Mid-Morning Look

Monday, February 08, 2021

Stocks surge to start the trading week, as all four major stock averages (S&P 500, Dow, Nasdaq, and Russell 2000) open at fresh new all-time highs, adding to last weeks gains as the S&P and Dow look to make it a 6^th straight day of gains. Major averages are coming off their best weekly gains since November as the S&P 500 gained 4.65%, Nasdaq rose 6.01%, and the Dow added 3.89%; while the Russell 2000 rose 7.7% in its biggest weekly gain since week ending June 5^th. Earnings, economic data, an accommodative Fed, and discal policy relief in DC all continue to lift sentiment every day, with fear being sapped from investors minds as the Volatility Index (VIX) has tumbled in recent days. Semiconductors outperform in tech, boosted by M&A news after Dialog (DLGNF) rises as Japanese auto chip maker Renesas Electronics Corp confirmed it agreed to buy the chip maker for EUR 4.9 bln ($5.9 bln) (helping boost auto chip supplier names). Bitcoin grabbed all the headlines this morning, surging as much as 16% topping the $44,000 for the first time after Tesla’s Elon Musk said the co has invested ~$1.50 billion in bitcoin according to an annual filing and that they expect to begin accepting bitcoin as a form of payment for products soon. Names that mine Bitcoin, part of the blockchain, accept payment, etc. such as RIOT, MSTR, OSTK, MARA, PYPL, SI, NCTY, MOGO, WBAI, GBTC all found strength today behind the rally in Bitcoin. Earnings relatively quiet this morning, but that will change quickly with an onslaught starting tonight and rest of the week (DIS, CSCO among biggies).

Sector Movers Today

·     Energy stock movers; OXY, MRO, APA surge as energy the early leaders in the S&P behind another rise in oil prices; LBRT downgraded to underperform at Bank America citing the company’s Q4 earnings miss and believes that it pursued market share at the expense of margins during the quarter; OXY was added to the US 1 list at Bank America as continue to believe Occidental is past the worst following a commodity downturn that exposed the high level of debt used to finance the acquisition of Anadarko in 2019; in MLPs, TRGP upgraded to buy at Seaport Global as expect TRGP’s integrated NGL platform to perform well in the current environment

·     Retailers; TGT upgraded to Buy at Stifel and raise tgt to $225 as positive stance reflects our view that share gains in recent years across most categories, especially digital (~18% of F2020 sales) continue; toy retailer HAS Q4 EPS/sales top views , as strength in gaming offset a miss in its franchise brands business; KSS to partner with Eddie Bauer to bring premium-quality performance outerwear and outdoor apparel for the entire family nationwide in Fall 2021; mattress retailers (TPX, SNBR, PRPL) active as Piper noted January PSC Mattress Retailer Survey showed the strongest sales growth in our 5 year survey history, with sales up +22-24% y/y; ENR posted top and bottom line Q1 beat

·     Consumer Staples; HSY upgraded to outperform at RBC Capital (raise tgt to $170) as believe that Hershey is poised to hold onto its share gains from 2020 and likely to gain more in 2022 and beyond due to recent struggles of its competitors; EL trading to record highs, upgraded to outperform with $299 tgt at JPMorgan and to Buy with $310 tgt at Jefferies as sees signs from F2Q results on Friday that EL has been able to successfully pivot travel-retail and department store sales to the online channel much faster than anticipated; in protein sector, Stephens upgraded TSN, SAFM, PPC to overweight as think that after years of under-earning, the group is poised to show improving fundamentals as we move through 2021 and into 2022 and have increased confidence that higher grain prices will drive production restraint

·     Aerospace & Defense; CUB agreed to be acquired by private equity firm Veritas Capital and U.S. Hedge fund Elliot Management in a $2.2B all-cash deal, with holders getting $70 per share https://on.mktw.net/36PCj6M ; LHX awarded systems integration contract for us navy frigate program which could exceed $300M; IRDM was downgraded to market perform at Raymond James saying they still like the business and believe in the growing Free Cash Flow (FCF) story, but think valuation has benefited from fund flows related to short squeezes and potential new ETFs; VSAT tgt raised to $67 from $63 at Raymond James as believes there is growth potential upon the launch of co’s ViaSat-3 (VS-3) satellite, and co’s efforts in managing costs and capacity

Stock GAINERS

·     AVRO +17%; after saying there was a 100% reduction of toxic substrate in the kidney biopsy of the first patient dosed with the Plato gene therapy platform in its Phase 2 clinical trial of AVR-RD-01 for Fabry disease

·     COHR +16%; as MKSI makes superior takeover offer for COHR of $240 per share, Under the terms of MKS’ proposal, each share of Coherent common stock would be exchanged for $115.00 in cash and 0.7473 of a share (above prior LITE offer of $226) https://on.mktw.net/36TWxwi

·     CUB +9%; agreed to be acquired by private equity firm Veritas Capital and U.S. Hedge fund Elliot Management in a $2.2B all-cash deal, with holders getting $70 per share  https://on.mktw.net/36PCj6M

·     GBTC +16%; among many names that tend to benefit from Bitcoin (MSTR, SI, MARA, XENT), surging as prices of the crypto currency spike as much as 16%, topping $44k for the first time after TSLA said the co has invested ~$1.50 billion in bitcoin according to an annual filing

·     OXY +10%; amid strength in energy early behind oil

·     PLTR +12%; IBM and PLTR partner to help businesses easily deploy powerful and open ai applications; unlock valuable data across hybrid cloud environments

·     VERU +17%; as reports positive efficacy and safety results from a mid-stage clinical trial for its drug candidate, VERU-111, in patients at high risk of COVID-19 associated Acute Respiratory Distress Syndrome

·     WPRT +46%; after late Friday reports from Reuters that AMZN has ordered more than 1,000 truck engines that run on compressed natural gas for U.S. fleet between the CMI Joint venture

·     XONE +10%; after guided Q4 revs $17M-$17.5M above the $16.7M est. and sees YoY rev growth of 15%-25% – other 3D related names move in sympathy (DDD, SSYS)

Stock LAGGARDS

·     AMC -8%; short interest “meme” stocks that surged in recent weeks amid Reddit, WSB retail commentary are mixed (KOSS, GME, EXPR)

·     HAS -2%; despite Q4 EPS/sales topping views, as strength in gaming offset a miss in its franchise brands business

·     MKSI -5%; as makes superior takeover off to acquire COHR (tops prior LITE offer) – see details and link above for more

·     SBAC -2%; downgraded to neutral at JPMorgan as Sprint churn to ramp earlier than expected; 2022 will be highest until 2025-26.

·     WYNN -1%; after filing to sell 5.5M shares of common stock