Mid-Morning Look

Tuesday, December 08, 2020

Stocks with modest weakness as vaccine rollouts get underway in the UK, while investors still awaiting news on the stimulus relief, which continues to drag on without any meaningful developments. In vaccine news, the U.S. FDA released documents that did not raise any new safety or efficacy issues about PFE and partner BioNTech SE‘s COVID-19 vaccine candidate, as the documents come ahead of Thursday’s meeting of outside advisers to FDA who will discuss whether the vaccine should be authorized for emergency use in the country. At the same time, the UK began rolling out the first doses of a widely tested and reviewed COVID-19 vaccine, starting a global immunization program today. The 10-year yield dips 3 bps to below 0.9% – first time below 0.9% since Dec 1 as bonds bounce with stocks pulling back off record highs. At the same time, Covid-19 cases continue to uptick as health authorities and local officials are calling for additional restrictions to halt the rise in infections and hospitalizations. Lawmakers struggled Monday to resolve one of two big stumbling blocks remaining in their efforts to strike a deal on the emergency-spending program. Congressional leaders said they plan to pass a one-week extension of the government’s current funding to buy more time for negotiations on both bills. Also, Brexit negotiations are set to enter a last decisive phase as British Prime Minister Boris Johnson prepares to travel to Brussels in a bid to secure a deal over the European Union’s relations with the U.K.

Economic Data

·     U.S. Q3 non-farm productivity revised to +4.6% vs. est. +4.9% (same as prior month) while Q3 non-farm unit labor costs revised to -6.6% (consensus -8.9%), previous -8.9%

Sector Movers Today

·     Auto sector; TSLA entered into an equity distribution agreement to sell shares worth up to $5 bln in capital raise as shares closed at record highs; UBER is selling its autonomous driving unit, Uber Advanced Technologies Group (ATG), to self-driving car startup Aurora, the companies said as the equity deal valued the ATG at $4 billion; auto retailer AZO beat earnings estimates for its Q1 on mostly in-line sales $3.2B as margins fell 62 bps from a year ago to 53.1% of sales

·     Consumer Staples; Wells Fargo initiated HPC and Beverage stocks with overweight’s on CLX, PG, SPB, KO, MNST, STZ and underweight on CL, COTY, EPC, and NWL; NOMD raised Q4 organic revenue growth to increase in the high-single digit percent range; organic revenue growth increased 10% through the first two months of the fourth quarter and is expected to remain above historical levels during the month of December; GRWG filed a registration statement for a proposed $125M follow-on public offering; COTY downgraded to Underweight from Equal Weight at Wells Fargo

·     Aerospace & Defense; GOL said it would resume flying BA’s 737 MAX planes on commercial routes in its domestic network from Dec. 9. Gol said it expects all seven 737 MAX aircraft in its fleet to be cleared to return fully to operation by the end of December; RTX authorizes to repurchase of up to $5B outstanding stock; NOC agrees to sell its federal IT and mission support services business to Veritas Capital for $3.4B in cash; expects to use the sale proceeds primarily for share repurchases, to offset dilution from the transaction and for debt retirement

·     Media & Telecom movers; CHTR active as the FCC said it has awarded $9.2 billion to provide high-speed broadband internet service to 5.22 million unserved homes and businesses, boosting access in rural areas and CHTR won $1.22 billion to provide service to 1.06 million locations, while Elon Musk’s SpaceX won $885 million to serve 642,000 locations; SIRI said radio and television host Howard Stern extends partnership with the company; NLSN announces ONE platform for standardized cross-platform viewer measurements; AT CEO says will soon reach 12.6 million customer activations for HBO Max

·     Retailers; SFIX tgt raised by analysts after reported better than expected F1Q21 results, while active client growth is accelerating, and Q2 sales guidance came in ahead of expectations (+12-14% Y/Y) and FY21 sales are expected to be +20-25% Y/Y (implying 29-40% in 2H); GIII posted Q3 EPS $1.29 on revs $826.6M, topping estimates of 77c on $768.2M, as selling and administrative expenses fell almost 28% in the quarter, and the company expects Q4 revenue to fall 30% (est. -26.9%); CASY Q2 EPS $3 on revs $2.22B vs ests. $2.80 on $2.21B, same-store sales +3.5%, and raised its quarterly dividend 6% to 34c; CONN Q3 EPS 25c (est. 23c) on revs $259.7M, retail same-store sales -10.9%, narrower than est. -12.5%, and credit revenue $74.2M (-22.5%) misses est. $83M; BNED Q2 EPS 15c on revs $595.5M (est. $522.5M), as the company was negatively affected by fewer students on college campuses due to the Covid-19 pandemic; BKE announces it will pay a 30c quarterly dividend in addition to a special $2 dividend on 12/29 to shareholders of record on 12/21; Cowen reiterated their Outperform rating on NKE and raised their earnings estimates above consensus and their price target to $165 from $150 ahead of the company’s 12/18 quarterly report, saying long-term consensus is conservative and the company is well-positioned for the consumer shift to digital; LULU was reiterated at Outperform with a $435 pt at RBC, who raised their sales estimates ahead of Thursday’s reports following the recent Black Friday-Cyber Monday period and strong online traffic trends; Jefferies raised their DECK pt to $346 from $315 and maintained their Buy rating despite warmer weather this winter as they view Ugg’s business as less correlated to weather and more fashion driven

Stock GAINERS

·     EFX +8%; after the company issued guidance for Q4 2020 and full-year 2021 that exceeded the average analyst estimates, prompting Barclay’s to upgrade to Overweight and several analyst to raise their price targets

·     HOLI +11%; disclosed a preliminary non-binding proposal to acquire all publicly held shares for $15.47 per share in cash, which represents a 24% premium to the stock’s Dec. 4 closing price https://bit.ly/2JB4aPW

·     MRNA +4%; after Switzerland increases covid-19 vaccine order

·     OXY +5%; rebound in energy stocks after leading the declines Monday (MRO, PXD rise)

·     PFE +1%; more than 1 year highs after FDA backs its coronaviral vaccine data ahead of meeting

·     SFIX +41%; tgt raised by analysts after reported better than expected F1Q21 results, while active client growth is accelerating, and Q2 sales guidance came in ahead of expectations (+12-14% Y/Y) and FY21 sales are expected to be +20-25% Y/Y (implying 29-40% in 2H)

·     SMAR +17%; reported strong results led by large customers with record $50K and $100K ARR expansions of 106 and 36, respectively (+14% and 29%, respectively, vs. prior records), as enterprise demand remains robust into F4Q

·     X +7%; to acquire remaining equity of Big River Steel for about $774M, expects to be immediately accretive to earnings with potential for significant synergies

Stock LAGGARDS

·     AZO -4%; beat earnings estimates for its Q1 on mostly in-line sales $3.2B as margins fell 62 bps from a year ago to 53.1% of sales

·     CONN -11%; Q3 revs of $334.2M missed the $345.2M and said retail revenue fell 7.3% to $259.7M, due to decrease in same-store sales of -10.9% and fall in repair service agreement commissions

·     COUP -4%; tgt raised by several analysts after reported a strong FQ3, exceeding consensus expectations across the board as billings beat by ~$26M as the company closed a few large deals, including Walmart – shares reversed overnight gains

·     MSTR -10%; downgraded to sell from neutral at Citigroup as they see the recent stock rally as overextended and see incremental risks to the story following an announced $400M convertible note to fund even more Bitcoin purchases

·     TOL -9%; EPS of $1.55 beat consensus of $1.23, driven largely by revenue on significantly greater delivery volume than we anticipated, while shares slipped amid lower than expected 1Q20 delivery and gross margin guidance

·     TRIL -17%; as Ladenburg noted TTI-622 and TTI-621 ASH20 presentations reported largely incremental update vs Sept. data, with notable updates on safety, PK, PD but minimal on efficacy

·     TSLA -1%; entered into an equity distribution agreement to sell shares worth up to $5 bln in capital raise as shares closed at record highs