Mid-Morning Look

Wednesday, March 23, 2022

U.S. stocks open lower, but a strong rebound following a double test of the S&P 200-day moving average technical support (4,472 level) which it topped and held yesterday helped pare losses. Market momentum continues higher, defying odds for those calling for a modest pullback after a near 10% bounce in 6-days for the Nasdaq. AAPL and TSLA providing broad market support, each on track for a 7^th straight day of gains, while energy prices recover on another spike in oil prices. Stocks opened with moderate losses Wednesday as oil prices continued to bounce higher, with futures on Brent crude trading back above $120 a barrel. President Biden departed for NATO summit this morning in Brussels as global powers discuss possible further sanctions for Russia following its ongoing invasion of Ukraine. Commodity prices generally higher today, while economic data was weaker, showing falling new home sales for February, but showed median sale prices jump over 10%. Major U.S. stock markets come into the day rising 5 of the last 6-trading days, turning from fear and market concern amid rising interest rates to all out enthusiasm and euphoria, with the likes of big tech, meme stocks and commodity names all leading a massive charge after stocks opened the year sharply lower.

Economic Data

·     New Home Sales for February fall -2.0% to 772K, missing the 805K consensus as new home sales supply at 6.3 months vs Jan 6.1 months; the February median sale price $400,600, +10.7% from Feb 2021 ($362,000)

Sector Movers Today

·     Housing & Building Products; in building products, AMWD and FBHS downgraded to Hold from Buy at Loop Capital and are lowering our PT to $59 for AMWD (-$4) and $91 (-$29) for FBHS as are concerned that inflationary pressures will both weigh on sales and margins over the next several quarters and says survey of cabinet manufacturers and dealers illuminated a few more specific headwinds; in housing, LGIH downgraded from Neutral to Sell at BTIG, reducing ests saying as rates rise, believe LGIH has a higher demand risk profile than most public peers; weekly MBA mortgage data shows the U.S. mortgage market index falls 8.1%, the purchase index fell -1.5% and the refinancing index decreases 14.4% as the 30-yr yield jumped 23 bps to 4.50% its biggest weekly increase since March 2020 – TOL, LEN, PHM, KBH, MTH homebuilders

·     Healthcare Services; WOOF outlines strategic approach to drive sustained, profitable growth with industry-leading ecosystem, reinforces success across services, unique merchandise, digital and powerful data and reaffirmed FY22 outlook; HQY Q4 EPS $0.20 vs. est. $0.22; Q4 revs $203.3M vs. est. $200.07M, sees year EPS $1.21-$1.30 vs. est. $1.41, revs $820M-$830M vs. est. $817.4M; CNC weaker as Jefferies said decision to name heir apparent Vice Chairman Sarah London as chief executive officer may surprise some investors in light of a board refresh in December that followed pressure from activist investor Politan Capital Management

·     Auto sector; HYZN Q4 EPS loss in-line (12c) on revenue $5.1M vs est. $26.5M, increased its backlog by 246% from its July 2021 update to $287M, said they expect to deliver 300-400 vehicles in 2022 from 87 in 2021; NKLA is holding a virtual investor day today at 4pm EDT; STLA said its Automotive Cells Company joint venture with Mercedes-Benz and TTE would build a battery plant in Italy and boost its capacity in Europe; EVGO was selected by California energy commission for two regional project proposed awards to support CA Rideshare electrification and separately reported Q4 revenue of $7.1M vs est. $6.2M and EPS (9c) vs est. (12c) with guidance forecasting FY22 sales ~$52M vs est. $53.6M; TM announced a buyback program of up to 80M shares worth 100B yen effective through May 10; LI will raise the price of its One model on April 1 but NIO said it will not be raising prices yet; CLSA initiated XPEV with a Buy rating and $42 PT as they expect it to be the first to achieve high-level autonomous driving in China

·     MedTech Equipment; ABT shares active after an inspection at its facility in Sturgis, Michigan found a harmful bacteria called Cronobacter sakazakii on the surface of some areas producing its powdered baby formula, the U.S. health regulator said; CDNA wins $44.9m in damages in trial against NTRA with $21.2m in compensatory damages and $23.7m in punitive damages as a jury found that Natera intentionally and recklessly misled the transplant community by deliberately engaging in false advertising in the promotion and marketing of its Prospera kidney transplant rejection assessment test

Stock GAINERS

·     CCHWF +4%; as CRLBF agreed to acquire Columbia Care Inc. (CCHWF) for $2B in stock as Columbia holders to receive 0.5579 of a subordinate voting share of Cresco for each share

·     GIS +5%; posted a Q3 adj EPS 84c beat est. 78c on in-line sales $4.54B and raised FY22 core sales and profit forecasts on higher prices and strong demand with organic net sales now expected to increase +5% from prior range of +4-5%

·     GME +9%; after billionaire Ryan Cohen’s investment company bought 100,000 shares according to a regulatory filing, raising stake to 11.9%, with the total number of shares owned at 9.1 million

·     MOS +2%; among top gainers in the S&P 500 as commodity prices rebound

·     OXY +3%; energy/oil stocks among leaders early as oil prices rebound

·     TSLA +2%; and AAPL helping pare market losses early – each up for a 7^th consecutive day as momentum remains clearly to the upside, helping drive markets off lows

Stock LAGGARDS

·     ADBE -7%; posted a slight top and bottom line beat for Q1 with net new Digital Media (DM) ARR coming in at $418M vs. consensus $402M, but softer Q2 guidance weighed on shares as sees Q2 adj EPS roughly $3.30 on revs $4.34B, below est. $3.35/$4.41B

·     GAN -17%; issues prelim qtrly total revenue of $30.5M, below $32.3M in the prior quarter and below consensus $35.2M and guides FY22 revenue expectations of $155M-$165M (est. $171M)

·     HYZN -5%; Q4 EPS loss in-line (12c) on revenue $5.1M vs est. $26.5M, increased its backlog by 246% from its July 2021 update to $287M

·     OKTA -7%; says up to 366 customers are potentially hit by a security breach caused by a hacking group known as Lapsus$ (follow up from hack announcement yesterday)

·     PLL -8%; 1.75M share Secondary priced at $65.00 – Offering size boosted from 1.5 mln shares, prices at 13.5% discount to stock’s last close of $75.17 on Monday

·     POSH ; posts mixed Q4 results with slightly larger loss and better sales but guides Q1 revs $86M-$88M (rev growth slows to 11%) vs. est. $90.53M and weaker Ebitda view

·     WOR -10%; Q3 adj EPS $1.13 misses the $1.37 estimate while sales rose 82% to $1.4B topping views but said steel price volatility is expected to remain a headwind for co