Mid-Morning Look: December 11, 2020

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Mid-Morning Look

Friday, December 11, 2020






DJ Industrials




S&P 500








Russell 2000






Stocks open weaker with attention focused on vaccine data after news that Sanofi/GSK experienced a setback following poor results for elderly patients and its rollout delayed until end of Q1 2021. That is offsetting the highly anticipated (and widely expected) news that an FDA advisory panel approved PFE and BNTX‘s Covid-19 candidate. However, it’s a combination of several factors that hit global markets overnight including Brexit fears as UK PM Johnson said that he is preparing the country for a no-deal Brexit in a press interview late on Thursday, warning there is a strong possibility talks would fail. Another factor, no new incremental developments on U.S. fiscal stimulus with Democrats and Republicans still apart on issues like liability protections, State, and local government aid (despite weeks of back and forth that they are making progress). Yesterday’s jobless claims data was clearly a negative but ignored by markets while U.S.-China tensions remain elevated after FCC ordered American carriers to remove equipment made by Huawei and ZTE. All these factors could be pressuring markets that are trading at or near record highs – but to this point, investors have taken every market pullback as a buying opportunity and have been rewarded every time thus far as they bet on continued hopes of an economic recovery (while ignoring surging Covid cases and tighter restrictions) – today no exception. Oil prices pull back from 9-month highs, Treasury yields slip, while gold and the dollar edge higher. In stock news, Dow component Disney (DIS) surges after offering upbeat Disney+ subscriber adds and forecasts.


Economic Data

·     Producer Price Index for Nov rose +0.1%, in-line with consensus and down from +0.3% prior, while YOY, prices rose +0.8% vs. +0.7% consensus and +0.5% prior. Core PPI (ex: food & energy) rose +0.1%, below the +0.2% consensus and +0.1% prior and YoY core rose 1.4% vs. est. 1.5%

·     University of Michigan Surveys of consumers current conditions index prelim Dec 91.8 (consensus 87.0) vs final Nov 87.0; consumers expectations index prelim dec 74.7 (consensus 71.0) vs final Nov 70.5; consumers sentiment prelim dec 81.4 (consensus 76.5) vs final Nov 76.9







WTI Crude















10-Year Note





Sector Movers Today

·     Leisure and Gaming; MTN reported pass sales +20%/flat in units/dollars for the upcoming season, an acceleration from last quarter’s +18%/-4% and a beat to Bank America expectations of +10% to +15% for units and -10% for dollars (though missed results for quarter EPS and sales); in casinos and gaming, Jefferies raised tgts on LVS (top pick) to 66 from 55, CZR to 85 from 68, WYNN to 107 from 82, PENN to 74 from 64, MCRI to 65 from 57, MGM to 30 from 22, CHDN to 190 from 176 and BYD to 45 from 39 as believe the regional markets are best positioned fundamentally despite a weaker than expected 4Q20 driven by COVID-related restrictions; cruise line price tgts raised at Stifel after meeting with mgmt of all three, as CCL, NCLH and RCL move to $32, $35 and $100, respectively saying they were encouraged to hear that demand from consumers remains extremely strong for itineraries in late-2021 and 2022

·     E&P sector was upgraded by Morgan Stanley to Attractive from In-Line as they believe the foundation appears in place for a sustained rally, but they also see the sharp rally in the group in the past month having created valuation disconnects. FANG upgraded to Overweight from Equal Weight with a $65 tgt, citing an estimated 14% free cash flow yield in 2021 that he expects to be highest among its peers; raised MUR to Equal Weight from Underweight with a $14 tgt, citing its reduced spending profile and improved cost structure. RRC also upgraded to Equal Weight from Underweight with a $7 tgt, stating that he now sees a more balanced risk/reward

·     Hardware & Component news; JPMorgan with changes in the Networking Equipment & IT Hardware 2021 Outlook as they downgrade GLW, JNPR to Neutral, upgrade COMM to Overweight, say the 5G thematic ideas for 2021: QCOM, COMM and Value/Cyclical trade ideas: VIAV, FFIV, DELL, with Secular stocks: AAPL, KEYS, CIEN and Stocks to avoid: NATI, AAOI; JBL with an “opening positive catalyst watch” at Citigroup as see upside to JBL’s revenue driven by strong Apple product demand and potential share gains from Catcher; ERIC filed a lawsuit against Samsung Electronics in the US for violating contractual commitments, and cautioned on delayed royalty payments and legal costs for which Samsung will have to bear cost between 1B-1.5B Swedish kronor ($118.1M-177.2M) a quarter

·     Retailers; LULU reported Q3 adj EPS $1.16 on revs $1.1B that topped estimates ($0.88 on $1.0B), comp sales +19%, ecommerce sales +93% YoY with a record performance for the week of Black Friday, adj operating margin decreased 10bps to 19.1%, its gross profit margin increased to 56.1% from 55.1% YoY, and the company upped its share repurchase program to $500M; COST Q1 EPS $2.62 vs. est. $2.05 on sales $42.35B (+16.9% from $36.24B last year) vs. est. $42.66B, membership fees up over 7% YoY to $861M, comp sales +15.4%, total E-Commerce comp sales +86.4%; TJX was downgraded to Neutral from Buy at Citi who is less confident that TJX is on a visible path to reversing the downward margin trajectory they have seen for the past several years; Citi upgrades RL to Buy from Neutral based on their belief that RL is making the right moves to upscale the brand while positioning itself to cut a meaningful amount out of its expense base



·     APRN +5%; announces resignation of CFO; said it expects results for 2020 Q4 to be better than company’s previously provided outlook for period

·     DIS +9%; leads the Dow after saying at its analyst day that Disney+ has 86.8M subscribers as of December 2nd (had hit 74 million as of early October) and sees Disney+ subscribers at 230M-260M by FY24 vs. prior view of 60M-90M and sees as many as 350M total subs by end of FY24

·     EFX +2%; upgraded to buy at Stifel think EFX shares will start to exit the “valuation penalty box” they had been in from the cybersecurity breach in 2017, and we expect the shares to trade in parity with TRU

·     FAT +41%; said it has agreed to combine with Fog Cutter Capital Group Inc., in an effort to ramp up financial flexibility and simplify its corporate structure. https://bit.ly/3qIhX81

·     LXRX +13%; said it has received U.S. FDA fast-track tag for development of LX9211 for diabetic peripheral neuropathic pain, or nerve damage caused by chronically high blood sugar and diabetes

·     TPGY +114%; EVBox Group, an electric vehicle charging products company owned by Engie SA, agreed to merge with a blank-check company formed by TPG. TPG Pace Beneficial Finance said the transaction values EVBox at an implied $969 million enterprise value https://bit.ly/3qNaYuj



·     AAL -3%; Airline sector downgraded at Deutsche Bank, cutting AAL, ALGT, ALK, DAL, JBLU, LUV, SAVE, SKYWand UAL all downgraded to hold from buy as finds airline stocks fairly valued following the recent rally

·     GLW -2%; JPMorgan with changes in the Networking Equipment & IT Hardware 2021 Outlook as they downgrade GLW, JNPR to Neutral, upgrade COMM to Overweight, say the 5G thematic ideas for 2021: QCOM, COMM

·     MTN -4%; missed results for quarter EPS and sales

·     NIO -5%; announced a secondary offering of 60Mm ADS (pricing Monday)

·     QCOM -4%; after reports Apple (AAPL) has kicked off the development of its first cellular modem according to Bloomberg, citing Apple’s chip chief telling staff. That Apple modem would replace Qualcomm’s modem in iPhones https://bit.ly/3m8YxFB

·     SNOW -5%; downgraded to hold from buy with $335 tgt at Deutsche Bank as shares have risen 28% since the Q3 report despite little change to the fundamental story and the risk/reward is now balanced

·     SNY -3%; and GSK delayed advanced trials of their potential coronavirus vaccine after it produced an “insufficient” response in older adults – they now say it won’t be ready until late next year

·     TSLA -2%; Jefferies downgraded to Hold from Buy but raised its pt to $650 from $500 as they do not believe the company can dominate the auto sector given the industry structure



·     AbCellera (ABCL) 24.15M share IPO priced at $20.00

·     4D Molecular (FDMT) 8.4M share IPO priced at $23.00

·     Certara (CERT) 29.055M share IPO priced at $23.00

·     Nanobiotix (NBTX) 7.3M share IPO priced at $13.50

·     Nabriva Therapeutics (NBRV) 6M share Spot Secondary priced at $2.50

·     Napco Security (NSSC) 2.23M share Spot Secondary priced at $26.00

·     Option Care Health (OPCH) 10M share Spot Secondary priced at $15.00

·     Protagonist Therapeutics (PTGX) 4.76M share Secondary priced at $21.00

·     Sea Limited (SE) prices upsized 13.2MADS offering (from 11M) at $195.00 per share

·     Vivos Therapeutics (VVOS) 3.5M share IPO priced at $6.00


Market commentary provided by Catena Media Financials US, LLC, a firm separate from and not affiliated with Regal Securities. Regal Securities has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.

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