Mid-Morning Look

Wednesday, May 08, 2024

U.S. stocks open Tuesday lower after trading in a narrow 10-point range overnight as investors digest a flurry of earnings results. Attention remains on earnings until key inflation data mid-next week with April producer prices (PPI) on Tuesday and Consumer prices (CPI) on Wednesday 5/15. Note the S&P 500 managed to eke out a small win on Tuesday, extending its winning streak to 4-days amid a good start to May, while the Nasdaq dipped, snapping its 3-day win streak but the Nasdaq remains an early month-to-date winner up around 4%. Oil prices fell on Wednesday as industry data showed a rise in crude and fuel inventories in the U.S. and as the U.S. dollar strengthened, signaling that demand for oil is coming under pressure. Tensions in the Middle East remain in focus, with the US pausing a shipment of bombs to Israel over concerns about a potential military offensive on the Gazan city of Rafah. Treasury yields inched higher, and the US dollar rose for a 3^rd day as limited data and Fed speakers keep markets in tight range. Some big movers to the upside and downside on earnings moving several sectors (see details below).

• U.S. MBA Market Index for May 3 Week +2.6% at 197.1; Prev Week 192.10; US MBA Purchase Index for May 3 Week +1.8% at 144.2; Prev Week 141.70; US MBA Refinance Index for May 3 Week +4.5% at 477.5; Prev Week 456.9.

• In FinTech/Payments: UPST shares decline after Q1 adj EBITDA loss down -35% y/y to $20.3M and said sees Q2 revenue of about $125M vs. est. $140.8M; for the second half expects revenue from fees about $300M. AFRM reported better Q3 EPS and revs (rose 51% y/y to $576.2M vs. est. $548M while guides Q4 revs $585M-$605M vs. est. $569M as op mgn rises 14%. NVEI was downgraded from Overweight to Neutral at JP Morgan. FLYW shares as Q1 results better but guidance weak as guides Q2 revs $99.0M-$108.0M, below est. $107.4M and adj EBITDA $1M to $4M below est. $4.6M.
• In Food & Beverages: SAM was upgraded from Sell to Hold at Deutsche Bank saying based on recent trends, remains cautious fundamentally heading into the peak summer selling season but sees more balanced long-term risk/reward; BUD 1Q profit beat brings a positive read across the sector and benefits beer peers as showed a margin beat supported by the benefits of a more positive commodity backdrop and operating leverage. GO shares tumbled as Q1 EPS missed and lowered FY24 adjusted EPS view to $0.89-$0.95 from prior $1.14-$1.20 and revs $4.3B-$4.35B vs. est. $4.34B.
• In Software: CFLT forecast FY2024 adj. net income and revenue above Street’s expectations; TWLO Q1 earnings topped expectations by $0.20 and beat revenue estimates but offered disappointing Q2 revs of $1.05B-$1.06B below est. $1.08B; ZI shares fell after forecasting revenue and profit in the current quarter that trailed Wall Street’s expectations; TOST shares rise after its results/guidance. QLYS reported mostly in-line quarterly results while guided 2Q to $147.5-$149.5M below street expectations for $150M and EPS is expected to be in the range of $1.27-$1.35; cuts full year guide to $601.5-$608.5M, down from prior guidance of $600M-$610M. EA said Q4 revenue of $1.67B on a bookings basis trailed consensus estimate of $1.77B while guided Q1 bookings $1.15B-$1.25B vs. est. $1.44B and FY25 bookings between $7.30B-$7.70B vs ests of $7.76B.

• BROS +13%; jumps on Q1 results as Q1 Adj. EPS of $0.09 was above consensus of $0.02 on system SSS growth of 10.0% and company owned SSS growth of 10.9% (vs. consensus of 3.8% and 3.8%, respectively).
• CFLT +7%; delivered strong Q1/24 results relative to expectations highlighted by a 2.6% revenue beat as management increased the CY/24 revenue guide by slightly more than the beat, Confluent Cloud outperformance.
• CRUS +8%; after posted strong FQ4 (Mar) results and FQ1 (Jun) guidance, which were solidly above expectations; sees Q2 revenue $290M-$350M vs. consensus $302.7M and guides Q2 GAAP gross margin is forecasted to be between 49%-51%.
• LPX +15%; after Q1 adj. EPS of $1.53 topped consensus of $1.12 while net sales rose by 24% to $724M and raised its full year forecast for consolidated adj. core profit to the range of $655M-$685M from earlier view $495M-$525M.
• MYGN +16%; Q1 revenue and EBITDA both topped analysts’ consensus estimates, saying the quarter saw early indications of market share gains in hereditary cancer and prenatal testing.
• PWSC +20%; after the WSJ reported Bain pursues takeover of the education-software provider which could be valued at around $6B including debt https://tinyurl.com/3akzjvnm
• RDDT +2%; after its first quarter out of the gates, beat expectations across users, revenue growth and margins, while Q2 revenue growth guidance of 35% at the midpoint, is down sequentially, but 13% ahead of consensus.
• WWW +11%; shares rise following Q1 top and bottom-line beat (sales fell -34% y/y to $395M but ahead of ests $361M).

• DV -38%; shares dropped in AdTech sector after cutting its year forecast, prompting at least two analyst downgrades; PUBM shares bounced however as Q1 results beat on top and bottom line; shares of competitor IAS declined in reaction to the DV guidance (IAS reports on May 9^th).
• INSP -26%; shares fell after results; RBC Capital noted co delivered a Q1 beat that was modest on sales but substantial on EPS while raising FY24 guide by 100bps to 25-27% y/y to be realized in 2H’24 (said stock trading down substantially due to a modest U.S. Q1 miss even though INSP called out enhanced seasonality).
• INTC -2%; forecasts Q2 revs below midpoint of $12.5B-$13.5B, vs. est. $13.0B, while for the full year, continues to expect revenue and earnings per share to grow year-over-year compared to 2023.
• MTCH -6%; shares dropped initially after guides Q2 revs $850-860Mm vs est. $882Mm and sees FY revs near low end +6-9% vs est. 6.96% (its 11-1-23 low of $27.85 after initial gap down).
• SHLS -12%; missed Q1 and guided down 2024 due to more project pushouts since last earnings call 10 weeks ago.
• SHOP -19%; reported Q1 top and bottom-line results ahead of estimates ($0.20/$1.9B vs. $0.17/$1.64B), but shares fell after saying gross margins would decrease by about -50bps vs. Q1 due to the sale of its logistics business and said revs will also be impacted and is expected to grow in the “low-to-mid-twenties” on a percentage basis.
• TRIP -29%; shares fell after results and saying its "Special Committee has determined that at this time, there is no transaction with a third party that is in the best interests of the Company and its stockholders.
• TSLA -3%; after Reuters reported U.S. prosecutors are examining whether Tesla committed securities or wire fraud by misleading investors and consumers about its electric vehicles’ self-driving capabilities.
• UBER -6%; declined following its results and guidance as Q1 gross bookings $37.65B, missed est. $37.97B and forecasts Q2 gross bookings $38.75B to $40.25B, below consensus est. $40.04B.
• UPST -9%; shares decline after Q1 adj EBITDA loss down -35% y/y to $20.3M and said sees Q2 revenue of about $125M vs. est. $140.8M; for the second half expects revenue from fees about $300M.