The Zacks Analyst Blog Highlights:Twitter, Bank of America, American International Group, JPMorgan Chase and Morgan Stanley
CHICAGO, May 21, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Twitter (NYSE:TWTR-Free Report), Bank of America Corporation (NYSE:BAC-Free Report), American International Group, Inc. (NYSE:AIG-Free Report), JPMorgan Chase & Co. (NYSE:JPM-Free Report) and Morgan Stanley (NYSE:MS-Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Tuesday's Analyst Blog:
Twitter to Acquire SoundCloud?
Reportedly, Twitter (NYSE:TWTR-Free Report) is likely to acquire Berlin-based audio hosting and sharing startup, SoundCloud. However, nothing has been confirmed by either of the companies as yet.
Established in 2007, SoundCloud is an online audio distribution platform that enables its users to upload, record, promote and share their originally-created sounds.
One of the key features of SoundCloud is that it enables artists to upload their music with a distinctive URL. SoundCloud is also known as the YouTube for Audio. In Oct 2013, the company had about 250.0 million users.
If the deal materializes in the near future, it is expected to carry an exorbitant price tag as the company is currently valued at $700.0 million.
This is not the first time that Twitter has ventured into music streaming. Earlier it had launched the Twitter Music service app in 2013. Nevertheless, the app failed to gain popularity and Twitter discontinued it in 2014.
Since then, Twitter has been continuously entering into alliances with various companies with to gain an entry into the music streaming industry. Earlier in 2014, Twitter had struck a deal with Billboard to display charts on the most talked-about songs. The company also trained celebrities in best practices on the network, with singer Justin Bieber being one of its most-followed users.
Per reports, more SoundCloud links are shared by people on Twitter than any other music service. With this deal Twitter will not only be able to curate but also host music very similar to what Vine does with video.
We believe that Twitter intends to solidify its position in the music streaming industry with this acquisition. This deal will enable Twitter to increase its active user base going forward, which had fallen to 25.0% in the last quarter from 30.0% in the year-ago quarter.
However, it is worth noting that some of the songs are uploaded on SoundCloud without the owner's permission. This, in turn, may pose copyright concerns for the company, which will adversely impact its goodwill and profitability in the near future.
BofA Favored by Appeals Court
The declaration by the 2nd U.S. Circuit Court of Appeals in New York on Monday favoring Bank of America Corporation (NYSE:BAC-Free Report) came as a breather for the banking giant. The court did not hold it accountable to shareholders for concealing a tentative lawsuit worth $10 billion against it. The news was reported by Reuters.
The lawsuit was filed by American International Group, Inc. (NYSE:AIG-Free Report) on Aug 8, 2011, alleging that BofA, along with its acquired units Countrywide and Merrill Lynch, had sold risky mortgage-backed securities worth more than $28 billion in the pre-crisis period that resulted in huge losses for the insurer.
The lawsuit greatly impacted BofA and its stockholders, as the company lost nearly 20.3% on that very day. Later, a Houston-based investment firm, Camcorp Interests Ltd, alleged that BofA, with prior information about the tentative lawsuit, should have informed its shareholders beforehand.
However, the 2nd U.S. Circuit Court, ruled down the allegation on lack of evidence that indicated foul play. According to the Court, the bank is not obligated to inform its shareholders about a lawsuit that is yet to be filed. Moreover, as words of a tentative lawsuit were already doing rounds in the market, BofA did not find the disclosure necessary.
Legal hassles pertaining to malpractices in the pre-crisis period continue to haunt Wall Street biggies including BofA, JPMorgan Chase & Co. (NYSE:JPM-Free Report), Morgan Stanley (NYSE:MS-Free Report) and Citigroup. Their profitability is still marred by the one-time legal expenses and compliance costs related to long-drawn litigations.
In April, a Bloomberg report affirmed settlement talks between BofA and the U.S. Department of Justice, though in a nascent stage. The anticipated settlement amount of over $13 billion overshadows the historic JPMorgan settlement on troubled mortgages.
Going forward, though we see an improvement in BofA's top line driven by investment banking as well as consumer and business banking, we remain skeptical about an expected rise in legal expenses.
Presently, BofA carries Zacks Rank #5 (Strong Sell).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
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