Mid-Morning Look

Friday, November 19, 2021

U.S. stocks are mixed as big tech leading again, while Smallcaps and the Dow Jones Industrial Average fall amid weakness in financials (on lower yields) and energy (on plunging energy prices). Also seeing a big rotation in some sub-sectors (large cap tech still leading with the Nasdaq Comp rising to new all-time highs, topping prior record of 16,053) and Nasdaq-100 outperforming even more. “Stay-at-home” stocks seeing renewed interest (NFLX, W, ZM, etc.) with online retail, video, software names rising early amid the pullback in “reopen” related sectors (cruise, airline, hotel) amid fresh restrictions in parts of Europe to tackle a spike in COVID-19 cases – Austria will become the first country in western Europe to reimpose a full coronavirus lockdown this autumn. In Washington, the U.S. house passes President Biden’s $1.75 trillion Build Back Better Act in 220-213 vote as the bill now moves to Senate. However, Senator Joe Manchin will play a big part on the next Federal Reserve Chair and the Biden spending plan in coming days. U.S. Treasury yields tumbled (10-year approaching 1.5%) as concerns about new lockdowns related to the spread of COVID-19 in Europe increased demand for the safe-haven bonds, though gold was only modestly higher. A mixed week for stocks overall as the Russell 2000 on track for declines of -2.5%, while the Nasdaq rises 1.3%, with better economic data helping.

Sector Movers Today

·     Retailers; FL Q3 adj EPS $1.93 beat est. $1.38 on revs $2.19B vs est. $2.15B, same-store sales +2.2% vs est. +0.6%, said inventory levels are ready to meet holiday demand, but shares fell after their CFO says they expect global supply chain constraints to persist throughout Q4; FTCH delivered surprisingly soft numbers with Digital Platform GMV coming in at 23% growth vs. guidance of ~30%, while expects 4Q Digital Platform GMV to grow 18-20% y/y vs. 22-37% growth implied in prior guidance, sending shares lower; BKE Q3 EPS $1.26 vs est. $0.82 on sales $319.4M vs est. $299.1M, comp sales +27.3%; ROST Q3 EPS $1.03 vs. est. $0.78 on revs $4.6B (+19% YoY) vs. est. $4.33B, comp sales +14%, and raised full-year guidance ranges for EPS and comp sales; DDS declared a special $15 dividend, payable Dec. 15 to shareholders of record November 29; U.K. retail sales rose 0.8% in October, the first increase in six months and beat +0.5% est.

·     Pharma movers; PFE and BNTX said the FDA has expanded the emergency use authorization (EUA) of a booster dose of the Pfizer/BioNTech covid-19 vaccine to include individuals 18 years of age and older. the booster dose is to be administered at least six months after completion of the primary series; in research, BMO Capital launched coverage on the e US BioPharma sector seeing multiple avenues to outperformance across coverage universe with Outperform ratings on BIIB, BMY, GILD (upgraded to OP), VRTX and PFE; MRK said it is stopping dosing of patients in a mid-stage study evaluating a combination of its drug candidates, MK-8507 and islatravir, as a once-weekly oral treatment for HIV-1 infection

·     Software movers; WDAY volatile as Cowen noted 3Q bookings growth of 24% beat their 21% est., but upside was a little softer vs. 1H – overall, Q3 results including accelerating 24-month subscription backlog growth, subscription revenue growth, and 24-month RPO bookings growth; PANW price tgt raised by several analysts as delivered strong FQ1 results, exceeding Street expectations across all key metrics as BTIG said the biggest surprise in the quarter was product revenue, which grew 25% y/y vs. their 12% est. (Street 11%) and billings outperformed +6%; ESTC downgraded from Outperform to Neutral on valuation at SMBC Nikko; SNOW downgrade from Buy to Neutral with $370 tgt (up from $300) at Rosenblatt on valuation; ZEN extends yesterday declines after Cowen downgraded to MP from OP and cut tgt to $115 calling it a “show me” story after holding its analyst/investor day on Thursday; DDOG upgraded to Outperform at RBC Capital on increased conviction in the durability of new customer adds, the cross-sell motion of the platform, and more comfort in their pricing model that is ROI driven

Stock GAINERS

·     INTU +12%; rises after delivering revenue, operating income, and EPS that beat estimates by +11%, +51%, and +55%, respectively, including an acceleration in Online Ecosystem growth to +36% y/y vs +30% in F4Q21 – several analysts raise price tgts

·     MRNA +6%; said the FDA has extended the emergency use authorization of a booster dose of its COVID-19 vaccine to all adults aged 18 and older.

·     MU +5%; leading in the semiconductor sector following AMAT earnings/commentary – Citigroup noted expect more positive catalysts for DRAM in the coming months and are initiating a positive catalyst watch on Buy-rated Micron

·     PANW +1%; price tgt raised by several analysts as delivered strong FQ1 results, exceeding Street expectations across all key metrics as BTIG said the biggest surprise in the quarter was product revenue, which grew 25% y/y vs. their 12% est. (Street 11%)

·     UWMC +21%; after saying SFS Holding, its principal shareholder, has terminated the previously announced secondary offering of Class A Common shares and concurrent stock repurchase effective immediately

·     ZM +2%; “stay-at-home” stocks seeing some renewed interest (NFLX, W, PTON) early amid the pullback in “reopen” related sectors (cruise, airline, hotel) amid fresh restrictions in parts of Europe to tackle a spike in COVID-19 cases – Austria will become the first country in western Europe to reimpose a full coronavirus lockdown this autumn

Stock LAGGARDS

·     AMAT -4%; following its Q4 results, where it missed expectations on top and bottom lines and guided to a disappointing profit figure for the current quarter (sees Q1 EPS $1.78-$1.92, below consensus $2.01 and sees Q1 revenue approximately $6.16B plus or minus $250M vs. est. $6.5B)

·     BA -3%; after the WSJ reported the plane maker has further slowed production of 787 Dreamliners as it addresses defects that are delaying deliveries of new jets and complicating airlines’ plans

·     CCL -3%; along with declines in airlines, theme parks, hotels, leisure amid the tighter restrictions in parts of Europe amid surging Covid cases

·     FL 6%; Q3 adj EPS $1.93 beat est. $1.38 on revs $2.19B vs est. $2.15B, same-store sales +2.2% vs est. +0.6%, said inventory levels are ready to meet holiday demand, but shares fell after their CFO says they expect global supply chain constraints to persist throughout Q4

·     FTCH -14%; delivered surprisingly soft numbers with Digital Platform GMV coming in at 23% growth vs. guidance of ~30%, while expects 4Q Digital Platform GMV to grow 18-20% y/y vs. 22-37% growth implied in prior guidance

·     MRK -1%; said it is stopping dosing of patients in a mid-stage study evaluating a combination of its drug candidates, MK-8507 and islatravir, as a once-weekly oral treatment for HIV-1 infection

·     WFC -3%; along with weakness in banks (JPM, C, GS) amid the sharp drop in treasury yields (10-yr hit low below 1.52%)

Syndicate:

·     Arrival SA (ARVL) 32.374M share Secondary priced at $9.50

·     Blackstone Mortgage (BXMT) 10M share Spot Secondary priced at $31.78

·     EQT Corporation (EQT) 10.974M share Spot Secondary priced at $20.50

·     Ecovyst (ECVT) 8M share Secondary priced at $9.50

·     FinWise Bancorp (FINW) 3.5M share IPO priced at $10.50

·     GFL Environmental (GFL) 12.658M share Spot Secondary priced at $39.75

·     Kornit Digital (KRNT) 2.65M share Secondary priced at $151.00

·     Privia Health (PRVA) 6M share Secondary priced at $29.00

·     Rover Group (ROVR) 11M share Secondary priced at $10.00

·     SEMrush (SEMR) 5M share Secondary priced at $20.50

·     Snow Lake Resources (LITM) 3.2M share IPO priced at $7.50