Mid-Morning Look

Friday, January 22, 2021

Stocks dip on the open, with many headlines citing questions about the details of the new $1.9B stimulus plan being pushed by the Biden administration and the challenges of delivering the COVID vaccine, but the fact is, markets have been in rally mode for weeks and weakness (if any) has generally been short lived. The Nasdaq Composite, which has outperformed counterparts this week, quickly erased its overnight declines just a few moments after the market open, despite weakness in IBM and INTC in big tech after mixed earnings results. Recent market winning catch up plays such as financial and energy names have seen profit taking this week as investors rotate money back into technology and mega caps ahead of earnings next week. Coronavirus headlines continue to dominate in Europe, with concern over infection numbers offsetting recent vaccine optimism, while the picture in the U.S. has been improving (slightly), but leaders warn that we aren’t out of the woods yet. There were some earnings headlines this week, mostly in transports, banks and tech, but next week gets busy with another slew of reports, which thus far have been mostly positive.

Economic Data

·     Markit January manufacturing PMI at 59.1 vs 57.1 prior, Services PMI Flash Actual 57.5 (Forecast 53.4, Previous 54.8) and Markit Composite PMI Flash Actual 58.0 (Previous 55.3)

·     Existing Home Sales for December rose +0.7% to 6.76M, topping the 6.550M estimate and came in above the prior 6.710M (revised from 6.690M); median home price for existing homes $309,800, +12.9 pct from dec 2019; inventory of homes for sale 1.07 mln units, 1.9 months’ worth

Sector Movers Today

·     Media & Telecom movers; DIS upgraded to Buy from Neutral with a $200 PT at as believe Disney is positioned to achieve scale like industry leader NFLX with 340M+ global subs by ’24, while its premium IP creates pricing power; GSAT downgraded to underweight at Morgan Stanley with $0.55 tgt noting the company now has an enterprise value of some ~$2.5B saying the satellite business is worth around ~$270m based on a 7x EBITDA multiple, implying spectrum is worth $2.2B; SWIR rises after saying it expects revenue to be above Street consensus of $116.5M Q4, as well as being above Street consensus of $110M in Q1; also expects to report approximately $170M in cash and no debt at the end of December 31, 2020

·     MedTech and Equipment; ISRG reported 4Q results as EPS of $3.58 well ahead of est. $3.09, driven by better-than-expected da Vinci shipments and higher stocking orders, but elected not to provide formal guidance; SENS 51.9M share Spot Secondary priced at $1.925; VRAY 11.5M share Block Trade priced at $4.75; BSX receives FDA approval for the Vercise genus™ deep brain stimulation system fourth-generation DBS portfolio features full-body MR conditional devices; STIM upgraded to outperform at William Blair after meeting with CEO/CFO as came away encouraged by the commercial strategy that has been put in place; QDEL upgraded to outperform at Raymond James saying core business is well positioned to exit the pandemic much stronger than it entered

·     Transports; CSX reported 4Q20 adjusted EPS of $1.04, ahead of the consensus estimate of $1.01 as the 57.0% operating ratio (OR) was 50bp better than the Street (shares were downgraded to Hold at Stifel); KSU EPS of $1.89 missed estimates by 3c on lower revs down about 5% YoY to $693.4M below est. $696.2M; it has been a mixed week for transports after record highs late last week, as airlines slumped on weaker UAL results Thursday, while rails have been mixed

·     Semiconductors; Samsung (SSNLF) intends to invest more than $10 billion to build a logic chipmaking facility in the US, Bloomberg News reported citing people familiar with the matter; INTC reported strong 4Q20 results (beat top/bottom line) due to continued PC strength but guidance was tempered by continued margin pressure in its data center business (30.5% of revenue); STX slips in HDD space as reported better than expected results driven by a combination of strength in the PC, Surveillance, and Enterprise markets, while guidance was less robust with STX guiding EPS just slightly ahead of prior Street numbers

Stock GAINERS

·     CRM +2%; after Goldman Sachs reinstated Buy and $315 tgt as believe that Salesforce remains poised to be one of the most strategic application software companies in the $1 Trillion TAM cloud industry

·     INCY +2%; FDA has accepted INCY’s BLA application for priority review of retifanlimab (a PD-1 checkpoint inhibitor) in second line (2L) patients with locally advanced/metastatic squamous cell carcinoma of the anal canal (SCAC) with a PDUFA target action date of July 25, 2021.

·     MGI +17%; expands real-time digital p2p payments with Visa Direct through New Checkout.com PartnershipCustomers can use the MoneyGram website or leading mobile app to send money in near real-time to Visa debit card holders across 575 corridors from 25 countries in Europe

·     NIO +3%; was initiated Buy and $80.30 tgt at Nomura

·     SIVB +4%; rises after earnings as JPM raised tgt to $550 from $440 saying demonstrated yet again alongside 4Q20 results that it is the bank of the innovation economy, with “off the charts” operating trends

·     SWIR +16%; said it expects revenue to be above Street consensus of $116.5M Q4, as well as being above Street consensus of $110M in Q1; also expects to report approximately $170M in cash and no debt at the end of December 31, 2020

Stock LAGGARDS

·     BJRI -5%; said it sees Q4 revenue $197.0M vs. est. $210.97M; guides Q4 comp sales down (-32.3%); sees Q4 adj. EBITDA $2.0M-$3.0M and Q4 restaurant level operating margin $12.5M-$13.5M and announces and ATM offering program

·     HAL -3%; general weakness in energy names as funds rotate back into tech (DVN, FTI slip)

·     IBM -10%; shares drop sharply after reported 4Q results with revs coming in a bit weak at $20.4B vs. est. $20.68B (total revs -8% y/y cc ex-divested biz), while EPS was ahead of expectations at $2.07 vs. cons. $1.81

·     INTC -7%; reported strong 4Q20 results (beat top/bottom line) due to continued PC strength but guidance was tempered by continued margin pressure in its data center business

·     ISRG -4%; Q4 EPS of $3.58 well ahead of est. $3.09, driven by better-than-expected da Vinci shipments and higher stocking orders, but elected not to provide formal guidance

·     STX -5%; reported better than expected results driven by a combination of strength in the PC, Surveillance, and Enterprise markets, while guidance was less robust with STX guiding EPS just slightly ahead of prior Street numbers

Syndicate:

·     Aurora Cannabis (ACB) 12M share Secondary priced at $10.45

·     Azek (AZEK) 20M share Secondary priced at $40.00

·     Corsair Gaming (CRSR) 7.5M share Secondary priced at $35.00

·     Docebo (DCBO) 2.01M share Secondary priced at $49.67

·     Invitae (NVTA) 7.77M share Secondary priced at $51.50

·     Passage Bio (PASG) 7M share Secondary priced at $22.00

·     Patria (PAX) 30.1M share IPO priced at $17.00

·     Precigen (PGEN) 15M share Spot Secondary priced at $7.50

·     RLX Technology (RLX) 116.5M share IPO priced at $12.00

·     Senseonics (SENS) 51.9M share Spot Secondary priced at $1.925

·     Silvergate Capital (SI) 3.968M share Secondary priced at $63.00

·     ViewRay (VRAY) 11.5M share Block Trade priced at $4.75