Mid-Morning Look

Tuesday, February 09, 2021

Stocks open mixed as the Nasdaq Composite tops the 14,000 level for the first time ever, while the Dow and S&P 500 look to extend their winning streaks to 7-days (longest streak since August) as market momentum carries stocks higher on good earnings, added fiscal stimulus hopes, a recovery in the U.S. economy and a dovish Fed which keeps rates at record lows. U.S. Treasury yields dip (10-yr 1.14% vs. 1.20% Monday) after a recent rise and ahead of the U.S. Treasury Departments due to sell $126 billion in new coupon-bearing supply (the U.S. Treasury Department will sell $58 billion in three-year notes on Tuesday, followed by $41 billion in 10-year notes on Wednesday and $27 billion in 30-year bonds on Thursday). Investors continue to closely track progress on the passing a proposed $1.9 trillion stimulus plan, by the Biden Administration, follows more calls from Treasury Secretary Yellen on going “big” regarding fiscal stimulus. Where the market mania a few weeks ago was the reddit short interest squeeze (GME, KOSS, EXPR, AMC, BBBY), attention has now turned to Bitcoin and the names that are leveraged to it in regard to mining, investing and blockchain names (MARA, RIOT, NCTY, WBAI, MSTR, OSTK, SI) as Bitcoin rose as high as $48,000 overnight. SmallCap stocks have led major averages over the last few days as the Russell 2000 slips off record highs. Oil prices dip as gold edges higher.

Sector Movers Today

·     Software movers; GLUU surges after EA to acquire the company for $2.1B, creating a new global leader in the largest and fastest growing gaming segment; Glu stockholders will receive $12.50 in cash for each share of Glu stock, representing a 36% premium https://on.mktw.net/3rDk78e ; TTWO delivered significant FQ3 top- and bottom-line upside due to continued recurrent consumer spend outperformance and raised FY21 guidance, passing through the FQ3 beat and issuing FQ4 guidance above prior consensus estimates; JPMorgan upgrades TWLO to overweight from neutral, while raising PT to $465 from $300 based as expects company-specific tailwinds, including its strengthening Enterprise presence, to drive the business in 2021; VRNS reported strong 4Q20 with revenues of $95.2M handily surpassing the high end of guidance at $85M while EPS at $0.34 swiftly came ahead of Street’s $0.12E on volume and cost optimization (ARR grew 36.5% to $287.3M, showcasing the subscription flywheel power at +99% of revenue mix)

·     Auto sector; Argus upgraded Ford (F) to Buy with a $14 tgt from Hold to reflect their expectations for stronger consumer spending helped by a new round of stimulus payments and wider vaccine distribution, low borrowing costs, and savings rates that have reached all-time highs; Barclays warns that GM is poised to report Q4 EPS below consensus with a cautious 2021 outlook in its earnings report tomorrow, but bumped their price target to $64 from $56 due to its Hydrotec truck potentially taking advantage of the emerging opportunity in fuel cell commercial trucks, and said potential weakness from tomorrow’s guide may provide a more attractive entry point; NSANY posted Q3 net loss of (Y37.76B), wider than its (Y26.09B) loss a year earlier but smaller than the expected (Y79.30B) loss and cut its revenue projection for the fiscal year ending in March, citing the impact of the pandemic and a shortage of semiconductors; HMC reported Q3 profit Y284.05B (~ $2.7B), more than doubling YoY and topping est. Y158.53B, and it trimmed its revenue projection for the fiscal year ending March but raised its net-profit forecast; GT Q4 adj EPS 44c beat est. 14c on sales $3.66B (est. $3.60B); DRVN was initiated at OW with a $39 pt at JPMorgan, OW with a $37 pt at Piper, and Buy with a $36 target at Bank of America given the franchise’s status as the leader in auto services and as a beneficiary of reopening

·     Housing & Building Products; BECN reported a strong beat of $158M in adjusted EBITDA vs. consensus of $117M while one firm noted even when stripping out the soon to be sold interiors business, EBITDA of $143M beat expectations (shares upgraded at BTIG); Wedbush raises tgts on builders KBH (to $53), TPH (to $25) & LEN (to $102) noting YTD the homebuilder ETF ITB is +16% vs a 4% gain for the S&P 500 and believe the anticipation surrounds the possibility of a $15k tax credit for first time home buyers; MAS 4Q EPS of $0.75 vs Consensus $0.74, with $1.86B vs Consensus $1.80B, EBITDA actually a small miss at $343M vs Consensus $346M, as gross margins missed by 40 bps and operating margins missed by 70 bps

·     Financial Services; INTU reported prelim Q2 adj EPS 67-68c vs est. $1.26 and prelim Q2 net rev $1.57-1.58B vs est. $1.92B as its revenue and operating income were below consensus due to tax season opening later this year; JPMorgan notes that its valuation multiples in the commercial mortgage sector remain below pre-Covid valuations and they downgraded LADR to UW despite seeing limited downside as they believe the potential returns are at the low end of the sector, and they upgraded KREF to OW as its potential returns are near the high end of the sector; JLL posted Q4 adj EPS $5.29 vs est. $3.93 on revs $4.85B (-10% YoY), and adj EBITDA $417.1M (est. $322.8M); SPGI Q4 adj EPS $2.71 topped est. $2.54 and revs $1.87B also topped est. $1.76B, and it now sees FY adj EPS $12.25-12.45 vs est. $11.90; NRZ reported in-line Q4 EPS 16c on revs $570.67M, which missed est. $768.75M; DA Davidson initiated FTHM at Buy with a $54 target given its recent agent growth and multiple long-term attractive adjacent opportunities

Stock GAINERS

·     CHGG +4%; as Q4 EPS and revenue topped consensus and issues Q1 and year revenue above consensus

·     GLUU +33%; after EA to acquire the company for $2.1B, creating a new global leader in the largest and fastest growing gaming segment; Glu stockholders will receive $12.50 in cash for each share of Glu stock, representing a 36% premium https://on.mktw.net/3rDk78e

·     HBI +21%; beat on earnings and margins and sees Q1 revenue of $1.49B to $1.52B vs. $1.45B consensus and EPS of $0.24 to $0.27 while to provide a full-year 2021 outlook at investor day

·     IT +11%; a top S&P gainer after top and bottom line beats

·     KALV +142%; shares more than double after saying its treatment with its experimental drug KVD900 significantly reduced the use of rescue medicines in patient with hereditary angioedema

·     TDC +14%; surges a 3rd day following earnings last week – (rise over 30% on Monday and Friday) with shares more than doubling in 3 days

·     TLRY +18%; after announcing an agreement with Grow Pharma, where the cannabis distributor will import and distribute Tilray’s GMP-certified medical cannabis products across the UK

·     VRNS +5%; Q4 EPS, revs both crushed, billings $112.1M (vs. est. $103.8M), ending deferred rev $101.4M (est. $104.2M), operating margins 800bps ahead and sees Q1/FY revs ahead

·     WBAI +30%; along with gains in SI, MSTR, MOGO, MARA, NCTY, RIOT, and GBTC as Bitcoin leveraged names soar a second day with overall prices (Bitcoin +3.5% $46,260)

Stock LAGGARDS

·     CARR -5%; 4Q adj EPS $0.31 vs. est. $0.36 on sales $4.6B vs. est. $4.49B; sees FY21 sales +6-8% (organic +4-6%) vs. revs est. +5.85%, sees FY21 FCF about $1.6B

·     COG -2%; modest pullback in energy stocks after recent market outperformance (FTI, OXY)

·     COTY -9%; 2Q net revs $1.42B vs. est. $1.43B but America sales of $540M missed the $600M view), and saw organic sales fall 18% during the quarter, driven lower by a 22% decline in the mass segment/says digital and e-comm sales +40%

·     ESPR -6%; downgraded to Sell at Goldman Sachs with street low $24 tgt down from $44 saying checks with both private practice and academic cardiologists suggest continuing low adoption among physicians for its drugs

·     TTWO -7%; despite delivered significant FQ3 top- and bottom-line upside due to continued recurrent consumer spend outperformance and raised FY21 guidance, passing through the FQ3 beat and issuing FQ4 guidance above prior consensus estimates

·     UAL -2%; as reopen sector trades (cruise CCL, airlines DAL theme parks SIX) slide

Syndicate:

·     Adagene (ADAG) 7.35M share IPO priced at $19.00

·     Cleveland-Cliffs (CLF) 60M share Spot Secondary priced at $16.29

·     Cloopen (RAAS) 20M share IPO priced at $16.00

·     Ekso Bionics (EKSO) 3.902M share Spot Secondary priced at $10.25

·     Evoqua Water (AQUA) 16.383M share Spot Secondary priced at $24.85

·     Ideal Power (IPWR) 1.18M share Spot Secondary priced at $17.00

·     I-MAB (IMAB) 3.284M share Secondary priced at $54.00

·     Liberty Oilfield Services (LBRT) 8.7M share Spot Secondary priced at $11.45

·     Option Care Health (OPCH) 15M share Spot Secondary priced at $18.50

·     OptimizeRx (OPRX) 1.325M share Spot Secondary priced at $49.50

·     Sientra (SIEN) 5.4M share Spot Secondary priced at $6.75

·     Wynn Resorts (WYNN) 6.5M share Secondary priced at $115.00

·     Zomedica (ZOM) 91.3M share Spot Secondary priced at $1.90