Mid-Morning Look

Wednesday, June 09, 2021

Stocks on Wall Street open higher, with major averages again sniffing back near record highs for the S&P 500, Nasdaq Composite and Russell 2000 before paring gains ahead of key inflation data later this week. While investors await the CPI report tomorrow morning, Treasury yields are sliding to their lowest levels in over 3-months as the 10-year breaks back below 1.5%. The Nasdaq Composite on track for a 4^th straight day of gains, which would be the longest streak since early February (2/4-2/9). However, the media attention (and market for that matter), remains the power of the retail investor as the list of names grows longer for a slew of retail trader favorites amid touts for stocks on Reddit. The latest round of names seeing absurdly higher moves on mentions on the WSB/Reddit sites include WISH, AEMD, CLOV, CLNE, GEO, WEN (though many of them have reversed lower after initial spikes)…in addition to the prior so called “meme” stocks of past notoriety AMC, GME, KOSS, BBBY, and BB among them. The interest for high short interest related names has intensified the last two weeks as investors look for ideas with macro stories, earnings, the Fed stance on inflation all factored in/behind us and markets lacking market catalysts. Treasury yields still tumbling ahead of key inflation data tomorrow (CPI) as the U.S. the 30-year yield falls to 2.1483%, lowest since March 1^st, while the 10-year Yields falls 5 bps to 1.47% (if hold will be lowest levels since end of February). China May PPI +9.0% y/y vs +8.5% poll, +6.8% in April; May CPI +1.3% y/y vs +1.6% poll, +0.9% in April (May CPI highest in eight months).

Sector Movers Today

·     Auto sector; Citigroup raises estimates on GM and Ford (F), with GM target going to $90 and Ford to $17 – GM remains Top Pick with a path to >$100/share and tier-1 supplier picks = MGA and APTV and also opening a 90-day Upside Catalyst Watch on LEA shares; RIDE shares tumbled late Tuesday into today after the company amended its annual filing with a going concern notice saying its “current level of cash and cash equivalents are not sufficient to fund commercial scale production and the launch of sale” of its vehicles.

·     Chemical sector; SHW raises Q2 sales guidance and full year 2021 sales and diluted net income per share guidance; raises FY 2021 consolidated net sales guidance to be up a high-single to low-double-digit percentage over full year 2020; Goldman Sachs upgraded CC to Buy from Neutral as see substantial improvement across Chemours’ end markets and downgraded CE from Buy to Neutral, following recent outperformance (since being added to the Buy list on March 30, 2020, CE shares are up 27% vs. SPX up 13%); EMN to sell the rubber additives and other product lines and related assets and technology of the global tire additives business to One Rock Capital Partners for $800M

·     Media & Telecom movers; FOXA upgraded to overweight from Equal-weight and raise tgt to $47 from $42 at Wells Fargo; DISH downgraded to Underweight from Neutral at JPMorgan though raise price target to $45 (from $38) saying at today’s levels we believe Dish shares are fully valued; WWE shares surged on no specific news; AT won a $725M contract to modernize the data network at the U.S. Dept. of Veterans Affairs.

·     Housing, Home Furnishing, & Building Products; LOVE 1Q EPS $0.13 vs est. ($0.58) on net sales $82.9Mm vs est. $75.1Mm, total comps +48.8%, showroom comps +182.7%, internet sales -16.3%; U.S. applications for home mortgages declined last week as refinancing dropped to its lowest level since February 2020. The Mortgage Bankers Association (MBA) said its seasonally adjusted market index fell 3.1% in the week ending June 4 from a week earlier. This reflected a 5.1% decline in applications for refinancing and was 27% lower YoY; CCS estimates trimmed at Wedbush after CCS disclosed the F2Q21 monthly sales absorption through 6/8/21 was ~5.0 orders/ month versus our prior 6.1 estimate and the Thomson consensus estimate of 5.7

·     Utilities & Solar; CLNE another Reddit/WSB social media forum retail favorite as shares soar amid an increase in interest on message forums; BLDP and W. L. Gore & Associates announce an agreement to empower advancements in fuel cell technologies; FSLR to invest $680M in expanding American Solar manufacturing capacity by 3.3 GW as new manufacturing facility in Ohio will be company’s third in the United States; Citi expands expand their renewable energy coverage further into biofuels, launching on DAR with Buy, $110 TP and REGI with Buy, $90 TP

Stock GAINERS

·     AEMD +370%; after Reddit contributors discuss a June 8 report from Zacks which discusses opportunities for AEMD’s Hemopurifier

·     BIIB +2%; seeing bounce after recent Alzheimer drug approval – with biotech names in general among top gainers in the S&P early (REGN, GILD, MRK, BMY)

·     CLNE +40%; continues to attract lots of attention on WallStreetBets and disclosed in an 8-K filing that it has no current plans to implement a new at-the-market equity offering program to raise additional capital.

·     FOXA +3%; upgraded to overweight from Equal-weight and raise tgt to $47 from $42 at Wells Fargo

·     FSLR +2%; to invest $680 mln to expand its U.S. photovoltaic (PV) solar manufacturing capacity by 3.3 gigawatts (GW) annually

·     KLAC +1%; upgraded to Buy from Hold with $375 tgt at Deutsche Bank saying while headlines for semicap equipment spending have continued to improve in the past few months, KLAC’s stock price has meaningfully underperformed its large cap semicap peers

Stock LAGGARDS

·     BF -5%; slips as Q4 adj EPS of $0.25 missed the $0.33 est. amid higher expenses while revs of $812M topped the $774M estimate and forecast mid-single-digit growth in net sales and operating income in 2022.

·     CMTL 12%; posts Q3 sales just below views ($139.4M vs. est. $140.7M) and lowers FY net sales $580M-$590M from prior $610.0M-$620.0M (est. $616.4M)

·     CPB 6%; announces up to $250M share repurchase program, reported Q3 EPS 57c, missing the est. 66c on revs $1.98B that also missed est. $2B, and now sees FY adj EPS $2.90-2.93, lower than their previous range of $3.03-3.11

·     PATH -4%; shares slid despite reporting 1Q results that beat estimates, with its 2Q revenue forecast also exceeding expectations

·     RIDE -12%; shares tumbled late Tuesday into today after the company amended its annual filing with a going concern notice saying its “current level of cash and cash equivalents are not sufficient to fund commercial scale production and the launch of sale” of its vehicles.

·     UNFI -18%; posted Q3 adj EPS 94c vs est. 87c on revs $6.62B vs est. $6.79B and reaffirmed its FY adj EPS guidance range $3.05-3.55

·     WEN -9%; subsidiaries commenced a refinancing transaction, which will consist of the refinancing of a portion of their outstanding securitization debt (news follows a spike in shares yesterday after being mentioned favorably on social media forums/Reddit); WEN also downgraded to Hold from Buy at Stifel

Syndicate:

·     Marqeta (MQ) 45.5M share IPO priced at $27.00

·     Ondas Holding (ONDS) 6.4M share Spot Secondary priced at $7.00

·     Option Care Health (OPCH) 15M share Spot Secondary priced at $20.00

·     UP Fintech (TIGR) 6.5M share Secondary priced at $24.50