Mid-Morning Look

Wednesday, February 24, 2021

Stocks slide after looking modestly higher overnight; Major averages open lower after the 10-year Treasury yield jumped above 1.4%, renewing fears of rising rates and inflation (but as yields inched back below 1.4%, markets rallied off lows). Stock markets have wavered in recent days following a strong start to the year, with highflying tech leading the declines on the rising yields as companies with high long-term growth prospects are especially sensitive to interest rates. Positive JNJ vaccine data this morning helped boost markets initially (and has helped further boost “reopen” related trades such as airlines, theme parks, casinos, lodging, etc.), but also sent Treasury prices lower, lifting yields which prompted the turn lower in markets. Markets recovered off lows yesterday as Fed Chairman Powell reaffirmed Tuesday his commitment to keeping easy-monetary policies unchanged for the foreseeable future (speaks again today to House Financial Services Committee). Banks rising (JPM, GS near record highs) on the bounce in yields, while energy stocks (MRO, COG, FANG) surging on higher oil prices and better earnings results. Consumer related names hopeful as the House of Representatives will vote Friday on legislation to provide $1.9 trillion in new coronavirus relief. Stay at home 2020 winners such as SQ, PYPL, W, PTON, ZM, DOCU seeing extended declines.

Economic Data

·     New Home Sales for January rose +4.3% MoM to 923K vs. 855K expected and 855K prior; Jan new home supply 4.0 months’ worth at current pace vs dec 4.1 months; homes for sale at end of Jan 0.307 mln units vs Dec 0.299 mln units and median sale price $346,400, +5.3% MoM

Sector Movers Today

·     Leisure and Gaming; BALY tgt raised to $80 from $65 at Truist as highlight as sports betting value play with near-term catalysts/believe shares are still undervalued; GNOG signs New York market access deal with Tioga Downs; in leisure, Truist raised estimates and reiterated Buys on RV names CWH, THO, WGO to reflect the resilient retail environment into early ’21 as well as our view that industry-wide production levels should remain at elevated rates throughout CY22; SIX Q4 EPS loss ($1.00) vs. est. loss (89c) and revs of $109M vs. est. $86.59M; said had 2.2 million guests, a decline of 4.0 million guests YoY which represented 35% of prior year total attendance

·     Semiconductors; memory chip maker SK Hynix said it had agreed a five-year procurement contract worth $4.34 billion with ASML to secure extreme ultraviolet (EUV) scanners used in manufacturing chips; MU tgt raised to $125 from $100 at Susquehanna citing other catalysts other than DRAM/NAND ASP trends; WDC tgt raised to street high $100 from $85 at Susquehanna as well in space; President Biden expected to sign executive order aimed at addressing the global semiconductor chip shortage and will launch an immediate 100-day review of supply chains for semiconductor chips, large-capacity batteries for electric vehicles, and others

·     Software movers; BIGC extends merchant reach with new WMT partnership; for a limited time, Walmart rolls out a new-seller savings offer for new sellers to join Walmart marketplace and enjoy zero commission fees during their first month with Walmart.com; UPWK reported strong 4Q results and guided 1Q21 and FY21 well above expectations as 4Q GSV came in at $728MM (+33% y/y), well above our $660MM estimate while 1Q21 and FY21 outlooks were robust; ADSK to acquire Innovyze, inc. for $1 billion; provider of smart water infrastructure modeling and simulation technology; MCFE upgraded to buy at Deutsche bank after co delivered a strong quarter marked by solid execution with +23% consumer growth; PUBM delivered 18% and 65% Q4 revenue and EBITDA beats, respectively

·     Energy earnings movers; COG reported Q4 adj EPS 26c vs. est. 21c on revenue $456.78M vs. est. $417.46M, daily production 2,375M cubic feet equivalent, reaffirmed its recently announced guidance for 2021, and is targeting FY21 capital program of $530M-$540M; PXD posted Q4 adj EPS $1.07, beating est. 68c, on rev $1.86B with FCF $294M for the quarter and $689M for FY20, averaged oil production of 204 MBOPD and oil production of 364 thousand barrels of oil in the quarter, both of which were in the upper half of guidance; RRC Q4 adjusted EPS 2c missed est. 6c on adjusted revenue $531M vs. est. $497.57M. and FY21 production is expected to average approximately 2.15 Bcfe per day, with approximately 30% attributed to liquids production and they see 2021 all-in capital budget $425M; NBR Q4 rev $443M, adj EBITDA $108.1M topped consensus $419.2M, $96.8M; CDEV Q4 EPS loss (32c) missed est. (7c) loss and was wider than Q3’s (19c) loss on revs $148.1M vs est. $142.6M; MTDR reported Q4 adj EPS 27c vs est. 12c on revs $224.24M vs est. $241.63M and expects Q1 output to drop 13-15% due to TX deep freeze

·     MedTech and Equipment; DGX introduces new COVID-19 semi-quantitative serology test service; SYK tgt raised to $265 from $245 at JPMorgan as continue to view as one of the most attractive names to own into the recovery as management’s history of solid execution is coupled with a return to premium growth and the integration of Wright Medical; ATRC posted results in-line with the prior preannouncement, with sales of $57.7M (-5.9% reported, -6.0% organic) largely in-line with the Street’s prior expectation for $58.2M; FMS downgraded to hold at Truist given the difficult operating environment, limited near-term visibility, and ongoing cost pressures; CSLT reported better-than-expected 4Q20 results, but weaker Q1 revenue outlook while ARR (annualized recurring revenue) declined again; QGEN and INO extend their partnership to develop liquid biopsy-based companion diagnostic products to complement Inovio’s therapies; INSP Q4 revenue of $46.0M grew 71% YOY and topped consensus by $4.3M; PODD posted a $14mn top-line beat as new patients improved to -10% of pre-COVID levels (-25% last Q)

Stock GAINERS

·     BIGC +8%; as extends merchant reach with new WMT partnership; for a limited time, Walmart rolls out a new-seller savings offer for new sellers to join Walmart marketplace and enjoy zero commission fees during their first month with Walmart.com

·     COG +4%; as energy again leading markets to upside; reported Q4 adj EPS 26c vs. est. 21c on revenue $456.78M vs. est. $417.46M, daily production 2,375M cubic feet equivalent, reaffirmed its recently announced guidance for 2021

·     FSR +22%; shares rise as Foxconn Technology Group agreed to assemble cars for the electric-vehicle startup Fisker Inc./signed an MOU to jointly produce more than 250,000 vehicles a year

·     JNJ +1%; as FDA says JNJ’s one-shot COVID-19 vaccine appeared safe and effective in trials; a panel of independent experts to the FDA will meet Friday to decide whether to approve the shot

·     MCFE +4%; upgraded to buy at Deutsche bank after co delivered a strong quarter marked by solid execution with +23% consumer growth

·     OMI +27%; as 4Q adj EPS $1.14 vs. est. $0.85 on revs $2.36B vs. est. $2.16B; sees FY21 adj EPS $3.00-3.50 vs. est. $2.46

·     OSK +6%; shares extend gains after the US Postal Service (USPS) announced the company had won the much-anticipated contract with the USPS for their Next-Gen Delivery Vehicle (beating out WKHS)

·     PRAH +20%; to be acquired by ICLR in a cash-and-stock transaction valued at about $12 billion; consideration consisting of $80 in cash and 0.4125 shares of ICON stock and represents about a 30% premium to PRA’s closing price as of February 23rd. https://on.mktw.net/2ZRCk69

·     RRD +37%; as posts both Q4 revenue and adj. profit above analysts’ expectations, helped by sequential improvement in net sales and execution of cost reduction plans; sees Q1 sales $1.09B-$1.15B vs. est. $1.11B

·     TEN +12%; as Q4 EPS of $1.68 beat the $1.02 estimate on better revs of $4.65B

Stock LAGGARDS

·     DDD -4%; said to delay Q4 results until March 1 after internal control deficiencies discovered

·     DOCU -3%; Stay at home 2020 winners such as SQ, PYPL, W, PTON, ZM, DOCU among those seeing extend declines

·     LOW -4%; despite beating Q4 sales and profit estimates, riding a sustained boom in demand for home improvement as a result of the COVID-19 pandemic, along with a 28.1% rise in Q4 same-store sales (follows weakness post HD results yest as well)

·     OSTK -10%; shares fell despite posting 84% sales growth YoY in the latest quarter and nearly doubled its new-customer growth as a trend toward more online shopping during the pandemic

·     SQ -8%; said it bought 3,318 Bitcoins at an average price of $51,236 and reported Q4 adj EPS 32c vs. est. 24c on revenue $3.16B vs. est. $3.09B/Wells downgraded to EW with a new $255 target from $200 as they see modest upside due to the company’s significant long-term growth potential being priced in at these levels

·     VRSK -7%; after top and bottom line q4 miss; 4Q adj EPS $1.27 vs. est. $1.30 on revs $713Mm vs. est. $716.8Mm

·     WKHS -11%; after losing the much-anticipated contract with the USPS for their Next-Gen Delivery Vehicle (beating out by OSK)