Mid-Morning Look

Thursday, January 14, 2021

Another positive start for U.S. equities, rising despite a weaker jobless claims report (big jump in first time claims) as investors look to President-elect Joe Biden who is expected to unveil an additional $1.5 trillion package later today to stimulate the economy. The Dow Jones Industrial Averages touches a fresh record high, along with new records for the Russell 2000 Smallcap index and the Philly Semiconductor index (SOX) as investors continue to pile into global equities on additional stimulus hopes, upbeat earnings/guidance ahead of earnings season, a continuing dovish and accommodative Fed and ongoing rollout of the vaccine. The stock market landscape has remained the same since the November Presidential election (buy on any dip) – with optimism about an economic recovery and reopen trade trumping political drama with Trump, soaring stock valuations and multiples, weakening economic data and surging coronavirus cases. Investors also continue to pile into financials, energy, materials, and industrials (underperforming sectors over the last few years) on the economic recovery play, while tech remains strong, though mega caps (AMZN, FB, AAPL) have failed to rally recently. The Philly semi-index (SOX) new record highs above 3,060 behind TSM beat and raise capex, which is also boosting semi equipment (LRCX, AMAT) and as INTC adds to gains after analyst upgrades. Energy among the top gaining sectors today, while defensive Staples and utilities lagging again.

Economic Data

·     Weekly Jobless Claims jumped 181K to 965K, above the 790K consensus while prior week revised to 784K from 787K; the 4-week moving averages rose to 834,250 in latest week from 816,000; continuing claims rose to 5.271Mm from 5.072Mm prior and est. 5.061M and U.S. insured unemployment rate rose to 3.7% from 3.5%

·     Import Prices for December rose +0.9%, beating the 0.7% estimate and Nov +0.2% reading; Dec export prices +1.1%, topping the +0.4% estimate and Nov +0.7% reading; Dec year-over-year import prices -0.3%, export prices +0.2%

Sector Movers Today

·     Leisure and Gaming; PENN downgraded to Sell from Hold at Loop Capital as believe the magnitude of the stock’s outperformance is unwarranted, however, particularly given PENN’s Barstool app is still only live in one state, PA, where PENN is losing share; in gaming at Truist, adjust estimates (mostly reflecting Q4 specific COVID impacts) and price targets, while upgrading IGT to a Buy rating from Hold and favor Buy rated operators BALY, RRR, BYD, MCRI, CZR and PENN as their casinos should all benefit in this pent-up demand environment

·     Transports; Dow Transports back at record highs after better earnings/positive analyst comments; in airlines, DAL reported better-than-expected Q4 revenue ( down 65% to $3.97B vs. est. $3.6B), boosted by strength in its cargo business, although losses were wider than forecast, as passenger revenue fell 74% to $2.70 billion to miss expectations; ALK reported Q4 load factor that was below expectations, and provided a downbeat outlook for January, as the air carrier saw revenue passengers decline during the quarter after reaching a pandemic peak in October; in trucking, ODFL upgraded to neutral from sell at Goldman Sachs with a new price target of $214 (from $187) and was also upgraded to Hold at Stifel with upped $194 tgt

·     Media & Telecom movers; NFLX tgt raised to $580 at Citigroup ahead of earnings and raise DIS tgt to $205 from $175 but continue to prefer Disney as think Disney has a quicker and easier path to sub growth over the next three years and suspect Netflix may have some hiccups over the next few quarters as price hikes potentially dampen quarterly net adds; CCI upgraded to Buy at Citigroup based on the combination of improving domestic site leasing growth in 2021, potential upside in future years from C Band and DISH; Bernstein believes that the Democratic Senate victory has pressured cable share prices but see no appetite for outright rate regulation despite the potential reclassification of broadband as a Title 2 service (CMCSA, CHTR); SBAC announces offering of $1.5 billion of senior notes due 2029; to use proceeds of offering to fully redeem all of 2017 notes, to pay all premiums and costs associated with such redemption

Stock GAINERS

·     ACIA 29%; as CSCO announces a new deal to acquire the company valued at $4.5B, paying $115 per share (comes just a few days after the two terminated their merger pact which was valued at $2.6B and $70 per share) https://on.mktw.net/3nPQ9vO

·     APA +6%; after upgrade to Buy and $22 tgt at Truist and co also announces oil discovery (with partner TOT) at the Keskesi East-1 exploration well in Block 58, offshore Suriname

·     BYND +6%; after YUM’s taco Bell says exploring a new plant-based protein with Beyond Meat with plans to start testing in the next year

·     GME +17%; shares jumping again after yesterday’s +57% move, shares looking higher again – (holiday sales, big recent jump in e-comm revenue and the recent announcement of 3 new e-commerce directors including Ryan Cohen (founder of RC Ventures and CHWY) are being looked at as the main reasons for the massive, short squeeze/chase in shares this week.

·     INTC +3%; upgraded by several analysts (BMO, Cowen, Needham, Morgan Stanley) as analysts applaud the hiring of former VMW CEO after INTC chief stepped down

·     NK +27%; and privately held ImmunityBio Inc. said they saw positive interim results from its PD-L1 t-haNK protocols; the two co’s said the data showed median survival rates more than doubled that of the historic rate in patients with advanced metastatic pancreatic cancer

·     ORGO +34% after CFO said he expects to beat its previously issued guidance for PCR tests for Covid-19 for 4Q and confirmed its revenue guidance

·     OXY +8%; as energy names again leading the Russell and S&P higher

·     SPCE +18%; after ARK Investment Management filed with the SEC to launch a space exploration exchange-traded fund; ARK didn’t identify what companies it would hold in the fund

·     TSM +9%; posted beat and raise with the strength coming from DC, PC, games, HPC automotive, while upped capex to $25B-$28B range which will likely be at the higher end and bode well for equipment makers as well LRCX, AMAT, KLAC, MKSI, AEIS, KLIC (among mkt leaders today)

Stock LAGGARDS

·     BLK -2%; shares slide despite quarterly results topping analysts’ expectations, helped by a rising stock market that boosted the firm’s assets under management to a record high $8.68 trillion

·     ES -2%; weakness in defensive utilities early – NI, LNT, AEE, CMS

·     MASI -3%; sees preliminary full-year 2020 product revenue of approximately $1.139 bln to $1.144 bln vs. est. $1.17 bln and FY 2020 Gaap eps and non-Gaap eps are expected to exceed guidance of $3.77 and $3.46 per diluted share vs. est. $3.82

·     PENN -2%; downgraded to Sell from Hold at Loop Capital as believe the magnitude of the stock’s outperformance is unwarranted, however, particularly given PENN’s Barstool app is still only live in one state, PA, where PENN is losing share

·     VIPS -2%; on reports China’s market regulator launched a probe into cos linked to VIPS over possible unfair competition – co’s include Vipshop (China) and Guangzhou Vipshop E-Commerce

Syndicate:

·     Evoke Pharma (EVOK) 5M share Spot Secondary priced at $2.50

·     Lemonade (LMND) 4.524M share Secondary priced at $165.00

·     Petco (WOOF) 48M share IPO priced at $18.00

·     Poshmark (POSH) 6.6M share IPO priced at $42.00

·     Provention Bio (PRVB) 6.25M share Secondary priced at $16.00

·     Repay Holdings (RPAY) 5.43M share Secondary priced at $24.00