Mid-Morning Look

Thursday, December 10, 2020

U.S. stocks faltered for a moment (very brief) at Thursday’s open after disappointing economic data, as weekly jobless claims spiked in the latest week well above expectations and still now word on the relief package out of Washington – but that didn’t stop investors from scooping up stocks on the open, with the Nasdaq Comp erasing losses of more than 100-points in a flash (traded lows below 12,220 before straight spike to 12,400 highs – 180-points). U.S. stocks looking to erase yesterday’s declines as the resurgence of COVID-19 towards the end of the year and no stimulus deal remains an overhang – but markets await headlines for the FDA approval of two vaccines (PFE, MRNA) as an FDA committee will meet today to weigh the risks and benefits of Pfizer and BioNTech’s experimental vaccine. The ECB left its key rates unchanged and announced it will increase the envelope of the pandemic emergency purchase program by EUR 500 billion to a total of EUR 1.85 trillion (both were widely expected). More IPO hype after DoorDash (DASH) pricing yesterday with AirBnB (ABNB) pricing its 51.3M share offering (IPO) at $68.00, which is above the prior range of $56-$60 and values the company at $47B. Fear remains nonexistent with the CBOE Volatility index (VIX) trading near its lowest levels since February. Oil prices jumping over 3% through the $47 per barrel level despite a big jump in inventories yesterday, as vaccine news overshadows all and drives recovery hope for demand into 2021 (lifting energy stocks).

Economic Data

·     Weekly jobless claims jump +137K to 853K vs. 730K consensus, 716K prior (revised from 712K); the 4-week moving average rose to 776,000 from 740,500 prior week (previous 739,500); continued claims rose to 5.757M from 5.527M (and above est. 5.335M); U.S. insured unemployment rate rose to 3.9% from 3.8% prior week

·     Consumer Price Index (CPI) for November rose a slightly “hotter” 0.2% vs. estimate rise of 0.1% and the flat level prior; core CPI (ex: food & energy) rises +0.2% vs. est. 0.1%; Nov CPI YOY up 1.2% vs. est. 1.1% and core CPI YoY rises an in-line 1.6%

Sector Movers Today

·     Retailers; OXM Q3 EPS loss better at ($0.44) vs consensus ($1.10) and revenue $175.1M vs consensus $164.4M (Tommy Bahama better, Lily Pulitzer) and GM above consensus; Goldman Sachs several changes in retail space today as they upgraded shares of LEVI, RL to Buy from Sell, FIVE and CPRI to Buy from Neutral, and PVH to neutral from sell and downgraded BBY, GOOS to Sell from Neutral and KTB to Neutral from Buy; JILL reports sales fell 29.4% to $117.2M in Q3; ASO big Q3 EPS and rev beat (91c/$1.35B vs. est. 36c/$1.26B) on 16.5% jump in comp sales

·     Housing, Furnishing & Building Products; RH price tgt raised by several analysts ($560 at Bofa, $520 at Loop and Wedbush) after revenues, profit margins, and earnings were well ahead of expectations as majority of the upside was driven by better SG&A as well as gross margin (a record 48.4%); FND was upgraded to buy from neutral at Goldman Sachs saying its building cash balance can be used to accelerate investments as it faces continued home improvement tailwinds; HOFT mixed Q3 with EPS beat and sales miss

·     Asset managers; AB announced that preliminary assets under management increased 7.4% to $668 billion during November 2020 from $622 billion at the end of October; BEN preliminary month-end assets under management of $1,466.7 billion at November 30, 2020, compared to $1,391.6 billion at October 31, 2020; IVZ preliminary month-end assets under management of $1,294.0 billion, an increase of 7.3% versus previous month-end; LAZ preliminary assets under management as of November 30, 2020 totaled approximately $247.6 billion; TROW preliminary month-end assets under management of $1.42 trillion as of end of Nov; VRTS preliminary total long-term AUM of $124.5B at Nov. 30, 2020 increase from $115.2B at Oct. 31, 2020

·     Biotech movers; EDIT said it had submitted an application with the U.S. FDA to start an early-to-mid-stage clinical trial of its cell therapy, EDIT-301, to treat sickle cell disease (upgraded to Overweight and $69 tgt at Wells Fargo); PBYIs neratinib meaningful reduces risk of recurrence and improves survival in early-stage breast cancer patients after results from the Phase III ExteNET trial; BIIB submitted a Japanese New Drug Application to the Ministry of Health, Labor and Welfare (MHLW) for Alzheimer’s drug aducanumab (BIIB037); ICPT CEO Mark Pruzanski stepping down, replaced by current COO Jerry Durso; IMMP surges after Chinese partner EOC Pharma will start a phase II clinical trial in up to 152 metastatic breast cancer patients in China

·     REITs; a massive ratings adjustment in REITs at Wells Fargo: in Net Lease REITs, upgrading LXP to Overweight and downgrading NNN; for tower REITs, remain bullish on the tower sector heading into 2021, although acknowledge that accelerating growth looks more like a 2022+ story in terms of financial contribution (top pick SBAC, but also recommend AMT); in data center REITs, remain positive on fundamentals and believe recent underperformance creates a more attractive entry point, with top picks CONE and QTS; in healthcare, OHI upgraded and cut PEAK and DHC; in office REITs, reit Overweight ratings on HIW, CUZ, BXP, KRC, and HPP and upgrade OFC to Overweight, while downgrade PGRE to underweight; in lodging, upgraded PEB, DRH, PK and XHR to overweight and HT to EW while downgraded HST and SHO

Stock GAINERS

·     APA +6%; as energy stocks extend recent rebound along with oil price recovery (despite very bearish inventory the day prior) – energy names among top gainers in the S&P

·     ASO +2%; posted big Q3 EPS and rev beat (91c/$1.35B vs. est. 36c/$1.26B) on 16.5% jump in comp sales

·     EDIT +21%; submitted an application with the U.S. FDA to start an early-to-mid-stage clinical trial of its cell therapy, EDIT-301, to treat sickle cell disease (upgraded to Overweight and $69 tgt at Wells Fargo)

·     IMMP surges over 200% after Chinese partner EOC Pharma will start a phase II clinical trial in up to 152 metastatic breast cancer patients in China

·     OXM +3%; Q3 EPS loss better at ($0.44) vs consensus ($1.10) and revenue $175.1M vs consensus $164.4M (Tommy Bahama better, Lily Pulitzer) and GM above consensus

·     SBUX +4%; tightened its underlying EPS growth at investor day to 10-12% starting in FY23 and guided to outsized FY22 EPS growth of >20% as sales & margins are expected to gradually recover while increased its global & US SSS outlook to 4-5% (from 3-4%)

Stock LAGGARDS

·     BBY -4%; among retailers downgraded at Goldman Sachs in shuffling of ratings in space

·     CIEN -4%; Q4 EPS of 60 cents misses analysts’ est. of 63 cents, with revs slightly better at $828.5M vs. est. $825.4M and said to reintroduce share repurchase program in Q1 2021

·     FB -1%; active again after 46 U.S. states and U.S. FTC filed lawsuits that could force social media giant to sell messaging app WhatsApp and photo-sharing app Instagram

·     FLR -2%; suspends 2020 forecast after Q3 EPS and revs fell short of consensus saying Covid continues to impact its business as clients are deferring capital investment decisions and the pandemic has slowed down their ability to fully staff and execute projects

·     ICPT -4%; CEO Mark Pruzanski stepping down, replaced by current COO Jerry Durso

·     QTNT -7%; after saying received FDA request for additional testing data regarding the 510(k) application for the Initial Serological Disease Screening Microarray and MosaiQ instrument

Syndicate:

·     Airbnb (ABNB) 51.3M share IPO priced at $68.00

·     ALX Oncology (ALXO) 2.38M share Secondary priced at $76.00

·     AquaBounty (AQB) 8.72M share Spot Secondary priced at $6.50

·     Fiserv (FISV) 17.5M share Secondary priced at $112.00

·     Hydrofarm (HYFM) 8.67M share IPO priced at $20.00

·     Ichor Holdings (ICHR) 4M share Secondary priced at $31.75

·     Leaf Group (LEAF) 7.15M share Spot Secondary priced at $4.20

·     Open Lending (LPRO) 9.5M share Secondary priced at $28.00

·     Rocket Pharmaceuticals (RCKT) 4.643M share Secondary priced at $56.00