Mid-Morning Look

Wednesday, September 08, 2021

Stocks open slightly lower on light volumes as stocks taking a modest breather following its record run over the last month. Sports and related media generally outperforming along with quick service restaurants and energy names, while technology shares show signs of weakness for the first time in over a week as the Nasdaq Composite pulls back off record closing highs Tuesday. Light day of economic data as July Job Openings 10.934M vs. 10M consensus and 10.185M prior (revised from 9.483M). Natural gas prices hit the highest levels since 2014 (nearing $5 per MMBtu) on Gulf of Mexico hurricane outage, strong demand, seasonally low inventories. Precious metals prices extend yesterday’s slide while oil prices rebound. A handful of companies issuing weaker outlooks (SHW in chemicals, PHM in housing). Shares of GIS in the food industry higher on upbeat guidance as several companies speaking at multiple sell-side conferences this week. U.S. listed Chinese stocks slide (DOYU, NTES, TCEHY, DIDI) as the Chinese govt summons gaming firms, says it will crack down on ride-hailing. Adding to recent worries was Friday’s weak August payrolls data and concern about the impact of the Delta variant.

Sector Movers Today

·     FinTech & Payments; PYPL agreed to buy Japanese “buy now, pay later” startup Paidy Inc. for about $2.7 billion, in a move that will boost its business in the world’s third-largest e-commerce market. https://on.mktw.net/3ncZkd1 (Paidy has >6M users (PYPL Japan pre acquisition 4.3M actives) and >700K merchants with a stated $1.5B GMV 2021 run-rate); GPN and Virgin Money form strategic alliance to redefine the future of digital commerce; FOUR 1.65M share Block Trade priced at $86.26

·     Biotech, Pharma movers; SNY to acquire U.S.-based biopharmaceutical company KDMN, with holders to receive $9.50 a share in cash, representing a total equity value of about $1.9B on a fully diluted basis. https://on.mktw.net/3haEIOs ; PRGO to acquire Héra SAS, a leading global consumer self-care company, from funds affiliated with private equity firm Astorg and Goldman Sachs asset management in deal valued at $2.1B; PFE and TEVA have agreed to settle a patent dispute linked to the rheumatoid arthritis therapy Xeljanz, Bloomberg reported; NVAX initiates phase 1/2 clinical trial of combination vaccine for #COVID19 and Seasonal Influenza

·     Metals & Materials; in the chemical sector, SHW lowered its Q3 net sales guidance to be “up or down by a low-single digit percentage YoY” from “up mid-to-high-single-digit percentage” due to industry-wide issues with raw material availability, including impact of Hurricane Ida (the lower forecast follows a similar update from PPG yesterday); in lithium space, ALB was double upgraded to Buy from Sell with $280 tgt at Berenberg, raised long-term forecast for lithium prices to USD15,000/ton as believe Albemarle is well placed to deliver fast earnings growth supported by ideally timed capacity expansions; LYB announced it is weighing strategic options for its Gulf Coast-based Refining Segment, including a potential sale

·     Internet; NFLX comes into the day with 8-day win streak, as JPMorgan said they believe 4Q should become NFLX’s strongest content quarter ever as project 3.8M net adds in 3Q & 8.0M in 4Q, implying 10% Y/Y growth in 2H as NFLX gains distance from pandemic pull-forward (raise tgt to $705); GOOGL pt raised from $3,140 to $3400 at Guggenheim and maintains Buy as continue to view Alphabet as a top investment idea in our coverage universe even after the strong YTD share performance; NTES and TCEHY slips on China headlines govt including cyberspace regulator summon gaming firms including Tencent and NetEase (Chinese tech names pressured early)

Stock GAINERS

·     COUP ; reported better-than-expected F2 results, with non-GAAP EPS of $0.26 vs. est. loss (-$0.06) on revenue growth of 42% (consensus 29%) including the benefit of the LLamasoft acquisition, an acceleration from 40% in F1Q22 and on y/y calculated billings growth of 49%

·     CTXS +3%; Elliott Management Corp. has a more than $1 billion stake in Citrix Systems Inc. (CTXS) and wants the software company to take action to boost its lagging stock price, according to people familiar with the matter – WSJ https://on.wsj.com/3yOaCGN

·     GIS +3%; expects its organic net sales and adjusted earnings for FY22 to be at the higher end of their prior guidance ranges

·     KDMN +75%; SNY entered into a definitive agreement to acquire U.S.-based biopharmaceutical company KDMN, with holders to receive $9.50 a share in cash, representing a total equity value of about $1.9B on a fully diluted basis. https://on.mktw.net/3haEIOs

·     NFLX +1%; riding an 8-day win streak, JPMorgan said they believe 4Q should become NFLX’s strongest content quarter ever as project 3.8M net adds in 3Q & 8.0M in 4Q, implying 10% Y/Y growth in 2H

·     TEVA +1%; and PFE have agreed to settle a patent dispute linked to the rheumatoid arthritis therapy Xeljanz, Bloomberg reported last night

·     TSLA +1%; sold 44,264 China-made vehicles in August, compared with 32,968 vehicles in July, data from China Passenger Car Association shows

Stock LAGGARDS

·     COIN -3%; as the SEC has warned that it will sue Coinbase if it launches a new digital asset lending product, and issued subpoenas to the cryptocurrency trading platform

·     COTY -9%; 50M share secondary Block Trade priced at $8.53

·     MGNX -3%; as announced final SOPHIA OS analysis did not demonstrate stat sig advantage for Margenza vs trastuzumab (HR 0.95; p=0.62).

·     NIO -5%; announces at-the-market offering of $2B of ADRs

·     PATH -8%; several analysts cut price tgts citing relatively mild revenue growth, despite being optimistic on its Annualized Renewal Run rate (ARR), following co’s Q2 results

·     PHM -4%; cut its Q3 deliveries outlook to be up 8% from a year ago to 7,000 homes, but that’s below the deliveries guidance range provided on July 27 of 7,300 to 7,600

·     SHW -2%; lowered its Q3 net sales guidance to be “up or down by a low-single digit percentage YoY” from “up mid-to-high-single-digit percentage” due to industry-wide issues with raw material availability, including impact of Hurricane Ida

·     SMAR -10%; Q2 results topped expectations, but Calculated billings grew 47% YoY to $142.9 million, a deceleration from the 48% growth rate in Q1 which pressured shares

·     VRT -4%; to buy E&I Engineering Group Ireland Ltd and its affiliate, Powerbar Gulf LLC, in a $1.8B mostly cash deal while also lowers FY net sales outlook to between $4.88B-$4.94B from prior view of $4.97B-$5.03B citing worse-than-expected supply chain challenges