Mid-Morning Look

Wednesday, May 10, 2023

U.S. stocks strong out of the gate, getting a boost after the year over year consumer prices (CPI) comes in at up 4.9%, below 5.0% expected, while month over month was up 0.4%, in-line with expectations and the core CPI both M/M and Y/Y were exactly in-line with consensus views. The in-line inflation reading keeps market hopes alive for a Fed “pause” of interest rates at the June and July meeting for the time being (and fed fund futures still forecasting at least 2-rate cuts by end of 2023). Market breadth early positive as advancers outpace decliners more than two to one as Technology a leader along with Consumer Discretionary, and defensive Utilities, while Energy standout decliner. The Nasdaq Composite hit its highest level since August of 2022 (12,322.38). The U.S. dollar continues slide following the CPI data earlier and Treasury yields also tumble on bets the Fed is done raising rates. The CBOE Volatility index (VIX) drops over 7% to around 16.40 (May low stands at 15.53 on 5/1) as investors are showing less and less fear in markets. While markets are higher early following the inflation report, still a PPI inflation report tomorrow morning, Bank of England policy meeting tomorrow (25-bps hike expected) and looming larger the U.S. federal government’s $31.4 trillion debt ceiling – as a failure to raise the limit would result in a federal debt default. White House and GOP members spoke last night.

Economic Data

·     The Consumer Price Index (CPI) data mostly in-line across the board for the month: Headline M/M for April reported in-line up +0.4% vs. est. +0.4% (prior +0.1%); Consumer Price Index (CPI) Headline Y/Y for April rose +4.9% vs. est. +5.0% (prior +5.0%). On CPI Core, Ex; Food & Energy M/M for April rose in-line +0.4% vs. est. +0.4% (prior +0.4%) and CPI Core, Ex: Food & Energy Y/Y for April also in-line at +5.5% vs. est. +5.5% (prior +5.6%)

Sector Movers Today

·     Autos: Used car prices (KMX, CVNA) were showing meaningful progress in coming down from pandemic highs. That changed in April. The index for used cars and trucks rose 4.4% from March, the first monthly increase in nearly a year and the largest jump since mid-2021. BLNK reiterated ’23 revenue guidance and 30% gross margins for the year, despite lower 1Q gross margins on weaker industry seasonality and overstock issues with contract manufacturers. CARG posted better than expected 1Q results and 2Q guidance. CARG’s foundational Marketplace Subscription business drove higher revenue per dealer. LI Q2 revs topped consensus and guided tear revs and deliveries above consensus. RIVN reported a smaller-than-expected Q1 loss and reaffirmed its annual production plans; MarQ top line at $661M, having delivered ~7.9k vehicles versus 10.4k produced. TM said it would invest an additional Yen1 trillion, equivalent to $7.4 billion, in EVs through 2030, bringing Toyota’s total planned outlays for the period to around $37 billion.

·     Software: TWLO tumbles as beat consensus 1Q23 revenue/EPS estimates by +.3%/$.26, but guided 2Q23 revenue growth to slow to 4% y/y. RNG 1Q23 results beat lowered revenue expectations but delivered impressive OM expansion (+680bp y/y) and FCF. EA reported a top- and bottom-line beat vs. guidance consensus but the company left FY24 expectations unchanged. AMPL downgraded by two analysts (Piper, William Blair) as see a challenging year ahead for renewals, down sell, and churn with no meaningful catalysts to offset these headwinds. RPD delivered solid quarter, beating on revenue / pro forma EPS, with ARR growth in line, while modestly raising guidance; provided no comment on strategic alternatives. QTWO reported upbeat 1Q23 results, with both revenue and EBITDA coming in above expectations. TOST reported strong 1Q results, beating expectations on the top and bottom line as the demand for modern restaurant software and payments solutions continues to grow and raised guidance.

Stock GAINERS

·     AKAM +8%; as Q1 results topped expectations and gave a full-year forecast that is ahead of consensus views; CDN beat, Compute was inline, & Security missed.

·     CELH +18%; traded all-time highs after posts revenue and EBITDA beat in 1Q23.

·     CTIC +85%; after agreeing to be acquired for about $1.7 billion by Swedish Orphan Biovitrum, which said it would pay $9.10 a share in cash for CTI, a roughly 89% premium to Tuesday’s closing price for the Seattle company. https://on.mktw.net/3B9VBmh

·     DUOL +6%; delivered a beat and raise across all key metrics as Needham notes the co accelerates in three key areas: efficacy, engagement, & monetization.

·     EXAS +9%; easily exceeded expectations in 1Q and raised guidance by more than the beat.

·     FRG +2%; to be acquired by a Consortium Led by Management Group with stockholders to receive $30.00 per share in cash, in a deal valued at $2.6B. https://on.mktw.net/42KZj19

·     NERV +10%; after FDA accepted marketing application for its experimental drug, roluperidone, to treat negative symptoms of schizophrenia.

·     RIVN +11%; reported a smaller-than-expected Q1 loss and reaffirmed its annual production plans; MarQ top line at $661M, having delivered ~7.9k vehicles versus 10.4k produced.

·     RNG +10%; 1Q23 results beat lowered revenue expectations but delivered impressive OM expansion (+680bp y/y) and FCF.

·     SYNH +8%; to be acquired by a private investment consortium for approximately $7.1B as holders to receive $43 per share (follows a Bloomberg report last night) https://on.mktw.net/3BdOOb7

·     UPST +35%; after earnings better but also said secured long-term funding agreements that could deliver $2 billion to the Upstart platform over the next 12 months.

Stock LAGGARDS

·     ABNB -10%; delivered 1Q nights below the Street and 2Q outlook now suggests that nights grow only between 10-14% y/y next quarter, below the ~19% y/y growth expected for the FY.

·     BROS -6%; downgraded at JPMorgan and TDCowen after results as thinks revenues are likely to miss reiterated guidance that it expects to ultimately be lowered.

·     COHR -9%; as Q3 adj EPS $0.58 well below the $0.82 estimate and revs $1.24B misses consensus $1.34B; guides Q4 EPS $0.33-$0.43 vs. est. $0.87 and revs $1.125B-$1.175B vs. est. $1.34B and guides year revs $5.08B-$5.15B, consensus $5.4B.

·     CUTR -18%; after CFO resigns, Q1 revs fell -5.2% y/y to $55.0M vs. est. $60.6M and reports Q1 adj EBITDA -$14.5M.

·     IEP -6%; after Q1 surprise EPS loss (-$0.11) v. est. $0.19 as revenue fell -35% y/y to $2.64B.

·     MODG -16%; topped expectations for Q1 as revs rose 12% to $1.17B above the $1.14B estimate but guided year EPS $0.63-$0.69 from prior $0.70-$0.78 range.

·     OXY -2%; reported a 48% decline in Q1 earnings as EPS of $1.09 missed the $1.24 consensus expectations as realized prices for oil fell to $74.22/barrel vs $91.91/barrel a year earlier.

·     ROK -2%; after the WSJ reported the co is being probed by the U.S. over whether the company is exposing critical U.S. infrastructure, military, and other government assets to a potentially serious cyberattack through one of its China-based facilities, https://on.wsj.com/3pra62v

·     TEVA -8%; posted a drop in Q1 profit that fell way short of estimates as EPS of $0.40 missed the $0.56 estimate and down from $0.55 y/y and revs of $3.7B compared to est. $3.63B saying sales were hurt to rising costs due to inflationary and other macro pressures.

·     TWLO -14%; beat consensus 1Q23 revenue/EPS estimates by +.3%/$.26, but guided 2Q23 revenue growth to slow to 4% y/y.