Mid-Morning Look

Wednesday, September 09, 2020

U.S. stocks with a nice partial recovery after three days of selling pressure, as the Nasdaq rises nearly 2% after falling about 10% from its record highs last week on valuation concerns/profit taking, while the S&P 500 and Dow also strong gains early. Dow transports higher on better package delivery, trucker moves offsetting weakness in airlines after several company updates (UAL, AAL, DAL). Asian markets dropped overnight, but U.S. future strength carried over into the morning trading session with many tech names recovering following their steep declines the last 3-days. Oil gained after falling over 7% on Tuesday given slowing demand fears while gold edges higher. Britain unveils details for post-EU which sunk the British Pound initially before recovering. More weakness in mainland China likely tied to the amped rhetoric by Trump to de-couple from U.S. on Monday. Further fiscal stimulus for the U.S. economy has concerned analysts and investors in recent weeks. Senate Republicans proposed a new, smaller package of coronavirus aid Tuesday aimed at unifying the party and bolstering it politically, as talks with Democrats remained at a standstill. Semiconductors helping the Nasdaq after a positive preannouncement from QRVO overnight boosts the sector.

Sector Movers Today

·     Transports; strong move early for the space as strength in truckers and package delivery (FDX, UPS) help offset weakness in airlines early (UAL, LUV, JBLU); FDX tgt raised at Argus ($250) and JPMorgan ($265) ahead of earnings next week; in airlines, UAL lowers Q3 passenger revenue down approx. 85% vs. previous 83% view; DAL said it sees no meaningful recovery in demand; HA said it expects capacity for Q3 to be down 87% from the same period a year ago, which is slightly lower than previous forecasts; AAL president says seeing gradual improvement in bookings, and hopefully, it’s sustainable, it’s still too soon to tell – says Q4 flight capacity to be down more than 50%, still preparing for a slow recovery

·     Healthcare services and providers; CHNG increased it F2Q21 guidance, now expecting solutions revenue of $690M to $710M (from $670M to $690M), adj EBITDA of $200M to $215M (from $180M to $190M) and adj better EPS citing slightly higher than expected healthcare utilization trends; SDC upgraded to peer perform at Wolfe noting it has been the worst performing stock in our coverage since COVID concerns hit the market in late January, -23% vs. Dental -3%; BDX new head-to-head study demonstrates equivalency and accuracy of covid-19 rapid point-of-care tests, despite different test sensitivity claims; PHR reported revenue and adjusted EBITDA above consensus estimates while continues to refrain from providing F21 guidance; HQY reported above-consensus F2Q results, and offered F21 guidance that was mixed in nature

·     Restaurants; TRXH indicate comp sales growth trending slightly above full quarter expectations; maintain relatively conservative near-term margin assumptions; Cowen said on the group checks at DNKN, JACK suggest that sales are mostly improving from June through August, leading them to view most concepts as tracking in-line to ahead of 3q consensus comp estimates

·     Leisure and Gaming; casino and gaming stocks continue to push with JPMorgan adjusting tgt prices, bumping up BYD to $40 (up from $30), PENN to $62 (up from $48), RRR to $21 (up from $17), LVS to $57 (up from $53), WYNN to $101 (up from $98), MGM to $23 (up from $17), and CZR to $55 (up from $50), reflecting higher multiples on LV Strip and Macau EBITDAR streams while also ascribe sports betting/iGaming valuations

Stock GAINERS

·     BNTX +4%; the European Commission said it had entered final stage talks with BNTX to purchase up to 300 mln doses of a potential vaccine against COVID-19

·     CHNG +3%; increased it F2Q21 guidance, now expecting solutions revenue of $690M to $710M (from $670M to $690M), adj EBITDA of $200M to $215M (from $180M to $190M) citing slightly higher than expected healthcare utilization trends

·     ITCI +64%; reports positive topline results from its late-stage clinical trial evaluating lumateperone to treat patients with major depressive episodes associated with bipolar disorder, saying a single daily dose met the main goal and had favorable safety and tolerability profiles

·     NLS +4%; positive call from Citron Research calling it the fastest growing name in home fitness with a $30 price target saying the company has found a new life under former MSFT executive Jim Barr and is about to blow out its earnings

·     QRVO +8%; positively preannounced September quarter results citing better than expected demand for its 4G/5G mobile products

·     TRIL +33%; announced updated data from its ongoing TTI-622 and TTI-621 dose escalation studies and also agreed to sell 2.29M shares of stock at a price of $10.88 to PFE

·     WTRE +31%; as a consortium led by insurer ACGL has made an approximately $500 million offer to acquire reinsurance firm WTRE, Reuters reported https://reut.rs/35qRqUa

Stock LAGGARDS

·     AZN -2%; paused its Phase III study of a potential coronavirus vaccine due to a “suspected serious adverse reaction” of a participant in the UK

·     LULU -8%; posted Q2 revenue and earnings ahead of estimates, led by e-commerce (+157% YoY in 2Q; +70% in 1Q), driving positive YoY revenue growth (vs. our -HSD% estimate) despite store closures, while talked down 2H store assumptions

·     NAV 2%; reported a top and bottom line quarterly miss

·     TIF -9%; after luxury-goods giant LVMH said it was backing out of its $16.2B takeover of Tiffany & Co., claiming that both the U.S. jewelry company and the French government asked it to delay the acquisition beyond the closing date allowed by the merger agreement

·     UAL -2%; lowers Q3 passenger revenue down approx. 85% vs. previous 83% view

·     WORK -15%; after Q2 calculated billings miss of $218.2M, an increase of 25% YoY but fell short of the $226M consensus views, while Q3 EPS guidance also fell short of consensus, prompting many analysts to lower tgt prices