Closing Recap

Friday, August 09, 2024

Stocks bounced this afternoon, erasing Monday’s entire rout as stocks closed mixed for the week! After all the volatility this week, including the massive drawdown on Monday after falling last Thursday/Friday, and then two big-bounce-back days, (8/6, and biggest day of the year +2.3% on 8/8) the S&P 500 finished flat on the week around 5,344. Today saw lots of market chop, before Bulls put in a late afternoon rally that pared weekly losses for major averages. There was strength in energy markets today as WTI crude settles +0.9% at $76.84 a barrel, and Brent rises 0.6% to $79.66 as the benchmarks close the week up 4.5% and 3.7%, respectively (rose a fourth straight session and post their first weekly gain in five weeks). Volatility has been increased over the last few weeks, with big swings daily as Bespoke Invest tweets: “Coming into today, the Nasdaq 100 has seen a 1% move (up or down) for 8 straight trading days. Think that’s long? Back in 2001 we had a 29-day streak of 1%+ moves.” There was not much volatility today, with major averages holding afternoon gains into the weekend. Small caps remained down on the day, falling over 1% for the week. The NYSE breadth was nearly flat on Friday despite nine of eleven S&P sectors being higher. For the week, the S&P 500 fell 0.04%, the Nasdaq declined 0.18%, and the Dow shed 0.6%.

• China’s PPI inflation remained at -0.8% YoY. Weaker consumer spending, however, saw muted passthrough despite higher factory gate prices. The prolonged destocking and extreme weather conditions dampened construction activity and weighed on prices of steel and cement.

• December gold rises $10.10 or 0.41% to settle at $2,473.40 an ounce. Corn prices fell 0.19% to $3.96-1/2 a bushel after earlier equaling a near four-year low of $3.95 first set last week; wheat rose 1.4% to $5.45 a bushel and was on track to gain for the week, and soybeans were down 0.1% at $10.06-1/4 a bushel in choppy trading all ahead of Monday WASDE crop report

• In Restaurants & Food: INGR was upgraded to Overweight from EW at Barclays and raise tgt to $145 from $122 following strong results and a guidance raise; SG shares jumped as raised ’24 revenue guidance to $670- 680MM (from $660-675MM) and comp store sales guidance to 5-7% (from 4-6%) largely reflect Q2 upside. PBPB expanding margins drove the bottom-line outperformance despite a difficult consumer environment.
• In Retail: BURL upgraded from Hold to Buy at TD Cowen and raised tgt to $279 from $257 saying recent field work gives US confidence in its above consensus SSS and EPS estimates into FY25E and beyond. CPRI followed other luxury retailers lower with a big Q1 miss as sales declines steepened despite easier comparisons (sales -13% in Q125 vs -8% in Q424) and EPS were $0.04 vs consensus of $0.60.

• In Leisure: EB downgraded from Overweight to Sector Weight as KEYB’s thesis on monetization and margin inflection has changed. Eventbrite acknowledged it pushed too hard with its monetization strategy and is shifting back to having a free tier to recapture lost creators (EB shares also downgraded to Neutral/Hold at Truist and Piper too).
• In Lodging: HGV was downgraded to Hold from Buy at Jefferies with a price target of $35, down from $55 following the Q2 miss, and guidance responds to the deceleration in timeshare demand in June, as well as the restructuring of the sales force both of which impact visibility.
• In Autos: auto supplier AXL shares rose after Q2 EPS $0.19 topped consensus $0.11 (on better sales $1.63B) and boosted its FY adj Ebitda outlook to $705m-$755M from prior view $685M-$750M.

• In Energy: BE reported 2Q where revenue exceeded our estimates, but product margins came in below expectations, pointing to a ramp in 2H as the Company maintained 2024E guidance; BRY mixed results as Q2 EPS $0.18 vs. est. $0.20. Revenue came in light at $169mn vs. cons $187.4mn and adj EBITDA in line at $74mn vs. cons $74.2mn. Baker Hughes (BKR) said U.S. energy firms this week added oil and natural gas rigs for the third time in four weeks, as the oil and gas rig count, an early indicator of future output, rose by two to 588 in the week to Aug. 9.
• Oil Drillers: Barclay’s recaps sector results saying the message from Q2 EPS was clear. Deepwater rig demand will likely hold steady through mid-’25, keeping dayrates at/near current levels until LT programs begin in 2H and into 2026. Barclays lowered ’24/’25 ests and tgt for VAL (RIG PT maintained) but still see significant upside from current levels.

• In FinTech: SYF and BFH both upgraded to Buy from Neutral at Bank America and both assigned a $54 price target driven by improving credit and less late fee rule pressure saying analysis suggests the current credit cycle has peaked and losses will be lower prospectively. The delay in implementing the late fee also provides nice upside optionality. PYPL was upgraded to Outperform from Neutral at Daiwa and raised tgt to $72 from $68 saying some of the company’s initiatives are "quickly generating visible results," such as improving profitability for Braintree.

• ANTX shares plunged after saying late yesterday it will stop mid-stage and late-stage portions of the trial testing its experimental lung disease drug, epetraborole.
• GILD beat Q2 profit estimates, driven by lower operating expenses and higher product sales, and the drugmaker raises its outlook for full-year earnings; posts higher-than-expected Biktarvy/Yescarta sales and lower OpEx.
• IOVA forecast FY 2024 total product revenue between $160M-$165M topping ests of $150M while guiding overall Q3 revs above views and said had cash, cash equivalents, investments $449.6M above $346.30M end of December.
• ITRM says the FDA announces September 9, 2024, Meeting of the Antimicrobial Drugs Advisory Committee; to discuss NDA for oral sulopenem etzadroxil/probenecid tablets for treatment of uncomplicated urinary tract infections.
• MRK to acquire investigational B-cell depletion therapy CN201 from Curon Biopharmaceutical for upfront payment of $700M in cash, plus earnouts of up to $600M
• RNA said its RNA-based drug produced 25% of normal dystrophin in patients with Duchenne muscular dystrophy caused by a mutation in exon 44.

• In Medical Equipment: FIGS beat on rev. and adj. EBITDA; raised FY rev. guide mid-point, lowered mid-point of EBITDA; noted U.S. growth inflected to positive +1% y/y, driven by positive y/y frequency trends during Q2. EVH shares jumped on a better than feared print, with a $11M beat on 2Q revs and FY24 revs rose by $15M or more than the magnitude of the 2Q upside; though lowered FY24 EBITDA by $13M.
• In Insulin space: PODD shares fell; raised 2024 revenue forecast late driven by strong sales of its insulin delivery devices branded as Omnipod, but shares fell after saying it expects a "less steep ramp" of new customer to start in H2 2024, driven partly by the overall market reduction in competitive switching.

• In Paper & Packaging: KRT downgraded to Hold from Buy at Truist after results as 2Q24 adj. EBITDA miss driven by sales, gross margins and operating expenses, and firm sees continued risk to expectations given macro demand pressures, continued product price declines, execution risk, freight rate volatility. SEE was downgraded to Hold from Buy at Jefferies and cut tgt to $35 from $47 saying the consumer weakening & secular headwinds in Protective gaining momentum, volume declines are accelerating & expected to decline again in 2025.

• In Media: PARA Q2 results were mixed as revenue missed expectations with lower affiliate/licensing revenue, while adj. EBITDA beat expectations driven by DTC. With the Skydance merger a likely scenario, PARA said strategy is to reduce costs, improve the profitability of DTC, and optimize asset mix, referring to asset sales.  SATS shares fell after Q2 net loss of $205.6M compared to profit of $212.7M y/y and revs $3.95B down from $4.36B y/y.
• In Online Services: NRDY reported in-line 2Q24 results across revenue and EBITDA, but 3Q guidance came in below consensus, and the company lowered full-year guidance meaningfully

• Cloud Software: FIVN shares fell as reported solid Q2 results, delivering an $8M revenue beat (roughly in line with Q1) and announced the acquisition of Acqueon but lowered its full-year revenue growth guidance to 11.5% Y/Y (from 16% Y/Y previously), with the largest driver being a new bookings shortfall (fewer $1M+ ARR deals in Q2).
• In Video Game: TTWO reported Q1:F25 bookings around the midpoint of guidance, with all parts of the business performing roughly as expected. FY25 bookings and adj. EBIT guidance was reiterated; expressed continued confidence in the progress being made on the content pipeline, with seven immersive core titles still on tap for this FY. Unity Software (U) reported a mostly in-line quarter, with revenue in line with guidance and expectations and EBITDA above expectations, but Q3:24 guidance was introduced and FY:24 guidance was lowered.
• In Storage: DBX reported generally better-than-expected Q224 results with EPS of $0.60 (consensus $0.52), on revenue of $635M (consensus $630M), up 2% y/y, down from 3% growth last quarter; ARR of 2.57B (consensus $2.53B), up 3% y/y; Paying users of 18.22M (consensus 18.19M), up 60K sequentially, but expected to moderate in 2H.
• IT Services & Consulting: FSLY disclosed restructuring plan to reduce expenses, including an 11% headcount reduction of full-time employees after results/guidance disappoint. AKAM was upgraded to Buy at Craig-Hallum after earnings results and guidance and on expected organic growth acceleration. CSCO to announce job cuts as early as next Wednesday, Reuters reported.

• SYNA posted strong FQ4 results, which were above and guided FQ1 Sep) results slightly lower (revs/GM were below, while EPS was above as upside in FQ4 was driven by Enterprise, as PC grew q/q, while video interface also improved; also noted that Enterprise/Auto inventories have largely normalized, but end-demand continues to be muted.
• TSM July revenue jumped 44.7% to T$256,953M($7.94B) from a year earlier; last month, TSMC raised its FY revenue forecast given surging demand for chips used in artificial intelligence.