Mid-Morning Look

Wednesday, December 09, 2020

Another day, another record high for major U.S. averages, as the Nasdaq Composite tops the 12,600 level for the first time, Dow Transports nearing the 13,000 level, Russell 2000 Smallcaps another record above the 1,930 level (after breaches 1,900 for first time yesterday) in another all-out buying frenzy for stocks. News today out of Washington helping sentiment initially as Treasury Secretary Mnuchin says he presented House Speaker Pelosi with $916B relief aid proposal, says reviewed proposal with McConnell, Trump, McCarthy and said to include robust liability protections and money for state/local government. Hopes for a vaccine-linked economic recovery and more domestic fiscal stimulus sparked demand for economically sensitive stocks such as banks, energy, consumer, and industrials again. IPOs grabbing market attention with DoorDash (DASH) pricing above the recently upped range at $102 (from $90-$95) and indicated much higher on its open with AirBnB (ABNB) expected to trade for Thursday. The market climb since the Presidential election has been nothing less than spectacular with stocks bouncing on the slightest pullback as everyone appears to get into the cyclical rotation, SPAC craze, electric vehicle (EV) growth story Smallcap recovery – and most recently the reopen trade as transports, leisure, lodging, retail and restaurant names seeing strength day after day. Markets still holding up well despite Democrats quickly rejecting the White House’s first post-election stimulus offer on Tuesday evening, hours after Senate Majority Leader Mitch McConnell (R–KY) proposed a much narrower path.

Sector Movers Today

·     Software movers; FEYE shares fell after the Internet security company said they were hacked in company blog post; says internal hacking tools were stolen and that it is working with affected vendors; MDB delivered a strong Q3 with revenue/EPS coming in well ahead of consensus estimates, reflecting normalizing Atlas customer usage (now 47% of revenue vs. 44% QoQ) and robust total (+42.1% YoY, accelerating from 1Q/2Q) and large customer (+30.5% YoY) growth; GWRE reported F1Q21 ARR of $513M that topped Street estimates of $511M and the upper end of guidance ($509-512M). Revenue and EPS ($170M / $0.17) also came in ahead of consensus expectations ($164.6M / -$0.05) aided by better-than-expected term license helped by duration ($1M above plan); AI 15.5M share IPO priced at $42.00; PUBM 5.9M share IPO priced at $20.00

·     Media & Telecom movers; DIS upgraded to overweight from equal-weight at Wells Fargo as think Disney is set to complete its transformation into a global streaming content company including the deep Disney brands (Disney+), general entertainment (Star, Hulu, Disney18+) and eventually global sports (ESPN+); KeyBanc initiated media with overweight and $177 tgt on DIS,, equal-weight ratings on DISCA and FOXA and an underweight on VIAC as believes the media industry is entering secular decline and sees ViacomCBS as one of the most exposed, as its streaming services lack original content and global reach and recommended selling shares; NYT total advertising revenues in Q4 of 2020 are expected to decline approximately 20% YoY; WMG 6.9M share Block Trade priced at $31.50

·     Consumer Staples; UNFI posts Q1 2021 adj. EPS 51c, below est. 74c, on sales $6.67B, also missing est. $6.81B, and posts net loss of $1M (2c/share) vs $383.9M loss YoY; CPB Q1 adj EPS $1.02 (est. $0.78) on sales $2.34B (+7.2%, beats est. $2.32B), driven by bulk purchases of soups (+21% alone, meals and beverages +12%) ahead of the winter, though Q2 guidance is soft (net sales +5-7% vs est. +6.5%, adj EPS 81-83c vs. est. 83c); HRL was downgraded to Hold from Buy at Argus on projected slowing retail sales growth in FY21 on low product inventories and decelerating EPS growth in FY22; TWNK was added to JPMorgan’s Analyst Focus List as a growth idea with 37% upside on its $19 target, which was raised from $17

·     Metals & Materials; metals stocks among best performers the last few weeks on China economic recovery, stimulus hopes in the U.S. and hopes a Covid-19 vaccine will boost the economic recovery in 2021; U.S. Steel (X) upgraded to buy from hold with $22 tgt at Argus; Morgan Stanley initiates coverage of the NA steel industry with an In-Line view noting he US S&P steel index up 38% over the last three months vs. the S&P 500 up 11%, thinks the risk-reward is less compelling from here, but notes that NA steel equities are under-owned (OW on STLD and EW on NUE, X)

Stock GAINERS

·     CATM +25%; after receives acquisition proposal from Douglas Braunstein, founder of Hudson Executive Capital LP and Apollo Global Management Inc for $31 per share in cash, which implies a premium of 19% to stock’s last close https://bit.ly/3m0idf0

·     LOVE +13%; Q3 EPS 16c vs. est. loss (88c) on better revs $74.7M vs. est. $66.1M as EBITDA $6.0M vs consensus ($10.2M) and comps +53.5% vs consensus +16.0%

·     LOW +5%; announces new $15B repurchase program; reiterates its outlook for operating results for Q4 and unveils strategy to drive market share acceleration at its 2020 investor update

·     MTSC +49%; to be acquired by APH in a $1.7B deal, with MTS shareholders will receive $58.50 per share held, representing a premium of 51.9% https://on.mktw.net/37RHH94

·     NTEC +104%; enters into a cannabinoid research partnership with London-based company GW Pharma for an undisclosed research program that will employ its drug delivery system

·     OMCL +11.5% after Bloomberg reported $BAX has expressed interest in buying the company but notes that no final decisions about the deal have been made https://bloom.bg/3gttsvc

·     PRTA +21%; reports positive 9-month results from phase 1 long-term extension study of prx004, the first investigational anti-amyloid immunotherapy for the treatment of ATTR amyloidosis

·     RCKT +40%; after it reported positive early data from the Phase 1 trial of RP-A501 in treating Danon disease

·     ROKU +6%; tgt raised to Street high $375 from $220 citing a new distribution agreement with Discovery+, new distribution agreement with HBO Max and additional inroads in the international market; ROKU also preferred over NFLX at Needham as suggests a pair trade

·     T +2%; AT&T Inc. received bids for its DirecTV unit valuing the satellite-TV service at more than $15 billion including debt, according to Reuters https://bit.ly/39RSy5H

·     VSPR +8%; and category-creating beauty health company HydraFacial entered into a definitive merger agreement pursuant to which HydraFacial and Vesper Healthcare will combine, and after which HydraFacial will become a public company https://bit.ly/36XIQg6

Stock LAGGARDS

·     FEYE -7%; the Internet security company said they were hacked in company blog post; says internal hacking tools were stolen and that it is working with affected vendors

·     GME -17%; shares dropped after Q3 revenue missed views on a same-store sales decline of (-24.6%) and filed a mixed securities shelf

·     PLAB -16%; Q4 earnings and revenues below consensus saying revenue fell due to geopolitical factors and softness in some sectors in which it operates and guides Q1 midpoint below consensus views ($145M-$150M vs. est. $152.1M)

·     PSTI -45%; said it decided to end late-stage study of its treatment for critical limb ischemia as the decision follows an independent data monitoring committee’s review, which found the study is unlikely to meet its main goal by the time of the final analysis

·     STM -10%; after the company lowered most of its midterm targets and pushed them back a year to 2023 – lowered midterm forecasts for gross margin, operating margin, and earnings before interest, taxes, depreciation, and amortization margin

·     UNFI -12%; posts Q1 2021 adj. EPS 51c, below est. 74c, on sales $6.67B, also missing est. $6.81B, and posts net loss of $1M (2c/share) vs $383.9M loss YoY

·     VRA -8%; as Q3 was weaker than expected, but profit rose, helped by a drop in expenses ($124.8M vs. est. $130M) while comp store sales fell around (-19%), with store traffic still hurt by the pandemic

Syndicate:

·     Atara Biotherapeutics (ATRA) 5.102M share Secondary priced at $24.50

·     BRP Group (BRP) 8.75M share Spot Secondary priced at $29.50

·     C3.ai (AI) 15.5M share IPO priced at $42.00

·     Curis (CRIS) 25.652M share Spot Secondary priced at $5.75

·     Delcath Systems (DCTH) 1.46M share Spot Secondary priced at $13.25

·     DoorDash (DASH) 33M share IPO priced at $102.00

·     GrowGeneration (GRWG) 5M share Secondary priced at $30.00

·     Hookipa Pharma (HOOK) 3.4M share Spot Secondary priced at $11.75

·     IGM Biosciences (IGMS) 2.222M share Secondary priced at $90.00

·     Intuit (INTU) 1.376M share Block Trade priced at $368.50

·     Kura Oncology (KURA) 8.11M share Secondary priced at $37.00

·     PubMatic (PUBM) 5.9M share IPO priced at $20.00

·     Sutro Biopharma (STRO) 6M share Secondary priced at $21.00

·     Syndax (SNDX) 5.435M share Secondary priced at $23.00

·     Talos Energy (TALO) 8.25M share Secondary priced at $8.90

·     Volaris (VLRS) 13.4M share Secondary priced at $11.25

·     Warner Music (WMG) 6.9M share Block Trade priced at $31.50

·     Xpeng (XPEV) 48M share Secondary priced at $45.00