Top US Stocks: Zoom, Merck and EA

Zoom Video’s merger with Five9 collapses, Merck’s oral Covid-19 drug looks promising, EA loses a key board member, Lordstown partners with Foxconn, Nio reports record deliveries, Netflix faces a lawsuit in Korea, and ExxonMobil’s earnings are set to rise with higher oil prices.

Zoom and Five9

The proposed merger between Zoom Video Communications and Five9 collapsed yesterday after the latter’s shareholders voted against the proposed $15 billion all-stock deal.

Zoom was hoping to bolster its phone offering with Five9’s cloud contact centre platform that companies use to streamline and improve their customer service across multiple channels.

It is thought the all-stock deal, worth 0.5533 Zoom shares for each Five9 share, lost support among Five9 investors following the steep fall in Zoom’s value since the deal was announced in July, having shed almost 25% as the appeal it boasted during the pandemic wanes and the global economy reopens. Notably, two major shareholder proxy advisers also told investors to vote the deal down after questioning the growth it would deliver and because of concerns about introducing a dual-share structure.

Zoom said the contact centre market remains a ‘strategic priority’ for the business and said it was launching its new Zoom Video Engagement Centre, a cloud-based service, early next year. Five9 said it still has what it takes to succeed as a standalone business.

 

Merck

Merck’s experimental oral drug has cut the risk of people being hospitalised by Covid-19 by 50%, according to the latest trial data, paving the way for it to apply for Emergency Use Authorisation ‘as soon as possible’.

Merck is developing the drug, named molnupiravir, alongside its partner Ridgeback Therapeutics. The latest Phase III trial reduced the risk of being hospitalised by half in non-hospitalised people with mild-to-moderate Covid-19. 7.3% of patients given the drug were either hospitalised or died within 29 days compared to 14.1% of those that received the placebo. It said there were no deaths among those given the drug within the same time period, but counted eight deaths from the placebo group.

‘Merck plans to submit an application for Emergency Use Authorization to the US FDA as soon as possible based on these findings and plans to submit marketing applications to other regulatory bodies worldwide,’ said the company.

Pharmaceutical firms are turning their attention to developing easier-to-administer drugs to help in the fight against the virus, with current vaccines and treatments requiring people to visit healthcare facilities.

 

EA

EA announced this morning that its chief operating and financial officer, Blake Jorgensen, will step down next summer.

Jorgensen is in charge not only of EA’s financial health but the day-to-day operations and has been with the business since 2012, having previously worked at Levi Strauss and Yahoo!.

The video games company has decided to split the dual role held by Jorgensen. This will see it hunt for a new chief financial officer before he departs and transition Laura Miele, the current Chief Studios Officer, into the chief operating officer role. She has been with the business since 1996.

 

Netflix

South Korean firm SK Broadband is suing Netflix after the streaming giant caused an explosion in traffic and caused maintenance work to be carried out despite paying no fees to the company.

A spokesperson from the firm, part of SK Corp, said it has filed a lawsuit against Netflix as it tries to get the firm to pay for using its networks since back in 2018, when SK introduced a dedicated line to allow larger amounts of data to be processed. Lawmakers in the country have suggested Netflix should ‘reasonably’ pay something, prompting Netflix to consider how to respond.

SK had previously estimated the cost of Netflix using its network was equal to around $22.9 million in 2020, according to previous court documents.

 

Lordstown Motors

Lordstown Motors has agreed to sell one of its factories to Foxconn, which will also invest in the US automaker, as the pair partner up.

The agreement is currently non-binding and the pair are working on a definitive deal. It will see Foxconn buy the 6.2 million square-foot production and assembly facility in Ohio for $230 million and produce Lordstown Motors’ Endurance full-size pickup truck.

Foxconn has also tentatively agreed to subscribe to $50 million worth of Lordstown stock at a price of $6.8983 each. Lordstown intends to issue further warrants to Foxconn that can be exercised within three years and converted into another 1.7 million shares at $10.50 each. Lordstown separately announced that costs will be higher than previously expected this year as it ramps up ahead of production.

‘We are excited about the prospect of joining forces with a world-class smart manufacturer like Foxconn and believe the relationship would provide operational, technology and supply chain benefits to our company and accelerate overall scaled vehicle production and increase employment in the Lordstown facility,’ said Lordstown CEO Daniel Ninivaggi.

 

ExxonMobil

ExxonMobil shares are in play after the oil giant said favourable prices will boost its earnings in the third quarter.

The company said the spike in oil and gas prices could provide a $700 million to $1.5 billion boost to earnings in the third quarter. It also said better downstream refining margins could provide a further boost of $500 million to $700 million, but said tighter chemical margins could cause a drag of $200 million to $400 million.

 

Nio

Chinese electric carmaker Nio said it delivered a record number of vehicles in September, marking a strong finish to the latest quarter.

The company said it delivered 10,628 vehicles globally in September alone, up 126% from the year before. The firm delivered its first vehicle in Norway and opened its first NIO House store in the country yesterday. The strong monthly performance meant deliveries doubled year-on-year in the three months to the end of September to 24,439.

The company is currently shipping three different models comprised of a six or seven-seater smart SUV named the ES6, a five-seater premium high-performance SUV named the ES6, and its five-seater coupe SUV named the EC6.

 

McDonalds and Yum Brands

Fast-food firms including McDonalds and Taco Bell-owner Yum Brands will be in play today after Reuters reported a number of outlets had decided to shut their indoor seating areas entirely in some cities after being ordered to check customers had been vaccinated before letting them dine in.

A number of US cities and counties including New York and San Francisco have introduced requirements for restaurants to ask for proof of vaccination from customers before allowing them to dine indoors, encouraging some outlets to opt for the easier option of supplying take-out, drive-thru and delivery only.

Reuters said Taco Bell has encouraged customers to order for pickup and delivery and that two sites it visited had closed their indoor dining altogether, and that three of eight McDonalds branches in New York it visited had done the same. Fast-food stores experienced a boom in demand when lockdown rules were eased earlier this year, prompting concerns how the new rules could impact the sector going forward.

 

Stock Recommendations

Jefferies initiated coverage on IBM with a Buy rating and a $170 target price, underpinned by the rising demand from businesses as they digitise and recover from the pandemic.

MGM Resorts was downgraded to Negative from Neutral by Susquehanna Financial on expectations that Draftkings pursuit of UK outfit Entain could weaken its prospects.

Bed Bath & Beyond had its price target slashed to $18 from $30 by Jefferies following its disappointing results yesterday that were hit by supply chain problems and Covid-hit traffic.

Paychex had its price target raised to $117 from $111 by JPMorgan following double-digit growth in revenue and earnings in the latest quarter.

Morgan Stanley had its price target increased to $108 from $105 by Credit Suisse.

 

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