About a month ago, the US slapped the shit out of ZTE for making illegal shipments to both N. Korea and Iran. Since then, Trump has become besties with N. Korea and he sent a delegation to China to negotiate terms for a new trade deal. The subsequent result of this action caused ZTE to shut the fuck down in America for lack of parts. Since they’re too stupid to create their own tech, if they’re not stealing ours — life sucks at ZTE.
Communication equipment players in America, such as ACIA, LITE, and OCLR got crushed due to the ban — especially ACIA, who derives 30% of their business from them.
“President Xi of China, and I, are working together to give massive Chinese phone company, ZTE, a way to get back into business, fast,” Trump tweeted. “Too many jobs in China lost. Commerce Department has been instructed to get it done!”
When news of the ban hit, lots of optical stocks got hit — but many of them for the wrong reasons. People threw babies out with the bath water without knowing who was going to be impacted by the ban. Since then, the shroud of uncertainty was lifted and we know who has the most exposure to ZTE.
This from DA Davidson will help.
DA Davidson notes the US Commerce Department is banning American firms from selling components to ZTE for seven years due to ZTE having violated terms in a sanctions violation case. The two cos they cover with the most exposure to this customer are Acacia (ACIA) and Oclaro (OCLR). ACIA derives 30% of its revenue from ZTE, while OCLR derives around 18%. Should Lumentum (LITE) close its deal to acquire OCLR later this year, around 10% of combined revenue will be derived from ZTE. All other optical cos have limited exposure to this customer.
They would stress that this ban is not related to other recent trade concerns with China, but to a history of illicit activity by ZTE. So far, damage is limited to just ZTE and its customers (primarily ACIA and OCLR in their space). Given the significant impact the sanction will have on ZTE, they expect The Company will work to resolve this issue with the US government per the settlement agreement worked out in 2017 (The US government claims ZTE has not fulfilled all of the obligations it agreed to).
One stock that might surprise to the upside if the ban is lifted is the beleaguered MXL, whose business sucks anyway and the lift could help buoy their pathetic excuse for what the deem a business.
This from the last Needham cut.
Needham cuts gtgt to $27 from $30 after MaxLinear reported light 1Q18 revenue while NG EPS beat by $0.02. However, 2Q18 revenue guidance came in much lower than their forecast reflecting headwinds in optical, legacy terrestrial tuners, MoCA and satellite solutions as well as a negative impact from the recent ZTE ban. Though they remain encouraged by the growth in MXL’s wireless infrastructure segment and the strong pipeline of new Infrastructure products, they lower their EPS estimates for 2018 and 2019 in an effort to provide a conservative model.
Net net, it appears Trump is on the verge of sucking some major Chinese dick. Look for stocks to swing higher again, given his proclivity to ‘make deals’ and his incessant desire for adoration from his beloved fans.
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Given that his sexual history is white-only (including Putin), sucking Xi would be a very liberal move on his part.
Did no one get you anything for mothers day, again? You are trying hard, but maybe you should try harder. Perhaps, offer your trades out – like what someone on fb would do regarding what they had for breakfast.
Lighten up international orally-sexed obsessed one, the Orange God is only fulfilling his campaign promise to Make China Great Again !
Throw in some race-baiting pizzazz, because that’s it’s schtick when it has nothing else.
Fly banned sarc who openly explained his veiws and welcomed opposition, while this character sneaks and slithers in with race at every twist.
Juice is old school iBC and will never get banned.
Wasn’t suggesting that in any form or fashion good doctor.
It’s no coincidence that Kim is denuclearizing and coming to the table shortly after his visit to China. Trump is right on this one.
EM debt has been pretty banked up on this USD move. On top of that ZTE woes whacked DIGICEL debt, for bond folks I like this; DIGICEL 8.25% 9/1/2020 USG27631AD56 in the mid $80’s $ price for mid teen’s YTM. Billionaire owner Denis O’Brien will not miss another opportunity to refinance this $2bln slug of debt, offering a catalyst for a + move.
banged up ….. damn fingers.
#freesarc
Regards
Chuck Bennett