Mid-Morning Look

Tuesday, November 10, 2020

U.S. stocks giving up some of Monday gains in the S&P 500 and Dow, while the tech heavy Nasdaq Composite underperforms for a second straight day in a bout of profit taking as investors rotate into reopen related trades (travel, leisure, consumer and energy) and out of the pandemic stay at home tech related winners following news yesterday of a potential vaccine treatment proving effective to fight Covid. U.S. regulators also authorized emergency use of the first experimental antibody drug for COVID-19 developed by LLY. Major averages all touched fresh intraday record highs on Monday (Dow, S&P, Nasdaq and Transports), but failed to hold. Gold regained some lost ground after a sharp fall of nearly 5% in the previous session as concerns over global economic recovery and expectations of further fiscal and monetary stimulus offered support to the safe-haven metal. The dollar was steady and the yen stayed low, as investors remained optimistic about progress towards a COVID-19 vaccine after PFE and BNTX yesterday said a large-scale clinical trial showed their vaccine was more than 90% effective in preventing COVID-19. Treasury prices are also steady after sliding yesterday, pushing yields to their highest levels in several months with the 10-yr at 0.95%, while oil prices rebound on hopes for a bump in demand. U.S. businesses face “a couple of difficult quarters” and the “jury is out” on Q4 growth due to the resurgence of COVID-19, Dallas Fed President Robert Kaplan said during a virtual 2020 event.

Sector Movers Today

·     Software movers; ADBE agreed to acquire Workfront for $1.5B; ZI Q3 beats and an upside full-year forecast as Q3 revenue rose 56% Y/Y to $123.4M beating estimates and guided Q4 revenue of $465-467M above prior $451-455M vs. est. $454.09M; TTWO confirmed it’s made a proposal to acquire UK-based Codemasters Group Holdings at 485 pence/share in cash and stock; RNG reported strong Q3 results and higher 2020 financial targets as Q3 showed business acceleration, very solid bookings growth, and record profit margins for a 3Q; CYBR slides as mixed Q3 and guide as the shift to bookings mix shift toward high-value recurring subscriptions created a headwind with billings weaker in the Quarter

·     Aerospace & Defense; BA rises as FAA says it could soon unground the Boeing 737 MAX. Administrator Steve Dickson says that the review of proposed design changes could be “finished in the coming days; JPMorgan upgraded RTX to overweight and SPR in the aerospace sector (also raised tgts on BA, HWM and TDG) saying the stocks seem more poised to price in potential goodness before it fully arrives while looking through near-term badness; AER said it had cancelled nine more orders for the grounded BA 737 MAX aircraft, but gave an upbeat assessment of the “steady recovery” in air travel that it believes will provide opportunities

·     Consumer Staples; BYND shares tumble after posting an unexpected Q3 loss on weaker sales of $94.4M, missing the $132.8M estimate and said due to covid-19 pandemic, company continues to experience a meaningful slowdown in its foodservice business; KHC 29.2M share Block Trade priced at $30.38; HAIN reported better than expected F1Q results with both sales and EBITDA above consensus and reaffirmed gross and adjusted EBITDA margin expansion view for 2021; in the food sector, BMO Capital upgraded shares of SYY, PFGC, CHEF, USFD to outperform as positive vaccine news makes the path to upside scenarios much more clear as it enables investors to look beyond what could still be a challenging next few months

·     Retailers; NLS posted Q3 EPS 87c on revs $155M, both topping ests. (32c on $115.7M) and guides FY20 revs $540-565M, also topping estimate ($448.6M); REAL Q3 adj EPS loss (41c), wider than est. (38c) loss, on revs $78.1M, beating est. $76.7M; Bank of America reiterates TJX as a Buy saying that channel checks points to the store being well positioned for a 2H recovery, downgrades RL to Neutral from Buy as its sales recovery is being slowed by strategic actions, and upgrades LEVI to Buy with a higher $20 pt (from $18), and also names LEVI as a brand that is relevant to younger consumers along with LULU, TPR; ULTA announced a partnership with TGT to provide shop-in-shop experiences starting next year at more than 100 Target locations; CSPR announced a partnership with JWN to sell their mattresses and accessories online and at select locations; PTON announces a multi-year partnership with Beyonce to provide content for classes

Stock GAINERS

·     ALT +12%; said it has entered into an agreement with Switzerland-based Lonza Group for the manufacturing of its potential COVID-19 vaccine, AdCOVID

·     BA +5%; as FAA says it could soon unground the Boeing 737 MAX. Administrator Steve Dickson says that the review of proposed design changes could be “finished in the coming days

·     FLGT +12%; 3Q20 results blew through consensus as per Oppenheimer, including revenue of $101.7M that exceeded our estimate of $53.5M driven by COVID-19 testing

·     LLY +3%; said the FDA authorized emergency use of its experimental COVID-19 antibody treatment bamlanivimab based on clinical trials

·     ULTA +6%; announced it’s partnered with TGT to bring its cosmetics to the big box retailer, as the latter adds to its roster of popular consumer brands.

·     XPER +24%; shares rose after its Q3 earnings were in conjunction with news of a new 15-year patent license deal between its TiVo unit and CMCSA

Stock LAGGARDS

·     AMZN -3%; slips as the EU files formal charges against amazon for alleged anticompetitive business practices based on vendor data as EU could impose fine of up to 10% of amazon global revenue in decision next year

·     ARNA -25%; announced 3Q earnings and topline atopic derm data from Phase 2 ADVISE, which did not meet the primary endpoint due to dose interruptions but were stat sig on the Phase 3 primary endpoint

·     BYND -21%; after posting an unexpected Q3 loss on weaker sales of $94.4M, missing the $132.8M estimate and said due to covid-19 pandemic, company continues to experience a meaningful slowdown in its foodservice business

·     CCL -5%; profit taking after filed to sell $1.5B worth of shares after rally yesterday on vaccine

·     CYBR -5%; slides as mixed Q3 and guide as the shift to bookings mix shift toward high-value recurring subscriptions created a headwind with billings weaker in the Quarter

·     JMIA -22%; Q3 rev EUR 33.7M misses est. EUR37.6M and Q3 GMV fell -28% YoY to EUR 187.3M, though its quarterly operating loss (EUR 28M) was -49% YoY and the lowest in three years;

·     NBIX -14%; as Ingrezza 3Q sales of $254MM came in well below consensus ($272MM), and reflect substantial pandemic-related challenges

·     SUPN -10%; received a Refusal to File letter from the FDA regarding its NDA for SPN-830 for the continuous treatment of motor fluctuations in Parkinson’s disease

·     TLRY 8%; Q3 sales came in 5% below FactSet consensus, but profit margins were better, and guidance for break-even EBITDA for the Dec qtr was reaffirmed