Mid-Morning Look: June 24, 2020

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Mid-Morning Look

Wednesday, June 24, 2020






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U.S. equities showing signs of weakness for the first time this week, with major averages falling (Nasdaq Comp first decline in 9-days) as another day of rising coronavirus cases in several US states, coupled with tariff headlines overnight prompted profit taking after a massive run higher of major stock averages. Overnight reports that the U.S. is weighing new tariffs on $3.1B of exports from France, Germany, Spain and the UK, targeting exports, while increasing duties on products including aircrafts and other items. At the same time, NJ Governor Murphy warned Tuesday that COVID-19 cases are “beginning to creep up” while NY Governor Cuomo told NBC he is “seriously considering a quarantine” for out-of-state visitors. But the concerns grow greater as high population states (TX, FL, CA) continue to see a surge in new cases and higher hospitalization. Just today, Texas COVID-19 hospitalizations rise over 7% to 4,389 from 4,092 Tuesday while Florida reports COVID cases rise 5.3% vs. prior 7-day average of up 3.7% as fears arise that states may have to re-think or adjust the openings of stores or large gatherings. Yesterday, infectious disease expert Dr. Anthony Fauci told lawmakers that recent COVID-19 trends were “disturbing” as the U.S. recorded a 25% surge in new infections for the week ending June 21, with 10 states recording increases of 50%. Stocks most leveraged to the pandemic such as leisure, cruise lines, travel, hotels, retail, restaurants and energy are seeing the biggest declines today as the increase of cases threatens the pace of the economic recovery. Energy prices are markedly lower, while Treasury prices and gold prices are little changed. No major economic data today to move markets.







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Sector Movers Today

·     Retailers; DKS was upgraded from Market Perform to Outperform at Cowen and raised its tgt to $50 from $36 saying the co is seeing accelerating share gain, improving allocations, and adoption of its e-commerce platform with e-commerce revenue modeled +150% in Q2:20; COLM was upgraded to buy at Davidson and raise tgt to $100 from $71 as the inventory situation appears to be getting back in shape; PTON tgt raised to $70 from $55 at KeyBanc saying delivery times are still quoted at 7-11 weeks, and trends remain very soft at physical boutique competitors; GNC files for Chapter 11 bankruptcy/to pursue dual-path process to restructure balance sheet

·     Restaurants; in research, TXRH was upgraded to neutral at JPMorgan while the firm downgraded CAKE to underweight as updates casual dining outlook saying COVID-19 winners DPZ, CMG will likely remain so due to strong digital and relatively low cost delivery platforms, but think both will see declines in their digital business in 2021 vs 2020 – said remain comfortable with global QSR exposure, specifically MCD but also WEN, while saying YUM and DNKN are not over-priced on a FCF basis – said BLMN remains the “risk on” name in casual dining, but 48% non-Outback US exposure and ~10% international (mostly Brazil) exposure but the recent decline in EAT shares makes this a tactical add in an otherwise volatile space – said use CAKE, SHAK, SBUX as source of funds; in other news, TACO prelim Q2 revs $104.5M and comp sales -10.1% as franchised restaurants saw positive comp sales growth during last five weeks of the quarter

·     Media & Telecom movers; TMUS 198M share Secondary priced at $103.00; CRTO was downgraded from Outperform to Market Perform at BMO Capital saying AAPL will make changes to IDFA that they think present a headwind for ad tech companies; CMCSA tgt was raised at two firms (Wells Fargo and Morgan Stanley) saying broadband momentum in Q2 is continuing while media headwinds are proving to be better than feared

·     Casino & Leisure movers; cruise industry cautious analyst comments as Barclays downgraded both RCL and NCLH to equal-weight from overweight citing ongoing uncertainty related to the pandemic while Argus downgraded its long-term rating to hold on NCLH; in gaming, DKNG shares active after to accelerate the launch of online casino gambling and sports betting from early 2021 to late 2020; in the RV space, WGO shares fall on mixed results as posts quarterly loss (on higher sales) but noted Ebitda was down around 93% on a YoY basis



·     AVAV ; reported April quarter results with revenues and EPS well above consensus estimates, while Piper raised its tgt to $93 from $76 as large contracts/record backlog drive upbeat outlook

·     DELL +11%; as WSJ reported the co is examining options including a spinoff for its roughly $50B stake in VMW as it recently kicked off a process to explore the possibility of unloading the stake or taking other steps that could include buying the rest of VMWare https://on.mktw.net/3fTyoIk

·     INFO +1%; upgraded by two analysts today (Stifel and UBS raised) saying the valuation discount between INFO shares and the comp group doesn’t make sense given the company’s prospects

·     PDCO +1%; posted adj EPS of 43c, topping the 18c estimate while sales fell to $1.286B from $1.437B but topped estimates of $1.24B while said is not providing FY21 outlook due to COVID-19 uncertainty

·     REGN +1%; tgt raised to $700 at Credit Suisse saying while Eylea and Dupixent remain important near-term commercial driver, they think that the oncology business (anchored by Libtayo) will likely drive the next leg of growth



·     ADSW -3%; after WM amends merger agreement, to buy the company for $30.30 per share representing a total enterprise value of $4.6B including $1.8B of debt. GFL Environmental will acquire assets from the two companies for $835M to address substantially all of the divestitures expected to be required by the DoJ for approval

·     BHVN -5%; after its experimental drug, Troriluzole, failed to meet primary goal of statistically significant improvement in patients with obsessive-compulsive disorder (OCD) at week 12 compared to placebo

·     GPS -7%; as retailers among top decliners in the S&P 500 amid rising COVID-19 cases

·     NCLH -9%; Barclay’s downgraded shares of cruise lines RCL and NCLH, while CCL had credit rating cut to junk by S&P – all three major cruise lines said over last few days no cruising until Sept 15th

·     WGO -7%; shares fall on mixed results as posts quarterly loss (on higher sales) but noted Ebitda was down around 93% on a YoY basis


·     Avinger (AVGR) 20M share Secondary priced at $0.27

·     Editas Medicine (EDIT) 6M share Secondary priced at $31.25

·     Palomar (PLMR) 1M share Spot Secondary priced at $82.00

·     Soleno Therapeutics (SLNO) 30.3M share Secondary priced at $1.65

·     T-Mobile (TMUS) 198M share Secondary priced at $103.00


Market commentary provided by Catena Media Financials US, LLC, a firm separate from and not affiliated with Regal Securities. Regal Securities has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.

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