Mid-Morning Look

Wednesday, February 17, 2021

Stocks move lower on the open amid another jump in inflation data as the January Producer Price Index (PPI) posted its largest advance since the index began, while retail sales for January came in well above expectations. The Fed has remained vigilant saying they plan on keeping rates at lows through the rest of this year, but the recent uptick in prices has grabbed the markets attention (as well as the jump in Treasury yields to fresh one-year highs). Fed’s Rosengren said today that “if inflation becomes a problem “the Fed will take care of it” – which the markets didn’t seem to like. Still, Rosengren said the 10-year treasury increase points to anticipation that the economy will do better in the second half of the year and that inflation is still too low (despite the jump in PPI, retail sales, recent surge in oil and other commodity prices). Rosengren also said there is definitely “froth” in some parts of the market, but I‘m concerned less about financial stability until the economy is closer to full employment”. Outside of data and Fed comments, earnings plentiful again today ahead of another busy week of results while Bitcoin prices touch another record high (above $51k). Appearing on CNBC, BlackRock (BLK) fixed income chief Rick Rieder confirmed his firm’s move into Bitcoin (BTC) investment, saying “we’ve started to dabble in it.” The comments coupled with several high-profile investments in the cryptocurrency such as Tesla, has boosted interest again. Dow components CVX and VZ rise after Berkshire Hathaway reveals stakes.

Economic Data

·     Retail Sales month-over-month for January reported at 5.3%, well above the 1.1% estimate; retail sales ex autos rose 4.9% vs. est. up 1%; retail sales ex autos and gas jumped 6.1% vs. prior month down -2.5%; and retail ex gasoline rose 5.4%

·     Producer Price index (PPI) MoM for January jumped 1.3% vs a 0.4% estimate (largest advance since the index began in December 2009), while core prices (ex-Food/Energy) rose 1.2% vs a 0.2% estimate, raising inflation fears; on a YoY basis, Jan PPI YoY rose +1.7% vs. +0.9% consensus

·     U.S. January industrial output +0.9% vs. est. +0.5% and Dec revised to +1.3% from 1.6% prior; capacity use rate 75.6% vs. est. 74.8%; manufacturing output +1.0% vs. est. +0.7%

·     February NAHB housing market index 84 vs. 83 estimate and prior month; index of current single-family home sales 90 versus 90 in January; index of prospective buyers 72 versus 68 in January

Sector Movers Today

·     Semiconductors; ADI posted a top and bottom line beats (EPS $1.44 vs. est. $1.32) helped by growth across all B2B markets and a record quarter for the industrials business, while guidance also topped consensus; CREE upgraded to Buy and up tgt to $160 at Citigroup as believe that over the next 12 months the stock will positively react to any governmental or industry news regarding increases to electric vehicle (EV) penetration or restriction on emissions on internal combustion engines; LSCC another beat/raise with all segments contributing to Q/Q growth as the macro recovery continues along with strong execution on margin expansion continued as GM exceeded expectations by 60 bps; DIOD reported better-than-exp 4Q20 results & provided 1Q21 guidance above the prior consensus view; Lidar specialist AEye says it is merging with CF Finance Acquisition Corp. III (CFAC), a special purpose acquisition company

·     Pharma movers; PFE has not yet delivered to the European union about 10 million covid-19 vaccine doses that were due in December, EU officials said, leaving it about one-third short of the supplies it had expected by now from the U.S. company as per Reuters; VIR rises after the co and GSK announced an expansion of its coronavirus collaboration to advance new therapeutics for influenza and other respiratory viruses. As part of the deal, GSK to increase its equity investment in VIR by $120M and making an upfront $225M payment; BHC upgraded to outperform at RBC Capital as believe Bausch will transform materially over the near to mid-term with coincident re-rating and critical deleveraging driving value creation; ALT rises after saying the FDA clears its Investigational New Drug application for a Phase 1 clinical trial of AdCOVID, a single-dose, intranasal COVID-19 vaccine candidate; RDHL said the first patient was dosed in its U.S. Phase 2/3 study of orally administered RHB-107, an investigational new drug for patients with symptomatic Covid-19 who do not require hospital care; SNDL filed a shelf registration with the SEC to issue up to $1 billion of securities over time

·     REITs; INVH reported 4Q20 core FFOPS of $0.32, in-line with consensus on revs $464M vs est $460.5M, same store average occupancy 98.1% (+210bps YoY) as same store NOI +4.3% YoY, and Mizhuo says these results confirm their thesis for the stock as a top pick and JPMorgan says that the in-line guidance could be conservative and that apartments REITs like the name remain attractive; VNO Q4 FFO 66c vs. est. 64c on revs $376.4M vs. est. $365M, a net loss of ($209.1M) for the quarter vs profit $193.2M YoY, and collected 95% of rent from tenants, including 97% from office and 88% from retail tenants; QTS posted Q4 FFO 78c on revs $143..9M vs ests. 72c on $140M, and they guide FY21 FFO $2.92-3.04 (est. $2.95) on rev $599-613M (est. $602M); RPAI Q4 FFO 20c narrowly missed est. 20c as revs $107.2M narrowly beat est. $106.8M, and the guide FY21 operating FFO 76-84c, missing est. 86c

·     Leisure and Gaming; lodging stocks weaker after CHH EPS and revs missed and HLT also weak on top and bottom line miss, pressure for rest of industry (MAR, H, WH, ABNB); CHH Q4 EPS 51c on revs $193.4M vs. est. 64c and $207M; in gaming, BYD Q4 adj EPS 46c vs. est. 39c; Q4 revenue $635.9M vs. est. $632.26M; Midwest & South achieves record fourth-quarter adjusted Ebitda and margins; theme park operator FUN posted Q4 results as revs of $33.88M fell -86% YoY but topped ests with Q4 net loss of $105.45M but sets a confident tone for 2021

Stock GAINERS

·     A +5%; reported fiscal 1Q21 revenue of $1,548mn which beat FactSet consensus of $1,440mn and EPS of $1.06 beat consensus of $0.90 and expects 6.5-8% organic revenue growth in FY21 as non-GAAP EPS guidance was set at $3.80 to $3.90 versus consensus of $3.71

·     CVX +3%; rises as Warren Buffett’s Berkshire Hathaway Inc revealed $4.1 billion stake in Chevron in a regulatory filing

·     IMUX -18%; after saying its lead asset, IMU-838, a selective oral DHODH inhibitor, has shown evidence of clinical activity in hospitalized patients with moderate Covid-19.

·     KRNT +11%; reported strong 4Q20 (Dec) earnings results and delivered a better-than-expected outlook for March and 2021

·     LODE +240%; earlier announced transactions securing rights to a majority equity stake in Linico Corp., a lithium-ion battery recycling company

·     QS +12%; after saying it made 4-layer multilayer cells and plans to build a pre-pilot line facility in San Jose, California/says it plans to increase the number of layers for the cells, aiming subsequently for 8 to 10 layers by year end

·     TPCO +6%; Alden Global Capital LLC, which already owned a 32% stake, reached an agreement to buy the rest of Tribune Publishing (TPCO) for $17.25 a share, valuing the company at around $630 million. The deal still requires shareholder approval https://on.mktw.net/3pslo0G

·     VIR +15%; after the co and GSK announced an expansion of its coronavirus collaboration to advance new therapeutics for influenza and other respiratory viruses. As part of the deal, GSK to increase its equity investment in VIR by $120M and making an upfront $225M payment.

·     WIX +3%; Q4 EPS loss (3c) was narrower than est. (11c) loss on revs $282.53M (+38% YoY, est. $270.22M) as net premium subscriptions added +185k in the quarter (+107%), creative subscription ARR +24% to $878M, and they see FY21 rev $1.27-1.29B vs est. $1.26B

Stock LAGGARDS

·     CAR -10%; after files for offering of up to 10.0 mln shares of common stock

·     HLT -4%; lodging stocks weaker after CHH EPS and revs missed and HLT also weak on top and bottom line miss, pressure for rest of industry

·     KAR -21%; shares tumble after (downgraded at Truist and Guggenheim) after the company’s Q4 earnings miss and below-consensus guidance

·     MOSY -17%; after entered into a definitive agreement with institutional investors for almost 1.5 million shares at $5 each, with the proceeds to be used for working capital and to repay debt

·     SHOP -7%; quarterly revenue nearly doubled and topped estimates but said it expects slower revenue growth this year from 2020 on vaccine rollouts/Q4 revs $977.7M topped the $910.2M est. (prior year was $505M)

·     SNDL -11%; after filed a shelf registration with the SEC to issue up to $1 billion of securities over time

·     WING -14%; after top and bottom-line miss, System-wide sales increased 26.5% to $502.5M and domestic same-store sales increased 18.2%