Mid-Morning Look

Wednesday, June 30, 2021

Stocks are mixed as they close out a strong first half that has seen the Dow and Nasdaq rise more than 12% and the S&P jump more than 14%. The Nasdaq has been red all morning after setting new all-time highs in 5 of the last 6 sessions heading into today, and the S&P has been unable to break $4,300 and extend its streak of days with intraday records to 5. Energy stocks are outperforming after yesterday’s larger-than-expected drop in crude inventories triggered a rally in oil prices. Today includes a busy slate of IPOs, with DIDI leading the charge as the biggest IPO of the year so far, raising $4.4B after upsizing its offering yesterday. LegalZoom, SentinelOne, and Clear Secure are also among companies scheduled to make their debut today. Economic data was also strong as ADP’s private payrolls showed an increase of almost 700,000 jobs in June, well above the consensus expectations of a 600,000 increase. Additionally, the National Association of Realtors’ Pending Home Sales for May were astonishingly strong and the strongest reading for the month in 16 years, as pending home sales jumped 8% in May from April and more than 13% vs May 2020, despite expectations that pending home sales would slip from April’s levels.

Economic Data

·     ADP Employment change reported at +692k for June, above est. 600k, and issued downwards revision for May to +886k from +978k

·     U.S. May Pending Home Sales index +8.0 pct (consensus -0.8 pct) to 114.7, +13.1% vs May 2020. This is the highest home sales data for May since 2005.

·     US Chicago PMI Actual 66.1 (Forecast 70, Previous 75.2)

·     US EIA Crude Oil Inventories Actual -6.718M (Forecast -3.85M, Previous -7.614M)

Sector Movers Today

·     Retailers; BBBY reported Q1 adj EPS 5c vs est. 9c on net sales $1.95B vs est. $1.87B, total enterprise comp sales growth +3% vs 1Q19, sees Q2 adj EPS 48-55c that sandwiches est. 52c, Q2 net sales $2.04-2.08B above est. $2B, guides FY adj EPS $1.46-1.55 vs est. $1.46, and raises views for Q2-Q4 comp sales growth to low-single digits from flat, and full-year views for net sales to $8.2-8.4B (est. $8.13B) from $8-8.2B and adj EBITDA to $520-540M from $500-525M; BNED Q4 EPS ($0.86) vs est. ($0.57) on sales $222.8M vs est. $230.5M, retail comp sales -6.9%;

·     Pharma and Biotech movers; CERE filed for an offering of 14M shares; TST acquired iGenomX, an NGS library preparation maker, for $35M; HC Wainwright initiated REGN at Buy with a $703 as shares have underperformed the XBI over the past year and 2 years and they see Dupixent achieving mega-blockbuster status with sales above $10B; ALT discontinued development of AdCovid, its intranasal Covid vaccine candidate, after its Phase 1 trial did not stimulate an adequate immune response in healthy volunteers, though Guggenheim made the stocks its Best Idea in biotech despite the trial miss as they believe the company has significant upside with its Alt-801 for NASH/obesity; CDMO Q3 revs $27.6M vs est. $21.6M, guides FY22 revs $115-117Mm vs est. $112.2Mm; AVAV Q4 adj EPS $1.04 vs est $0.81 on revs $136M vs est $147.2M, FY revs guidance $560-580M was in-line with est $571.5M; Mizuho initiated Buy ratings on CABA ($22 pt), ELOX ($3.10 pt), and ARQT ($58 pt);

·     Metals & Materials; MP initiated at Outperform with a $45 PT at Baird who says the stock deserves a premium to peers given its unique asset in Mountain Pass, non-China status, and sustainable business practices; BMO upgraded BHP to Outperform as they see an attractive entry point for a high-quality stock that should be trading at a premium to its peers with a near-term 8% dividend yield and also upgraded NSTYY to Outperform as they see the 34% decline since its October IPO (vs GDX -11%) as overdone given its rare combination of size and organic production growth, in exclusively tier-one jurisdictions; Citi expects strong earnings in 2Q and even stronger earnings in 3Q for fertilizer names as realized prices follow spot pricing by roughly 60 days (urea prices up ~90% YTD, DAP up ~50%, potash up ~40%), initiated a pair trade of CTVA over FMC and ranked fertilizers NTR, CF, MOS

Stock GAINERS

·     BBBY +22%; Q1 adj EPS 5c vs est. 9c on net sales $1.95B vs est. $1.87B, total enterprise comp sales growth +3% vs 1Q19, sees Q2 adj EPS 48-55c (est. 52c), net sales $2.04-2.08B (est. $2B), guides FY adj EPS $1.46-1.55 vs est. $1.46, raises views for Q2-Q4 comp sales growth to low-single digits from flat, and full-year views for net sales to $8.2-8.4B (est. $8.13B) from $8-8.2B and adj EBITDA to $520-540M from $500-525M

·     AMD +4%; up for the 6^th time in 7 days after receiving unconditional EU merger approval to buy XLNX

·     POWW +10%; Q4 adj EPS 4c vs est. (1c) on sales $24.2M vs est. $23.95M

·     OCUP +36%; Ocuphire’s VEGA-1 Phase 2 trial in Presbyopia met primary and secondary endpoints

·     DARE +16%; Roth raised price target to $11, said DARE-HRT1 could be a blockbuster opportunity given up to ~18M women were being treated with HRT in 2007, prior to published concerns around HRT, and the number of women on HRT are once again rising given novel options

Stock LAGGARDS

·     SPCE -6%; Bank of America double-downgraded to Underperform from Buy

·     ALT -35%; discontinued development of AdCovid, its intranasal Covid vaccine candidate, after its Phase 1 trial did not stimulate an adequate immune response in healthy volunteers

·     QUMU -24%; preliminary Q2 revs $5.7-5.9M missed est. $6.57M

·     APP -5%; Morgan Stanley double-downgraded to UW from OW on valuation – APP has risen 57% in the past ~2 months following 1Q results; now sees 18% downside to unchanged $68 sum-of-the-parts based PT

Syndicate:

·     Aerovate Therapeutics (AVTE) 8.682M share IPO priced at $14

·     Clear Secure (YOU) 13.2M share IPO priced at $31

·     CVRx, Inc. (CVRX) 6.25M share IPO price range $15-$17

·     Didi Global (DIDI) 316M share ADS priced at $14

·     Intapp, Inc. (INTA) 10.5M share IPO priced at $26

·     LegalZoom.com, Inc. (LZ) 19.1M share IPO priced at $28

·     SentinelOne, Inc. (S) 35M share IPO priced at $35

·     Xometry, Inc. (XMTR) 6.875M share IPO priced at $44

·     Integral Ad Science (IAS) 15m share IPO priced at $18

·     Intellia Therapeutics (NTLA) 4.14M share Secondary priced at $145.00

·     Pop Culture Group (CPOP) 6.20M share offering priced at $6.00

·     electroCore (ECOR) 18M share offering priced at $1.00

·     Cadiz (CDZI) 2M share offering priced at IPO price of $25.00

·     Xpeng (XPEV) final offer prices for both international offering and Hong Kong public offering set at hk$165.00 per offer share