Mid-Morning Look

Monday, April 19, 2021

U.S. stocks starting the week lower, coming off all-time highs for the S&P 500 and Dow Jones Industrials late last week and after the Nasdaq settled at its second-highest level Friday. Large cap tech (AAPL, FB, GOOGL) outperforms early, helping ease the broader market pullback, along with a bounce in energy shares on higher oil prices, recovering following last week’s underperformance. Semiconductors pressured early, while consumer space holding up well, led by strength in restaurants. Momentum sectors such as electric vehicles and bitcoin/crypto currency seeing weakness. Treasury yields edge higher while the dollar slides against major currencies and gold is down slightly. A busy week of earnings coming up with Dow component KO posting better results this morning, ahead of IBM tonight. Overall, there are about 79 S&P 500 companies expected to report earnings this week. There were a handful of M&A deals today (two in regional banking space) and one in consumer.

Sector Movers Today

·     Crypto-currency news: Bitcoin prices took a tumble over the weekend, falling as much as 15% on Sunday, just days after reaching a record of $64,870 (has pared losses around $56K) with a few theories including: power outage in China being blamed as well as continuation of selling pressure from last Friday’s announcement from Turkey’s central bank banning the use of cryptocurrencies. Bloomberg also noted there was also speculation Sunday in several online reports that the crypto plunge was related to concerns the U.S. Treasury may crack down on money laundering carried out through digital assets. https://bloom.bg/3x7njwE ; COIN is the best way to play the Bitcoin boom, according to Barron’s saying it’s a "novel" company with competitive advantages that have enabled it to increase market share; CLSK announces $16.2 Million Increase in Microgrid Contracts, a 220% Improvement

·     Semiconductors; NVDA shares slip after headlines the UK govt says it is intervening in the sale Softbank-owned arm to NVidia on national security grounds (INTC, AMD modest bounce on headlines); QCOM was downgraded to neutral from positive at Susquehanna saying trusted contacts suggest Apple’s increased dedication to internal modem/RF independence in 2023/24, and a revamped MediaTek portfolio present major future risks; LSCC downgraded to neutral from positive at Susquehanna amid rally in shares and raised WDC tgt to $124 from $100 and boost estimates well above consensus of $3.07/$5.22, driven by improving NAND fundamentals; Citigroup raised tgt price on AMAT ($160), LRCX ($750), and KLAC ($380) on expanded market multiples as firm lifts 2021/22/23 WFE forecasts to $76B/$81B/$71B from prior (Jan) $71B/$71B/$77B expectations and maintain $100B 2025 view; KLIC issues upside guidance for Q2 as sees EPS $1.20 on revs $340M (above ests 91c and $300M)

·     Bank movers; busy morning of M&A in the Smallcap and regional bank sector: 1) STL to be acquired by WBS in an all-stock merger that will create a company with a total market value of ~$10.3B where Sterling shareholders will get a fixed exchange ratio of 0.463 WBS share for each share of STL stock they own valued at $26.56 https://on.mktw.net/3aiAjWv ; 2) BMRC and AMRB said they agreed to merge in a transaction valued at $134.5M, or $22.46 a share as AMRB holders to receive a fixed exchange ratio of 0.575 shares of Bank of Marin common stock; MTB Q1 EPS 3.41 vs. est. $3.00; recorded a provision for credit losses recapture of $25 million in the first quarter of 2021; net loan charge-offs were $75 million during the recent quarter; in research, WAL upgraded to Overweight at Wells Fargo saying they can no longer sit on the sidelines waiting for a better entry point following mgt.’s guidance on the 1Q21 conf. call

·     Energy stock movers; BMO upgraded BKR upgraded to Outperform from Market Perform with a $26 target price, seeing an attractive entry point after shares materially lagged SLB and HAL with the recovery in oil prices and upstream spending, and they expect positive revisions to the company’s conservative International/NAM OFS outlook, and they also downgraded COG to Market Perform with a $19 target price from $20 as their better FCF yield versus nat gas peers has narrowed, and oily E&Ps now offer better FCF yields and valuations, and this downgrade leaves CNX as the only natural gas stock they rate at Outperform; PVAC provided an operational update as increased its full-year 2021 production guidance ahead of its May 4 1Q21 conference call; Into earnings, Cowen lifted their pt on BP to $28 from $23 as they say it could beat EPS and investors are focused on how it will deploy its buyback, said the near-term commodity setup is most favorable for XOM, and RDS, CVX remain their top picks; Also ahead of earnings, RBC said integrated oil stocks appear fundamentally attractive given valuations and the commodity backdrop, and they raised their price targets on BP, E (Eni), EQNR, and highlighted RDS as the most significant outlier in the sector, as their forecast of 2021 EPS being 20% higher than 2019 contrasts with shares being 45% lower

Stock GAINERS

·     ALB +3%; upgraded to Outperform at Evercore/ISI and raise tgt to $200 from $160 saying after reaching a bottom in the second half of 2020, lithium pricing has continued to move higher

·     CLNE +21%; said it signed an agreement with AMZN to provide low and negative carbon renewable natural gas

·     FANG +1%; seeing broader strength in energy names following last week declines

·     GME +9%; after Keith Gill, the man known as "Roaring Kitty" on social media and whose online posts helped spark the recent retail frenzy in GME, exercised call options on stock to buy 50,000 more shares at a strike price of $12, Bloomberg reported (separately, the company GME CEO George Sherman is stepping down by the end of July or earlier

·     HOG +11%; outperformance after Q1 sales and profit topped expectations and boosted its revenue growth outlook for the year to 30%-35% from prior view of 20% to 25%.

·     KNL +31%; to be acquired by rival MLHR in deal valued at $1.8B, with KNL holders to receive $25.06 per share, a 45.4% premium https://on.mktw.net/3x57QNv

·     KO +1%; with better Q1 results as EPS $0.55 tops est. of $0.50 on net revs $9.0B vs. estimate $8.63B, says volume trends steadily improved each month through 1Q, March volume back to 2019 levels with growth in at-home offsetting pressure in away-from-home

·     MANU +8%; after Juventus Football Club SpA it announced plans to take part in a European Super League that would circumvent established organizations, providing the Italian soccer club with a guaranteed revenue stream

·     MRLN +54%; to be acquired by HPS Investment Partners in an all-cash transaction for $23.50 per share, a 65% premium to Friday’s close https://bit.ly/3svzJLh

Stock LAGGARDS

·     ANIX -18%; said the FDA has requested additional information regarding its Chimeric Antigen Receptor-T cell therapy (CAR-T) being developed in partnership with Moffitt Cancer Center (MCC)

·     HAE -29%; after CSL Plasma informed the company it would not be renewing its supply agreement for the use of PCS2 Plasma collection system devices and the purchase of disposable plasmapheresis kits when agreement runs out in June ’22

·     PTON -6% after the CPSC said treadmills are unsafe for people with young children or pets, as the warning comes after its probe into child’s death; peloton calls advisory ‘inaccurate and misleading’ https://on.wsj.com/3v7lq1j

·     NVDA -2%; after headlines the UK govt says it is intervening in the sale Softbank-owned arm to NVidia on national security grounds (INTC, AMD modest bounce on headlines);

·     TPCO -4%; after saying that Hansjorg Wyss has backed away from a potential role in a joint bid to acquire the media company

·     TSLA -5%; following a report of a car involved in an accident that killed two passengers over the weekend in Texas was believed to be without a driver and on autopilot. The Tesla Model S crashed into a tree, caught fire and led to the deaths of the two passengers