Takeaway: StreetAccount consensus estimates for Q2 net physician adds were just released and they look reasonable.



StreetAccount consensus estimates for Q2 net physician adds were just released and they look reasonable.  Relative to consensus, our estimate comes within a margin of error for athenaCollector and athenaClinicals, which are the most important products when gauging the health of the business.  We are ~500 lower for athenaCommunicator after adjusting our mix assumptions due to several quarters of coming in higher than actual results.  However, we don't think it will make a difference as our model is forecasting above consensus Sales and Non-GAAP EPS of $229.3 mill ($227.0 mill Consensus) and $0.30 ($0.25 Consensus), respectively.  Chart above above shows the build up and break down of how we arrived at the net physician count for the quarter.


We will get into the details of our process and provide a comprehensive review of our long thesis in a Best Idea Update Call tomorrow at 11:00 am ET.  As a reminder, the company will be reporting earnings after the close that day.


key metrics

  • athenaCollector
    • Consensus 1,697 vs HRM 1,642
  • athenaClinicals
    • Consensus 1,077 vs HRM 1,154
  • athenaCommunicator
    • Consensus 1,907 vs HRM 1,415


Please call or email with questions.


Thomas Tobin
Managing Director 



Andrew Freedman



Cartoon of the Day: Bull vs. Bear

Cartoon of the Day: Bull vs. Bear - Bull and bear extra cartoon

"It’s probably different this time," Hedgeye CEO Keith McCullough wrote in an Early Look earlier this week. "Post a 6yr equity ramp shouldn’t you pay 351x earnings for Netflix or chase QQQs? I’m hearing the charts 'look good.' They did in 2000 and 2007 too."


P: Notes from WebIV Closing Arguments

Takeaway: We doubt anyone left thinking P had the upper hand yesterday, but what we learned is P is largely on its own, and SX is going for its throat


  1. ECONOMICS VS. LAW: Bulls vs. Bears: trying to prove that P has the better economic argument vs. considering the legal parameters of the Copyright Act that governs the WebIV proceeding.  During closing arguments yesterday, both SoundExhange (SX) and the Services (P included) each presented what could be viewed as compelling economic arguments depending on who you were rooting for. But the big difference is the legal arguments, with SX literally citing multiple passages from the Copyright Act stating that the copyright owner’s (the labels) rights takes precedent.  P’s only rebuttal here was that SX was being too literal, and asking the judges to operate outside of their mandated roles.
  2. P = ODD MAN OUT: The parties representing the “Services” are not all on the same side of the table. The NAB's priority is clearly on simulcast rates, which SX isn’t really challenging (NAB council made a point to call this out).  IHRT's core platform is terrestrial radio, and the focus of its WebIV filings are largely on simulcast as well.  Note that IHRT’s rate proposal is largely based on the iHeart-Warner deal, which we believe leverages IHRT's much larger terrestrial radio platform (link), which is outside the scope of WebIV.  However, the agreement touts the leverage terrestrial radio (by extension simulcast) has over the labels, which was probably IHRT's agenda.  We suspect all parties are tacitly horse trading; SX is yielding simulcast in exchange for less pushback from NAB/IHRT on webcasting, making P the odd man out.  
  3. LOSING THE KEY DEBATE: Does P have a basis to request lower ad-supported royalty rates (vs. subscription rates)? We've always contended that this debate has been both P’s weakest argument and where it has the most to lose.  P’s only basis is trying to use the Pandora-Merlin agreement as a benchmark, which SX spent much of its time yesterday attacking.  Note that SX already provided rebuttal testimony from the involved Merlin parties stating the agreement is a derivative of the Pureplay Agreement, which is inadmissible for WebIV.  Note that of all the major parties involved, P is the only one asking the judges to distinguish rates by how the copyright buyer chooses to monetize those tracks, which the judges of Web III Remand essentially ruled out (see link below for exact quote).  


Let us know if you have any questions, or would like to discuss in more detail.  


Hesham Shaaban, CFA




P: Losing the Critical Debate?

04/08/15 08:53 AM EDT

[click here]


Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.46%
  • SHORT SIGNALS 78.35%

June-boree | Demand ↑, Supply ↓, Price ↑

Takeaway: Today’s triple header of housing data tells a congruous story of ongoing demand improvement, tight inventory, and accelerating price growth.

Our Hedgeye Housing Compendium table (below) aspires to present the state of the housing market in a visually-friendly format that takes about 30 seconds to consume. 


June-boree | Demand ↑, Supply ↓, Price ↑ - Compendium 072215 


Today's Focus: June Existing Home Sales, FHFA HPI & MBA Purchase Apps


1. EHS follows PHS to new highs. 2. EHS Inventory & FHFA corroborate HPI acceleration. 3. Purchase Apps signal stable demand trends to start 3Q.   


Today’s triple header of housing data tells a congruous story of continued improvement in demand trends with price and inventory data supportive of accelerating price growth. 


Existing Home Sales, which headlined this morning’s data, rose +3.2% sequentially and accelerated to +9.6% YoY as transaction activity in the existing market made a new post-crisis high. 


Taking a composite view of today’s releases, there are a few key takeaways:


PHS vs EHS | Predicting the Present:  The strength in June EHS was not unexpected and was well telegraphed by the multi-month strength observed in PHS.  As we’ve highlighted repeatedly, Pending Home Sales are a strong leading indicator for Existing Home Sales and EHS re-coupling to PHS after short-term dislocations has been as high probability a call as one could make.  The re-convergence between the two series is largely complete following the advance in EHS in June.  We show the divergence-convergence trend over the last 18 months in the 1st chart below.


1st-time Buyers | Worse …. No, wait, Better .. it depends:  Last month’s rise in 1st-time buyer share to 32% of sales (a 33-mo high) proved a quasi-headfake as their share of sales in June retreated moderately to 30%.  Given the rise in total sales, the decline in absolute sales to 1st-time buyers was more modest and belies the magnitude of ongoing improvement for this demographic.  Indeed, sales to 1st-time buyer are up a notable +17.4% YoY – a premium to the +9.6% YoY growth in EHS in aggregate as distressed/investor/cash sales continue to decline and the slow march to market normalization progresses.  So long as labor/income fundamentals continue to improve and the employment recovery for 25-34 years continues to mature, headship rates among young adults should rise with single-family purchase demand manifesting on a lag.  As can be seen in the 2nd chart below, mean reversion to 40% share for 1st-time buyers implies upside to >6.0 mm in EHS.  


Inventory ↓ = Future HPI ↑:   Units of inventory rose +0.9% MoM in June to 2.3 mm but with sales growing at a premium to supply for a second month, inventory on a month-supply basis dropped -2.2% to 5.03-months – representing a second month of tightening supply and the 34th month below the canonical balanced market level of 6-months.  Tight - and tightening - supply in the 90% of the market that is EHS remains supportive of improving HPI trends.  Indeed, the FHFA HPI series for June released this morning showed price growth accelerating +30bps sequentially to +5.6% YoY in June (vs +5.3% prior) and playing catch-up to the (more leading) CoreLogic HPI series which has shown accelerating improvement in each of the last 3-months.  Improving 2nd derivative trends in HPI augurs positively for housing related equities given the strong contemporaneous relationship between the two. 


Rates:  Interest rates on the 30Y FRM contract held flat at 4.23% for a 3rd straight week.  Rates remain -2.3% lower than the corresponding period last year with the current rate of 4.23% comparing to the full year 2014 average of 4.35% and the 1H15 average of 3.97%. 


Purchase Applications = Less Noise, More Signal:  Purchase applications rose +1.0% WoW while accelerating to +17.8% YoY, taking the index up to 198.3.  Given the typical peri-holiday volatility in the data, this week represents the first clean read on underlying demand for 3Q.   In short, transaction activity appears stable and roughly in line with the 2Q15 average. 


While good on an absolute basis, flat sequentially in 3Q15 represents an end to the large-scale, positive reversal we’ve seen over the last ~3qtrs.  Whether #Good Is Good Enough against harder comps and pervasive seasonality remains a tough call, especially with rates providing no discrete head or tailwind to affordability at current levels. 



June-boree | Demand ↑, Supply ↓, Price ↑ - EHS vs PHS


June-boree | Demand ↑, Supply ↓, Price ↑ - EHS 1st time buyer upside


June-boree | Demand ↑, Supply ↓, Price ↑ - EHS 1st time buyers


June-boree | Demand ↑, Supply ↓, Price ↑ - EHS Inventory Mo Supply


June-boree | Demand ↑, Supply ↓, Price ↑ - EHS Inventory Units


June-boree | Demand ↑, Supply ↓, Price ↑ - EHS LT


June-boree | Demand ↑, Supply ↓, Price ↑ - EHS Median Price YoY


June-boree | Demand ↑, Supply ↓, Price ↑ - EHS regional


June-boree | Demand ↑, Supply ↓, Price ↑ - EHS Units   YoY TTM


June-boree | Demand ↑, Supply ↓, Price ↑ - PHS Comps


June-boree | Demand ↑, Supply ↓, Price ↑ - Purcahse   Refi YoY


June-boree | Demand ↑, Supply ↓, Price ↑ - Purcahse YoY


June-boree | Demand ↑, Supply ↓, Price ↑ - Purchase 2013v14v15


June-boree | Demand ↑, Supply ↓, Price ↑ - Purchase Index   YoY Qtrly


June-boree | Demand ↑, Supply ↓, Price ↑ - Purchase LT


June-boree | Demand ↑, Supply ↓, Price ↑ - 30Y FRM


June-boree | Demand ↑, Supply ↓, Price ↑ - FHFA HPI YoY



About Existing Home Sales:

The National Association of Realtors’ Existing Home Sales index measures the number of closed resales of homes, townhomes, condominiums, and co-ops. Existing home sales do not take into account the sale of newly constructed homes. Existing home sales account for 85-95% of all home sales (new home sales account for the remainder). Therefore, increases in existing home sales tend to signify increasing consumer confidence in the market. Additionally, Existing Home Sales is a lagging series, as it measures the closing of homes that were pending home sales between 1 and 2 months earlier.



The NAR’s Existing Home Sales index is published between the 20th and the 22nd of each month. The index covers data from the prior month.


About MBA Mortgage Applications:

The Mortgage Bankers’ Association’s mortgage applications index covers more than 75% of mortgage applications originated through retail and consumer direct channels. It does not include loans delivered through wholesale broker and correspondent channels. The MBA mortgage purchase applications index is considered a leading indicator of single-family home sales and construction. Moreover, it is the only housing index that is released on a weekly basis. 



The MBA Purchase Apps index is released every Wednesday morning at 7 am EST.




Joshua Steiner, CFA


Christian B. Drake

McCullough: Watch Out Below If Apple's Chart Breaks | $AAPL

Hedgeye CEO Keith McCullough weighs in with his unvarnished take on Apple’s third-quarter results and shares his cautious outlook for the stock and overall market with Maria Bartiromo on Fox Business.

the macro show

what smart investors watch to win

Hosted by Hedgeye CEO Keith McCullough at 9:00am ET, this special online broadcast offers smart investors and traders of all stripes the sharpest insights and clearest market analysis available on Wall Street.