Mid-Morning Look

Friday, May 07, 2021

U.S. stock markets surge with the S&P 500, Dow Jones Industrials and Transports all touching record highs despite the surprisingly weaker (and lower revisions) monthly jobs data, while the technology heavy Nasdaq outperforms after recent underperformance and decline in Treasury yields. The downbeat jobs report eased valuation concerns, while boosted expectations the Fed will stay at ultra-low rates and loose policy for longer and longer. The Labor Department’s employment report showed U.S. employers hired far fewer workers than expected in April, with nonfarm payrolls increasing by only 266,000 jobs last month after rising by 770,000 in March and well below the 983,000 est. The unemployment rate increases to 6.1% from 6.0% and falls short of the 5.8% consensus. Coming into today, the Nasdaq Composite was on track for a -2.3% decline, which would be its worst weekly decline since late February but is up over 1% today. The debate in the market today remains: is the weak jobs report a function of extended unemployment benefits from the gov’t keeping would be workers at home earnings more than they would a lower paying job, or is it a function of fear of the virus? The softer job report sent Treasury and gold prices markedly higher (10-year yield plunged to lows of 1.47% initially but has since pared those losses back at 1.545). A strong quarter of earnings is starting wind down, with over 400 companies in the S&P having reported thus far, with an EPS beat rate around 85%.

Economic Data

·     Monthly Jobs data much weaker than expected: Nonfarm payrolls for April rose 266K vs. est. 978K (revisions – March +770,000 (previous +916,000), February +536,000 (previous +468,000); private payrolls rose 218K vs. est. 893K, and manufacturing payrolls rose fell -16K vs. est. 55k; the unemployment rate rose to 6.1% vs. est. 5.8%

·     U.S. March wholesale sales +4.6% vs. est. +1%; vs. Feb unchanged (previous -0.8%); March wholesale inventories revised to +1.3% vs. est. 1.4%

Sector Movers Today

·     Software movers; DDOG topped Q1 estimates and raised its full-year forecast while saying customers with $100K+ ARR totaled 1,437 compared to 960 a year ago; NET rises after posting strong Q1 revenue and sales guidance (Q1 sales up 51% to $138.1M) with Q2 $143.5M-$146.5M vs. est. $138.8M; RPD Q1 ARR growth accelerated to 30% Y/Y and meaningfully exceeded the Street’s ~25% forecast while raised its 2021E outlook for ARR and revenue; PCTY reported FQ3 results in line with consensus on revenue and nicely ahead on EPS, with FQ4 guidance above expectations; CSOD exceeded total revenue expectations by delivering higher-than-expected professional revenue (beat by $3.6M), but beat only slightly on subscription revenue (by $1.5M) and guided Q2 revenue below consensus while raising 2021 guidance by $2M; APPN shares slide after eps miss and sees FY21 EPS (68c)-(65c) below consensus (59c)

·     Media movers; ROKU Q1 earnings showed yet another revenue beat and gross profit that more than doubled (revs rose 79% to $574.2M vs. est. $491M) and guided Q2 revs $610M-$620M vs. est. $546M – did note a slowdown in active accounts, which grew just 35% YoY to 53.6M; IAC reported a rev beat for qtr of $876M vs. est. $842M; NWSA revenue rises 3% to $2.34 bln, above analysts’ estimate of $2.2 bln, and says Wall Street Journal’s digital-only subscriptions jumped 29% to 2.63 mln average subscriptions in Q3, and represented 78% of its total subscriptions; VIAC upgraded by two analysts today (Wells Fargo and RBC); DISCA upgraded to Equal-weight at Barclay’s as believe this risk reward is adequately balanced from a valuation perspective; GCI Q1 revenue falls 18.1% to $777.1M missing the $791.7M estimate as same store sales decreased 16.5% due to unfavorable impacts and net loss for the quarter widened to $142.3M

·     Restaurants; SHAK mixed Q1 as margin miss despite comp sales growth upside as adj. EPS of $0.04 was above ($0.03) consensus on comp sales growth of +5.7% vs -0.5% consensus; EAT was upgraded to Overweight at JPMorgan with an unchanged $78 target following recent pull back; WING downgraded to neutral at Northcoast; CHUY 1Q EPS of $0.42 exceeded consensus by $0.21 largely owing to stronger comps and margins. AUVs relative to 2019 improved exiting the quarter to an ~4% decline and accelerated further to near flat vs. 2019 in April.

·     Consumer Staples; BYND slides after missing on top and bottom line (Q1 adj EPS loss (42c) vs. est. loss (19c); Q1 revs $108.2M below est. $113.67M); MNST reported 1Q21 pro forma EPS of $0.59 (+14% YoY), which was below consensus of $0.61 driven by weaker-than-expected profit margins, which were partially offset by higher-than-expected net sales growth; SFM reported a strong quarter, with continued improvements in traffic towards the end of 1Q and going into 2Q. E-commerce sales continue to grow at a robust pace and now represent 12.5% of company sales; BRBR Beat and raise, sales a little better, GM a little worse, guides net sales growth of +18% to +21% vs. prior +8% to +13

·     Casinos, Gaming, Lodging & Leisure sector; DKNG raises 2021 revenue guidance; sees FY revenue $1.05B-$1.15B from $900M-$1b prior after q1 revs of $312M tops the $236.1M est.; said monthly unique payers for B2c segment increased 114% compared to q1 of 2020; on average; PLNT memberships in 1Q grew by 600K from 4Q while EPS missed by 8c; AGS upgraded to Buy from Hold as Q1 EBITDA handily beat our/Street estimates by +22%/+24%; CNK Q1 revenue tops estimates, but posts wider-than-expected loss per share, while AMC posts weaker quarterly revs but co expects business to improve in coming months

Stock GAINERS

·     DDOG +9%; reported strong 1Q21 results as revenue and EPS were well above consensus and FY21 revenue guidance was materially ahead. Strength in the quarter was driven by continued new logo momentum

·     ET +4%; Q1 adj EBITDA nearly doubled from a year ago to $5.04B and easily tops $2.72B analyst consensus estimate and now expects to realize a $2.4B total impact from the Texas winter storm

·     EXPE +6%; tgt raised by several analysts after co reported a stronger-than-expected Q1, with significant outperformance across bookings, revenue, and EBITDA

·     GRPN +7%; posted stronger-than-expected revenue and also raised its full-year 2021 guidance to $950M-$990M from $930M-$980M (also boosted year Ebitda);

·     PTON +9%; bounces after strong earnings results, recovering off recent recall as posts record quarterly revenue of $1.26B, topping estimates, while did not offer an outlook for the year

·     ROKU +16%; posts Q1 profit of 54c, compared to (45c) loss a year ago, and revs rose 79% to $574.2M topping the $492M estimate with much higher Q2 rev outlook

·     SQ +7%; after reporting better-than-expected quarterly profit, as surging demand for bitcoin fueled a jump in cryptocurrency transactions on its application

·     TLRY +6%; double upgraded to Buy from Underperform with $23 tgt at Jefferies saying when Aphria and Tilray combined, it was the perfect match

Stock LAGGARDS

·     APPN -14%; shares slide after eps miss and sees FY21 EPS (68c)-(65c) below consensus (59c)

·     BYND -3%; after missing on top and bottom line (Q1 adj EPS loss (42c) vs. est. loss (19c); Q1 revs $108.2M below est. $113.67M)

·     CCXI -60%; FDA panel voted 10-8 that the drug’s safety profile was adequate for approval and that its benefits outweigh risks; but experts’ vote was split 9-9 on whether the efficacy data was adequate for approval

·     GCI -12%; Q1 revenue falls 18.1% to $777.1M missing the $791.7M estimate as same store sales decreased 16.5% due to unfavorable impacts and net loss for the quarter widened to $142.3M

·     MNST -5%; reported 1Q21 pro forma EPS of $0.59 (+14% YoY), which was below consensus of $0.61 driven by weaker-than-expected profit margins

·     STMP -3%; did not provide 2021 guidance due to uncertainties related to the pandemic and ecommerce outlook, but reiterated a 20%+ increase in investment-related expenses.