Mid-Morning Look

Tuesday, June 06, 2023

Another weak open for U.S. stocks, was met with another quick bounce/rally into positive territory as every pullback, no matter how slight, has been met with buying since the middle of March, as major averages look to rebound after modest weakness on Monday. No Fed speakers or economic data, and only a few earnings results as well, so no key drivers for major averages this morning. Crypto and Bitcoin grabbing all the headlines early after the SEC sued Coinbase (COIN), accusing it of illegally operating without registration with the regulator (shares fell 15%). News comes a day after the SEC filed a lawsuit against Binance and its CEO, Changpeng Zhao. The SEC said Coinbase has since at least 2019 operated as an unregistered broker by handling cryptocurrency transactions, evading the disclosure requirements meant to protect investors. After a pullback on Monday, the Russell 2000 with a big recovery early, erasing yesterday’s declines as the market continually seeing market rotation. Financials (banks), Materials, Communications were early S&P leaders while Staples and Healthcare declined. Treasury yields and the dollar rebound with the 10-year back above 3.73% and the 2-yr at 4.53%.

Sector Movers Today

·     In Bitcoin/Payments: COIN shares tumbled after the SEC sued the company claiming alleging operation as unregistered securities exchange, broker, clearing agency and that Coinbase failed to register offer, sale of crypto asset staking-as-a-service program; shares of Bitcoin slipped as did securities leveraged to crypto MARA, RIOT, BTBT, MSTR.

·     In Healthcare Tech (HCIT)/Services: GEHC files to sell 25M shares of common stock for holders; HQY reported a top- and bottom-line beat and raised both its FY24 revenue and adj. EBITDA guidance with cash higher-than-expected, driven by better custodial revenue (9% above consensus) off higher-than-expected cash yields. IOSCR upgraded to Neutral from Underperform at Bank America as see an increasing visibility in the path to removing the financing overhang.

·     In Metals: TECK said it is pursuing a separation of its base metals and steelmaking coal businesses. Teck’s Board of Directors and independent Special Committee, with the support of their financial and legal advisors, will continue to consider and evaluate all actionable. In Research, RBC Capital upgraded VALE from Sector Perform to Outperform, Anglo American (NGLOY) upgraded to Outperform from Sector Perform noting shares are down 37% over the past year, creating an attractive valuation.

·     In Retail Apparel: CHS reported mixed quarterly earnings and guidance; GIII reports Q1 net sales $595M above $584.3M est. and an adj. EPS profit vs. estimate of a loss and said now expects fiscal 2024 net sales of ~$3.29B vs its prior projection of ~$3.23B on better earnings outlook; JOAN 1Q adj EPS ($0.93) vs est. ($0.66), adj EBITDA $3.5Mm vs est. $9.878Mm on revs $478.1Mm vs est. $480.61Mm, gr mgn 52.1%; guides FY net sales -1% to -4% vs est. -1.74%.

Stock GAINERS

·     CXM +7%; reported better-than-expected F1Q24 results, with non-GAAP EPS of $0.06 above consensus $0.01; non-GAAP operating margin of 6.0% down from 8.7% in F4Q; revs of $173M +20% y/y vs. est. $169M (but a deceleration from 22% last quarter).

·     GTLB +23%; as reported a strong 1Q as revs grew 45%, above Street at 35%, and FY24 rev growth guide rose from 26% to 28% and guided for a smaller EPS loss for year.

·     HOLI +8%; gains amid report of management-led buyout talks https://tinyurl.com/yuxtbdsv

·     HQY +11%; reported a top- and bottom-line beat and raised both its FY24 revenue and adj. EBITDA guidance with cash higher-than-expected, driven by better custodial revenue.

·     MTB +3%; after filing last night showed CFO Bible buys $10K in shares valued at $1.2MM.

·     THO +12%; Q3 EPS $2.24 tops est. $1.07 on better Q3 revs $2.93B vs. est. $2.83B and raises low end of FY23 EPS view to $5.80-$6.50 from $5.50-$6.50 (est. $5.64) and narrows its FY23 revenue view to $10.5B-$11B from $10.5B-$11.5B (est. $11.03B).

Stock LAGGARDS

·     ASO ; Q1 EPS and sales missed consensus ($1.30/$1.38B vs. est. $1.66/$1.44B) and lowered FY profit and net sales forecast on slumping demand and high costs of production; 2023 adjusted EPS view $6.80-$7.50 down from $7.00-$7.75 on weaker comp sales.

·     CBRL -2%; Q3 adj EPS $1.21 below consensus $1.34 and weaker revs $832.7M vs. consensus $846M; said Q3 comp store restaurant sales increased 7.4%, while comparable store retail sales decreased -4.6%; said casual dining traffic declined at end of Q3.

·     CIEN -10%; reported a top and bottom-line beat for Q2 results and said expects to repurchase $250M shares this FY while narrows FY22 rev growth view to 18%-22% from prior 20%-22% while affirms GM guidance of 42%-44%.

·     COIN -13%; after the SEC sued the company claiming alleging operation as unregistered securities exchange, broker, clearing agency and that Coinbase failed to register offer, sale of crypto asset staking-as-a-service program.

·     NVRO -16%; after lowering its revenue guidance for Q2’23 to $106M-$108M from $110M-$112M and announcing a new CCO yesterday after the close.

Syndicate:

·     Cadre (CDRE) 1.5M share Spot Secondary priced at $19.00.

·     Celestica (CLS) 12M share Spot Secondary priced at $12.40.

·     Blue Bird (BLBD) announces offering of 5M shares of common stock for holders.

·     Corebridge (CBRG) announces offering of 65M shares of common stock for holders (AIG).

·     GE HealthCare (GEHC) announces offering of 25M shares of common stock for holders.

·     Mobileye (MBLY) announces offering of 35M shares of Class A common stock for holders.

·     Ryman Hospitality (RHP) files to sell 3.5M shares stock.

·     Skyward Specialty (SKWD) files to sell 3.85M shares of common stock for holders.

·     Smart for Life (SMFL) files to sell 7.94M shares of common stock for holders.

·     WeWork (WE) files to sell 90.76M shares of Class A common stock for holders.