Closing Recap

Wednesday, August 07, 2024

Big reversal day lower for stocks, finishing at the lows! U.S. stock markets opened higher, held gains the first two hours in what appeared to be another strong day for U.S. stocks as all eleven S&P sectors were in the green, but once major averages couldn’t trade above recent resistance levels, the wheels came off and sellers appeared, pushing averages lower. With today’s selloff, the S&P 500 index (SPX) moved back below its 100-day moving average support, with the 200-day within striking distance, while the same can be said of the Nasdaq 100 and Russell 2000 index as well. The Nasdaq with a near 500-point reversal from highs to lows and the S&P about -125 points from peak to bottom, as risk assets were sold with Bitcoin erasing early gains and technology (XLK) sector going from +2.3% this morning leading, to down over -1%. It wasn’t Fed speakers, or economic data, not further unwind of the yen/dollar carry trade, no Wall Street market calls…just an old-fashioned broad-based mkt sell-off. The yen dropped -2.5% to session low of 147.94 before paring losses after an influential Bank of Japan official played down the chances of a near-term rate hike. In stocks news semiconductors remain a key area in tech with SMCI tumbling about 20% after results disappoint (and impacted AI related plays DELL, VRT, ARM, etc.), DIS slips on theme park weakness, LYFT drops on guidance, the travel/lodging space has seen a consistent flow of negative commentary/weak RevPAR guidance in recent weeks with ABNB joining the ranks of BKNG, HLT, MAR. On the positive side, FTNT shares jumped on results, as did SHOP in retail, taser maker AXON and UPST in FinTech. Earnings season is beginning to wind down, but still a couple more full days of results, including LLY tomorrow morning.

• In Food & Beverage: GO reported solid Q224 results and broadly maintained its 2024 guidance—lower comp but unchanged sales (slightly higher store growth) and profits. CART reported solid 2Q results with GTV upside driven by sequential growth of average order value (AOV). 3Q guidance was also above expectations, while management stated it assumes a modest order contribution from restaurants; EBITA guidance also above views. TAP downgrade Buy to Hold and lowering PT to $58 from $68 after results at TD Cowen.
• In Restaurants: JACK Q3 print was below expectations as an increasingly challenged lower-income consumer drove a comp miss and guide down for FY24 across both brands, though EBITDA came in ahead on better cost controls.

• In Housing Services: RDFN Q2 sales and AEBITDA were ahead of views while F3Q24’s guidance was generally below consensus as current sales activity showed a small pickup with 30-year mortgage rates dipping below 6.5%

• In Lodging: HLT reported Q2 adj EPS $1.91 topping ests while cuts the higher end of FY RevPAR to be 3% from prior expectation of 4%; raised lower end of FY EPS forecast to be $6.93 vs prior forecast of $6.89.
• In Autos: RIVN shares fall early as posted results that came in just above the top line estimate while seeing a miss on Adj. EBITDA vs. expectations; maintained full year guidance; announced technology JV With Volkswagen Group with a total deal size of up to $5B; ended the Q2 with $5.8B in cash and cash equivalents vs. $7.9B at the end of calendar year 2023. TRUE was upgraded to Buy from Neutral at BTIG
• In Travel & Online: ABNB shares fall on weak results as missed Q2 nights, guided to a Q3 deceleration, guides Q3 revenue $3.67B-$3.73B, consensus $3.84B; Q2 gross booking value $21.2B vs estimate $21.3B. TRIP was downgraded to Neutral at B Riley after earnings as cut reflects a deterioration in Core (I.E., Brand Tripadvisor) revenue growth and margins, implied in management’s outlook.

• In Energy: DVN delivered a second consecutive beat/raise quarter in 2Q24 driven by stronger oil and total volumes, better oil and NGL realizations and lower LOE. SU was upgraded to Outperform from MP at BMO Capital after Suncor reported much better-than-expected Q2/24 financial and operating results as the company completed its heavy turnaround activities ahead of schedule. PR delivered a 2Q24 beat, driven by stronger gas/NGL volumes and better realizations and raised FY24 standalone production guidance 1.3% at the midpoint.

• In FinTech/Payments: UPST shares bounce after guides Q3 revenue of approximately $150M topping ests $138.7M while Q2 revenue also beat estimates, adj. loss per share narrower-than-expected amid improvements in business coming from significant advances in AI model. GPN beats Q2 adjusted profit estimates with EPS at $2.93 vs. est. $2.90 helped by strong consumer spending and revs climbed 5.5% to $2.32B; TOST also a mover on earnings.

• AMGN was downgraded to Equal Weight with $335 tgt at Wells Fargo after earnings as thinks the Street is already giving them near full credit for MariTide success, making unattractive risk/reward into the year-end Ph2 data. AMGN Q2 results were mixed and raised lower end of year outlook.
• GTHX entered into a definitive merger agreement under which Pharmacosmos A/S, through its U.S. subsidiary Pharmacosmos Therapeutics Inc., will acquire all outstanding shares of G1 Therapeutics common stock for U.S. $7.15 per share in cash for a total equity value of approximately $405 million.
• ILMN reported core Q2 revenue of $1.09B vs consensus of $1.08B with margins posting a significant beat driving EPS of $1.09; core GMs were 69.4% vs cons 65.1% and core OPMs were ~22.2%, above guidance of 18% consensus of 17.9%; expects for Q3 ~$1.08B in core revenue at the midpoint and ~20% core OPMs.
• LGND reported Q2/24 total revenues of $41.5MM that were ~26% ahead of FactSet consensus ($33.0MM); Q2/24 revenues were aided by $10.1MM in milestone payments ($5.8MM earned upon FDA approval of Ohtuvayre.
• MDGL Q1 Rezdiffra sales were $14.6M (above $4.6m cons, though approx. in line with buyside whisper).
• NVO reported 2Q24 sales of DKK 68,060mn, broadly in line with company-compiled consensus, but NVO announced a 19% miss to Wegovy US cons revenue – Ozempic US revenues of ~DKK 19.5B were ~2% above consensus (per Visible Alpha (VA)) of ~DKK 19.0B, while Wegovy US revenues of ~ DKK 9.9B missed VA cons of ~DKK 12.2B by ~19%

• In Medical Devices: NVRO downgraded by several firms, sending shares tumbling after delivered a Q2’24 miss on sales while EPS beat, and FY24 revenue guidance was lowered by 8.5% at the midpoint to down 5-6% y/y or $400-405MM. Management called out softness in the U.S. SCS market.
• In Medical Research: CRL shares tumble as now expects adj. profit for 2024 to be $9.90-$10.20 down from prior forecast of $10.90–$11.40 per share and forecasts annual revenues to decline 2.5% to 4.5%, compared with previous expectation of a 1% to 4% revenue growth which reflects the lack of a recovery in demand; SWTX reported a significant beat on 2Q24 product revs of $40.2M vs. est. $33.6M and introduced 150 mg and 100 mg tablets in blister packaging to enhance patient convenience and improve visibility on dosing/compliance behavior
• In Medical Equipment: MASI announced Q2 revenue of $496M that was consistent with the company’s preliminary release in July, while gross margin percentage and adjusted EPS details revealed an easy beat vs. Street and management’s prior guidance.
• In Healthcare Services: PGNY shares stumble as reported an in-line quarter, with utilization (female only) of 0.47% that was up from 0.46% in 1Q and lowered its full-year guidance to reflect a "lesser-than-historical rate of increase in revenue per utilizing member given the variation we’re presently seeing." (downgraded by three analysts). PETQ surges as Consumer health-focused private equity firm Bansk Group will acquire PETQ for about $1.5 billion in cash; paying $31 for each PETQ share held, a 50% premium.

• In Industrials: ROK cuts FY24 adjusted EPS view to $9.60 from $10.00-$11.00 (est. $10.11) and lowers FY24 revenue view to down 8.5% from down 4%-6% saying they expect continued sequential order growth in the fourth quarter and into our next fiscal year, but at a more gradual pace than we originally expected.
• In Shipping: Maersk (AMBKY CEO said U.S. inventories “are not at a level that is worrisome or that seems to indicate a significant slowdown right in the offing,” he told CNBC, as fears of a recession in the world’s largest economy mount.

• In Internet: IAC and ANGI 2Q results showed better than expected revenue and EBITDA across key segments. Keybanc noted importantly, Dotdash Meredith (DDM) does not appear to be facing traffic headwinds from Google’s AI Overviews and the Digital business is reaccelerating revenue growth with healthy incremental margins.

• In IT Services/Consulting: CTSH upgraded to Neutral from Underperform at Bank America given mgmt’s progress in rehabilitating CTSH’s competitive profile/culture and notes CTSH has begun to materially close the revenue growth Gap vs the Indian IT Services comp group.
• In Data Center/AI: VRT was upgraded to Outperform at Mizuho following three factors; 1) operational footing has firmed with FCF higher, leverage lower (now ~1.8x vs ~5.6x in Q122), and loans repriced, 2) order expectations have been reset, and 3) stock looks attractively valued on a variety of metrics.
• In Internet Security: FTNT reported a solid 2Q for billings amid negative investor sentiment. 2Q billings slightly beat consensus by $20M/1% vs. an $18M/1% miss last quarter. Gross and operating margins beat significantly, and 2024 billings guide maintained; QLYS delivered mixed results combining in-line revenue and better than expected profitability with billings that missed expectations and declined 2% y/y; billings weakness combined with a still uneven macro led to lowered revenue guidance.

• CRUS posted strong F1Q (Jun) results and F2Q (Sep) guidance, which were solidly above expectations. Upside in the quarter was attributed to strong iPhone 15 demand, while guidance reflects the ramp of the new iPhone 16.
• ENTG enters into a long-term supply agreement with ON as Entegris will provide onSemi a broad range of co-optimized chemical mechanical planarization (CMP) solutions for silicon carbide (SiC) applications.
• INTC: Reuters notes Intel had been in talks for up to 30% stake in OpenAI and passed on a $1B investment in the co. in 2018.