirus pandemic wears on, "staycations" should support stocks tied to solitary leisure, Bank of America analysts led by Robert Ohmes wrote Monday. 
  • Credit card data suggests that spending solitary activities such as golf accelerated in June. 
  • In addition, travel and Google Mobility data show that consumers are staying closer to home and increasing visits to parks and beaches over restaurants and malls. 
  • Here are three stocks that Bank of America upgraded as they're poised to gain from the "staycation" trend. 
  • Read more on Business Insider.

Even as the US economy reopens, many Americans are still practicing social distancing rules that are even impacting how they vacation, according to Bank of America. 

"We believe COVID-19 is accelerating the consumer spending shift away from traditional entertainment (e.g. amusement parks, movie theaters, & tourist attractions) and international travel to 'solitary' leisure activities (e.g. golf, marine, hiking, camping) and 'staycations'," a group of analysts led by Robert Ohmes wrote in a Monday note. 

There are a few data points that back up the claim, according to the note. First, travelers are holding back and choosing to stay local as the coronavirus still presents a health threat, Bank of America said.

Google mobility data through mid-June suggests that visits to parks, beaches, and marinas are growing, and tracking nearly 70% above pre-COVID levels. At the same time, visits to restaurants, shopping centers, theme parks, museums, libraries, and movie theaters are 16% below pre-COVID levels. 

Read more: A CEO overseeing $147 million outlines his 4-part strategy for identifying which stocks to buy — and shares 2 he sees primed to explode higher right now

Credit and debit card data also suggests that consumers are spending more money on solitary leisure activities, according to the report. Through mid-June, spending on entertainment such as movie theaters and amusement parks is down nearly 90% from a year ago, while spending on activities such as golf and marine activities are up double-digits on the year and continuing to gain. 

This trend will support three stocks that "should benefit from a potential sustained change in consumer habits due to rising consumer demand for active social distancing & contactless leisure experiences," according to Bank of America.

In addition, the "solitary leisure" stocks will especially gain with fears of a potential second wave of coronavirus cases mounting, Ohmes wrote. 

These are the three "solitary leisure" stocks Bank of America recommends. 

1. Dicks Sporting goods

Ticker: DKS

Price target: $50 (from $45) 

Rating: Buy 

"We believe DKS is the best positioned retailer to benefit from the increasing popularity of golf as one of the largest equipment retailers in the U.S.," Ohmes wrote. 

 

Source: Bank of America



2. Columbia Sportswear

Ticker: COLM

Price target: $90 (from $82) 

Rating: Buy 

"COLM should see momentum from more participation in Camping, Hiking, and Fishing as visits to national parks continue to increase," Ohmes wrote Wednesday.

"Columbia Sportswear apparel, including its PFG line, should be a beneficiary," he said, adding, Columbia Brand Footwear "should see momentum especially in hiking & trail running categories."

Source: Bank of America



3. Yeti

Ticker: YETI

Price target: $42 (from $35) 

Rating: Buy 

"We also see YETI as a key beneficiary of the shift towards solitary leisure activities as its coolers & drinkware are used across marine, fishing, park, and beach activities," wrote Bank of America analysts led by Ohmes. 

Source: Bank of America





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