Mid-Morning Look

Wednesday, January 13, 2021

U.S. stocks choppy to start the trading day, as major averages edge higher with investor focus on Washington D.C. and Trump’s impeachment vote as well as market positioning ahead of earnings season. There are also several Fed speakers on tap today following dovish commentary from a few members yesterday which sent Treasury yields sliding from 10-month highs. Economic data mostly in line with estimates as Consumer Price Index (CPI) for December rises 0.4% and core prices (ex: food & energy) rises 0.1%, both in-line. Political drama continues as the House of Representatives began debate on Wednesday as lawmakers considered impeaching him for his role last week in the Capitol Building riots. At least five Republicans have said they would join Democrats in voting for an article of impeachment of inciting an insurrection just seven days before he is due to leave office and President-elect Joe Biden is sworn in on Jan. 20. In stock news, INTC jumps after announcing a new CEO change and upbeat Q4 guidance, boosting the Philly semiconductor index (SOX) to record highs before slipping. Oil prices fell after earlier gains, down from 10-month highs despite bullish inventory data as energy stocks take a breather after outperformance this week. The Big week of IPOs kicked off last night with Affirm Holdings (AFRM) looking at a big jump in its IPO debut (priced 24.6M shares at $49 last night), with DRVN, POSH, WOOF, PLTK IPOs expected this week still.

Sector Movers Today

·     Semiconductors; INTC jumps after CNBC’s David Faber first reported that CEO Bob Swan to step down effective February 15 and VMW’s Gelsinger to replace him (later confirmed by INTC which also said it expects to exceed Q4 EPS and rev view); QCOM said it plans to buy Nuvia Inc. for its flagship smartphones, driver-assistance systems, laptops and networking infrastructure in cash deal valued at $1.4B; AMBA was upgraded from Neutral to Buy with $130 tgt at Roth as believe AMBA represents a differentiated investment opportunity in computer vision and low power video processors; ACLS raises Q4 EPS view to approximately 32c from 21c (est. 21c) and boosts Q4 revenue view to about $120M from $110M (same as estimates) as well as gross margin view; ON tgt raised to $39, reit buy at Mizuho as new ON CEO priorities focus on growth, GM and portfolio positioning driving manufacturing footprint; QRVO, MTSI top overall names in semis at Cowen as recent checks indicate lead times being extended through May for several kinds of chips sold across auto, consumer electronics and industrial market

·     Housing & Building Products; homebuilders got a boost after KBH reported Q4 EPS and sales above consensus and said it expects meaningfully higher revenue and earnings in 2021 to drive significant expansion of return on equity (LEN, DHI, MTH, BZH other builders); in home improvement retail, HD was upgraded Buy from Neutral at Guggenheim with a $310 price target on the back of the closing of the acquisition of HD Supply, $3.0 billion debt offering and the recent moderation in the shares’ valuation, which has eroded HD’s historical premium.

·     Pharma movers; the NYT reports JNJ may not be able to deliver as many vaccine doses as initially anticipated because of manufacturing delays; BHC said it expects its Q4 revenue will be greater than $2.20B (est. $2.12B); anticipates gull year will outperform high end of its latest revenue guidance range; LGND received a $1.5M milestone payment from MRK, triggered by the FDA acceptance for review of a biologics license application for V114; FLXN said sees 4Q sales $26.3Mm vs. est. $25.7Mm, sees FY sales $85.5Mm vs. est. $84.9Mm; QLI rises in second day of trading after doubling yesterday after 5M shares IPO priced at $5; GMAB receives $40M milestone payment in ABBV collaboration; ACOR enters definitive agreement with contract CTLT to sell its manufacturing facility for its Parkinson’s disease treatment Inbrija for $80M in cash

·     Hardware & Component news; Wedbush positive on AAPL saying Asia supply chain checks for iPhones continue to be incrementally bullish around iPhone 12 5G demand and have now exceeded even our “bull case scenario” for units in FY21 given the current trajectory – While the Street is forecasting roughly 218 million iPhone units for FY21, they believe based on the current trajectory and in a bull case Cupertino has potential to sell north of 240 million units; SWCH upgraded to Buy at Jefferies saying earnings growth has inflected with an acceleration of leasing volume along with margin expansion; DBX said it would reduce global workforce by 11%

·     Consumer Finance; AFRM 24.6M share IPO priced at $49.00; Visa (V) and Plaid terminated their merger agreement and agreed with the Department of Justice to dismiss the litigation related to the proposed transaction; ALLY announces up to $1.6 billion share repurchase authorization and dividend on common stock; Jefferies upgraded MA and V (Visa) to Buy from Hold after the two companies have recently underperformed despite an accelerated shift to digital payments and also raised their price targets on Buy-rated PYPL (to $280 from $230), GPN (to $235 from $210), and FLT (to $315 from $285); BMO recommends buying auto lenders, seeing 20% upside in ALLY and 50% in SC; Truist reiterated their Buy rating on EEFT and lifted their target to $195 on better travel volume post-vaccine rollout and also raised their price target on Buy rated TREE to $350 from $340 following their report of better-than-expected preliminary Q4 results yesterday, and the stock’s pt was also raised at Bank of America to $380 from $350 but downgraded to Market Perform at Northland

Stock GAINERS

·     ACOR +49%; after enters definitive agreement with contract CTLT to sell its manufacturing facility for its Parkinson’s disease treatment Inbrija for $80 mln in cash

·     BHC +3%; said it expects its Q4 revenue will be greater than $2.20B (est. $2.12B); anticipates gull year will outperform high end of its latest revenue guidance range

·     GMLP +20%; after NFE said it would acquire $HYGO, a 50-50 joint venture between GLNG and Stonepeak Infrastructure Fund II Cayman, for $2.18 bln- under the deal, NFE will acquire all of the outstanding shares of Hygo for 31.4M shares of NFE stock and $580 mln in cash

·     INTC +8%; after CNBC’s David Faber first reported that CEO Bob Swan to step down effective February 15 and VMW’s Gelsinger to replace him (later confirmed by INTC which also said it expects to exceed Q4 EPS and rev view)

·     KBH +7%; reported Q4 EPS and sales above consensus and said it expects meaningfully higher revenue and earnings in 2021 to drive significant expansion of return on equity

·     QLI +43%; in second day of trading after doubling yesterday after 5M shares IPO priced at $5

·     REGN +2%; said the U.S. Department of Health and Human Services and the Department of Defense will purchase additional supply of the Casirivimab and Imdevimab antibody cocktail for use in non-hospitalized COVID-19 patients

·     TEF +9%; soared had agreed to sell its mobile phone masts in Europe and Latin America to AMT for 7.7 billion euros ($9.41 billion) in cash.

Stock LAGGARDS

·     BIG -9%; QTD basic comps +7.5%, reflecting double-digit comps in all merchandise categories other than Seasonal, which is down by a mid-teen percentage due to low levels of Christmas inventory in December; guides year PS $2.40-$2.50 vs. est. $3.02

·     DBX -5%; said it would reduce global workforce by 11%

·     MARA -10%; announces $250M registered direct offering

·     PRTY -6%; said Q4 prelim sales are $645M-$650M, below the $676.5M estimate and comp sales are expected to fall in the mid-single digit range, below the consensus for a 2.3% decline

·     SAM -3%; downgraded to market perform at Cowen and cuts tgt to $1,000 from $1,250 saying hard seltzer is slowing and getting more competitive

·     URBN -7%; after saying total net sales for the two months ended Dec. 31 decreased (-8.4%) from a year earlier, as its stores recorded lower traffic and expects Q4 gross profit margins to take a hit due to higher expenses from increased online sales

·     VMW -4%; after CEO left to go to INTC

Syndicate:

·     Affirm (AFRM) 24.6M share IPO priced at $49.00

·     Affimed N.V. (AFMD) 10M share Spot Secondary priced at $6.00

·     B. Riley Financial (RILY) 1.229M share Spot Secondary priced at $46.00

·     Motorsport Games (MSGM) 3M share IPO priced at $20.00

·     Zoom Video (ZM) 5.1M share Secondary priced at $340.00