On The Fly

Credit Suisse downgraded theater owner Cinemark (CNK) to Underperform, its equivalent of a sell rating, from Neutral. As reasons for the downgrade, the firm cited "weak box office trends" and the looming threat of video on demand. Based on similar concerns, the firm cut its price target on two other theater owners: Regal (RGC) and AMC (AMC). It also lowered its price target on another movie-linked stock, IMAX (IMAX), citing a lack of near-term catalysts. WEAK THEATER TRENDS: U.S. box office trends have been weaker than expected this quarter, as revenues are on track to fall 2% versus the same period a year earlier, according to Credit Suisse analyst Omar Shikh. The analyst continues to estimate that U.S. box office revenue will be flat this year, but he predicts that box office revenue will have to jump 15% in order to meet his 2017 estimate. PREMIUM VOD: Studios are going to continue to seek to launch premium video on demand rentals this year and the analyst thinks that such a development will probably cause movie theaters' profits to decline. PRICE TARGET: Sheikh cut his price target on Cinemark to $34 from $38. OTHER THEATERS: Sheikh cut his price target on Regal to $17 from $19, on AMC to $20 from $26, and on IMAX to $26 from $33. He kept Underperform ratings on Regal and AMC and maintained a Neutral rating on IMAX. Regal and AMC will be hurt by the same factors as Cinemark, while IMAX has few catalysts and is increasing its investment in new initiatives, causing its profits to drop significantly this year, Sheikh wrote. The analyst believes that IMAX will grow in 2018, but he says that it lacks near-term catalysts. PRICE ACTION: In afternoon trading, Cinemark fell 3.6% to $38.39, Regal lost 1.5% to $20.46, AMC slid 1.5% to $22.70 and IMAX gave back 3.4% to $23.40.

Solar stocks soared Thursday after President Donald Trump, speaking at a rally in Iowa, appeared to float the idea of equipping his potential southern border wall with solar panels. TRUMP REMARKS: At a rally in Cedar Rapids, Iowa, on Wednesday evening, President Trump stated: "We're thinking of something that's unique. We're talking about the southern border. Lots of sun, lots of heat. We're thinking about building the wall as a solar wall, so it creates energy and pays for itself. And this way Mexico will have to pay much less money, and that's good... Makes sense. Let's see. We're working it out. We'll see." IDEA PREVIOUSLY FLOATED: According to reports by Politico and Axios on June 6, President Trump presented the idea of lining the border wall with solar panels in a meeting with Congressional leaders that day. Trump didn't "express certainty" that the concept would come to fruition but said he'd become aware of the idea and wanted input, according to Politico. Those reports followed media coverage in early April on construction bids submitted for the wall, which noted that Gleason Partners had proposed to cover the wall in solar panels. FEASIBILITY: Bloomberg reported on June 9 that Axiom Capital analyst Gordon Johnson modeled the solar wall idea, finding that the roughly 13.4M panels needed to cover the structure would add an additional $7.6B in costs and generate roughly $221M in annual profits. Taxpayers would be break-even after 125 years without adjusting for inflation, but discounting for expected changes in the value of money would leave a significant funding gap, and Johnson also warned that solar panels need to be replaced over time. PRICE ACTION: Shares of SunPower (SPWR) are up 15.6% in afternoon trading, while First Solar (FSLR) and JinkoSolar (JKS) are up in the range of 5%. Canadian Solar (CSIQ) and JA Solar (JASO) are higher by 10% and 1.4%, respectively. Tesla (TSLA), which last year acquired SolarCity, is up 2%.

Shares of Tesla (TSLA) are in focus following the company's confirmation it is working with the Shanghai government to explore production in China. NOTABLE: It was reported by various media agencies that Tesla signed a preliminary agreement with Shanghai to produce vehicles in China in a move that could reduce manufacturing, labor and shipping costs for the automaker. In an emailed statement to The Fly, a Tesla spokeswoman said, "Tesla is working with the Shanghai Municipal Government to explore the possibility of establishing a manufacturing facility in the region to serve the Chinese market. As we have said before, we expect to more clearly define our plans for production in China by the end of the year. Tesla is deeply committed to the Chinese market, and we continue to evaluate potential manufacturing sites around the globe to serve the local markets. While we expect most of our production to remain in the US, we do need to establish local factories to ensure affordability for the markets they serve." Under the deal, Tesla would be able to construct factories in Shanghai's Lingang development zone allowing it to better compete with Chinese automakers through the elimination a 25% import tariff that makes its Model S sedans and Model X SUVs more costly. The company, which expects to start production of its Model 3 in its sole assembly plant in California in July, would also need to establish a joint venture with at least one local company to be granted manufacturing permits under current rules. PRICE ACTION: Tesla rose 1.5%, or $5.69, to $382.09 in afternoon trading.

Shares of hospital and health insurance stocks are rising this afternoon after Senate Republicans released a draft of their Affordable Care Act replacement bill. WHAT'S NOTABLE: The draft includes cuts to Medicaid and restructures the program from an open-ended government funding commitment to a limited federal payments system. The bill also repeals billions of tax dollars used to expand coverage and abolishes the ACA's mandates to purchase coverage. Under the draft, federal funding for Medicaid will be phased out from 2020 to 2024 and additional cuts would begin in 2025, as the cap on Medicaid payments begins to grow at a slower rate. While the bill retains some of the ACA's tax credit structure, which assists citizens in buying private coverage, senators have reshaped the credits so they are less generous and less costly to the government. The bill is expected to be voted on next week. COMPANIES TO WATCH: Publicly traded hospital operators include HCA Holdings (HCA), LifePoint (LPNT), Tenet Healthcare (THC), Community Health (CYH) and Quorum Health (QHC) and health insurance providers include Aetna (AET), Anthem (ANTM), Centene (CNC), Cigna (CI), Humana (HUM), Molina Healthcare (MOH), UnitedHealth (UNH) and WellCare (WCG). PRICE ACTION: HCA was up 3.8%, LifePoint rose 3.3%, Tenet was up 8.7%, Community Health rose 8.4% and Quorum was up 8.3% in early afternoon trading. Aetna, Anthem and Centene also rose 1.3%, 1% and 3.6%, respectively. Cigna was up 1.1%, Humana rose 1.5%, Molina gained 2.6%, UnitedHealth was up 1.5% and WellCare was up 3.5%.

Shares of Chinese internet companies Sina (SINA), Weibo (WB), Phoenix New Media (FENG), YY (YY) and Momo (MOMO) are falling following reports that Chinese regulators are cracking down on online videos and streaming in an effort to police online content. WHAT'S NEW: The State Administration of Press, Publication, Radio, Film and Television of the People's Republic of China has ordered internet platforms Sina Weibo, Phoenix New Media's iFeng and ACFUN to stop all video and streaming services as China increases its efforts to cut down the dissemination of "vulgar content." The regulator said the companies do not have the necessary license to stream content and were "not in line with national audiovisual regulations and propagating negative speech." The move is seen as a blow to Sina Weibo which has invested in livestreaming companies and announced a partnership in December with the National Football League to stream games. It is unclear if the ban on streaming is temporary or permanent. WEIBO CONFIRMS RECEIPT OF NOTICE: Following the report, Weibo announced that it became aware of a public notice issued by The State Administration of Press, Publication, Radio, Film and Television of the People's Republic of China stating that the SAPPRFT had recently requested the local competent authorities to take measures to suspend several companies' video and audio services due to their lacking of an internet audio/video program transmission license and posting of certain commentary programs with content in violation of government regulations on their sites, and Weibo is named as one of these companies. The company said it is "communicating with the relevant government authorities to understand the scope of the notice" and "intends to fully cooperate with the relevant authorities." PRICE ACTION: Sina was down 7.5% to $85.07, Weibo fell 9.6% to $69.57, Phoenix New Media was down 2.2% to $2.69, YY dropped 3.5% to $56.90 and Momo fell 2.5% to $37.75 in morning trading.

UP AFTER EARNINGS: Oracle (ORCL), up 11.7%... Hain Celestial (HAIN), up 5.6%. ALSO HIGHER: American Airlines (AAL), up 5.1% after disclosing a notice from Qatar Airways indicating its intention to acquire about 10% of American's shares... Novartis (NVS), up 3.2% after the Phase III CANTOS study met its primary endpoint. LOWER: EnSync (ESNC), down 30.1% after its 7.15M secondary priced at 35c... Accenture (ACN), down 2.8% after reporting quarterly results... STMicroelectronics (STM), down 2.9% after offering $1.5B in bonds and announcing it will buy back up to $297M of stock... Taylor Morrison (TMHC), down 3.9% after its 10M share Spot Secondary priced at $23.50.