Closing Recap

Friday, February 05, 2021

Equity Market Recap

·     It was a big week for global stock markets, jumping after last week losses as the Nasdaq Comp, Russell 2000 and benchmark S&P 500 hit new highs again. Stronger-than-expected corporate results in Q4, better economic data, stimulus hopes and the longstanding buy-the-dip mentality coming out of the prior week selloff kept stocks rising. The S&P and Dow each extended their winning streaks to 5-days as all eleven S&P sectors were in the green, led by energy as oil prices set fresh-one-year highs on continued bets of an improving economic recovery. The BLS reported that the nonfarm payrolls rose as expected. Helping sentiment overnight, the Senate voted 51-50, after Kamala Harris broke her first tie, to adopt a budget blueprint for President Biden’s $1.9 trillion stimulus after amendments from both parties. In vaccine news, JNJ submitted its vaccine candidate to the FDA for emergency use authorization with a meeting scheduled for Feb 26. Longer-term U.S. Treasury yields rose after U.S. jobs rebounded less than forecast in January, bolstering hopes Congress will approve the $1.9 trillion COVID-19 relief package. Gold rose as the dollar retreated slightly (snapping the buck 5-day win streak) as investors will continue to bet on the buck with Treasury yields rising. In Europe, the broad STOXX 600 posted its best weekly performance since Nov, rising 3.5%. Volatility has fallen off a cliff after jumping last week, but biggest risks seem to revolve around upward pressure on rates (Treasury yields hit one-year highs), new virus mutations, a resurgence of the dollar (3-month highs) and continued pockets of market exuberance (after the recent short interest “meme” squeeze and Bitcoin speculation).

Economic Data

·     Nonfarm payrolls for January rose +49K vs. +50K consensus, while prior month revised to -227K from -140K; private payrolls rose +6K below the 50K est. (prior revised to -204K from -95K) and manufacturing jobs fell -10K vs. est. +30K (prior month revised to -23k from -45K); the unemployment rate dropped to 6.3% vs. 6.7% consensus and prior as labor participation rate to 61.4% from 61.5% prior; average hourly earnings rose 0.2% vs. est. 0.3%

·     December Trade in Goods and Services reported at (-$66.6B) vs. (-$65.80B) consensus and (-$69.0B) prior as exports were $190.0B and Imports $256.6B

Commodities

·     Oil prices close out a strong week, as WTI rose 62c or 1.1% to settle at $56.85 (rising a 5^th straight session and highest since Jan 2020), while Brent edged closer to the $60 mark, rising 50c or 0.85% to settle at $59.34 per barrel. For the week, WTI crude rose around 9%, supported by improving economic recovery hopes, as output cuts by OPEC+ continued to feed expectations for tighter global crude supplies, and general buying optimism for riskier assets. OPEC+ has pledged to keep draining a virus-driven surplus as inventories from China to the U.S. shrink. The total Baker Hughes (BKR) weekly rig count added another 8 to 392 as drilling rigs targeting crude oil gained 4 to 299 in the count’s 11th ninth consecutive increase, while gas rigs also added 4 to 92.

·     Gold rebounded above the $1,800 psychological level on Friday, as April god rises $21.80 or 1.2% to settle at $1,813.00 an on ounce, helped by a retreat in the dollar. For the week, gold posted a 2% loss (as the dollar advanced until today), its biggest weekly decline in a month. Silver futures gained $0.79 or 3% to settle at $27.019 an ounce, edging up about 0.4% in what was a volatile week of trading. U.S. employment growth rebounded moderately in January and job losses in the prior month were deeper than initially thought.

·     The U.S. dollar snapped its 5-day winning streak, as the dollar index fell from three-month highs above 91.50 (rising as much as 200 bps YTD), as the euro edged back above the 1.20 level after dipping below this week for the first time since December 1^st. Today was probably more a bout of profit taking in the buck, as economic was generally better on the week, helping boost its appeal. A rise in Treasury yields also helped the dollar, as the 10-year yield hit a new 2021 highs above 1.18% today before pulling back while the 30-year hit 1-year highs this week above 1.9%.

Sector News Breakdown

Consumer

·     Apparel & Footwear Retailers; COLM 4Q results exceeded expectations and the FY21 outlook topped consensus views; FL upgrade from Neutral to Buy with $60 tgt at Citi as believe it a good way to play the economic recovery in F21 as a cheap name within the athletic footwear market; DECK Q3 EPS $8.99 vs. consensus $7.14 and revenue $1.08B vs. consensus $963.5M as margins 57.0% vs consensus 54.6%; not providing GY21 guidance; SKX Q4 EPS 34c vs. est. 30c; Q4 sales $1.32B vs. est. $1.31B; not providing guidance/qtrly china sales grew 29.7% year-over-year

·     Non-apparel retail; GPRO shares slide after Q4 revs dip ~32% to $357.8M, missing the $373.6M consensus estimate while guided next quarter above views for EPS and revs; PTON Q2 sales, earnings and subscribers beat expectations as revs rose 128% to $1,065M, and Connected Fitness subscribers was 1.667M, up 134% YoY, but forecast Q3 core earnings below estimates; LESL reit Overweight rating at Piper and raise our PT to $33 following a solid FQ1 beat and raised guidance; GME trading volatility continued, rebounding from big drop this week as Robinhood lifted all the buying curbs imposed this week due to extreme volatility

·     Auto sector; Ford (F) posted a sizable EPS beat of 34c vs. est. 7c while increases commitments to invest in growth to more than $22B in EVs, $7B in AVs; Lucid Motors CEO said he can neither confirm nor deny speculation about going public through a SPAC deal with CCIV, he said in CNBC interview with David Faber; SBE, the acquirer of ChargePoint (CHPT, pending) at Buy with a $46 target at Roth saying ChargePoint’s 73% share in networked Level 2 EV charging stations is a good indictor the company should remain a long-term leader in the rapidly expanding EV charging infrastructure market; Lakestreet raising PT to $19 on HYRE following the Amer Drive car supply partnership and 25.9M capital raise which priced yesterday

·     Housing & Building Products; CCS upgraded to outperform from neutral and raising our PT to $64 from $48 at Wedbush saying Q4 gross margin was 290bp ahead of our expectation, and this improvement should carry into FY21; Keybanc raises estimates on HD, LOW, HOME where the data and our channel checks are supportive of notably stronger results than the Street is modeling

·     Consumer Staples; EL reports surprise rise in Q2 sales ($4.85B vs. est. $4.49B), benefiting from strong demand for its premium skin-care products in China along with big EPS beat ($2.61 vs. $1.69); also says plans to resume share buybacks in 2H’21; BRBR shares edge higher on Q1 EPS/sales beat and reaffirms year rev and Ebitda guidance; POST with top and bottom line beat on weaker margins while reaffirms year Ebitda along with $400M buyback

·     Leisure and Gaming; WYNN reported Q4 ad EPS loss ($2.45) vs est. loss ($2.31) on revs $686M vs est. $722.3M, which was a 58.5% YoY decline, including a 65.4% decrease in rev from Macau and a 53.2% decrease in Las Vegas rev, though Bernstein notes that January and forward bookings are showing improvement; WWE Q4 adj EPS 24c on revs $238.2M vs est. ($245.7M) and sees 2021 adj OIBDA $270-305M, which would be 15-20% without Covid, and also expect a significant increase in expense base as employees return from furlough though they do not reinstate quarterly guidance

Energy

·     Energy stock movers; CVX, who owns roughly 62.5% of midstream infrastructure company NBLX said it made a nonbinding proposal to acquire the rest in a stock swap, offering to exchange $12.47 of stock for each remaining unit, https://on.mktw.net/3jhyf4k; CMS was upgraded to Outperform from Neutral at Credit Suisse; NOV posted Q4 EPS loss (90c) was wider than est. loss (19c) on revs $1.33B vs est. $1.34B, quarterly new orders booked +27% to $215M, and backlog for capital equipment orders for completion & production solutions at Dec 31, 2020 was $696M; CN Energy (CNEY) 5M share IPO priced at $4.00; DSS 12.3M share Secondary priced at $2.80; NOG 12.5M share Secondary priced at $9.75; TOT acquired a development pipeline of 2.2GW solar projects and 600MW of battery storage assets in Texas from SunChase Power; EQNR said it discovered oil and gas in the North Sea near Norway’s Troll field and expects it to contain between 44069M Boe; the total Baker Hughes (BKR) weekly rig count added another 8 to 392 as drilling rigs targeting crude oil gained 4 to 299 in the count’s 11th ninth consecutive increase, while gas rigs also added 4 to 92.

Financials

·     Bank movers; SBNY 3.5M share Spot Secondary priced at $178.00; in insurance, PRU reported $2.93 as earnings beat came from outperformance of $0.51 in Retirement, $0.19 in PGIM, $0.15 in International & $0.08 in Individual Life while also announced a $1.5 billion share repurchase program for 2021 & a dividend boost; in consumer finance, FLT shares slipped as sees FY21 adj profit of $11.90-$12.70 where the midpoint is below the $12.65 estimate despite beating Q4 EPS and revs and expects expenses to be higher than 2020 levels; PFSI tgt raised to $100 at Piper after easily beating consensus while continuing to grow market share in all origination channels; asset manager LAZ reports AUM of $259B as of December 31, 2020, up 4% y/y and up 14% from September 30, 2020; JHG 30.7M share Secondary priced at $29.25

·     Real estate services; Goldman Sachs upgraded shares of ZG to Buy (tgt to $200 from $119) and RDFN (tgt to $78 from $41) to Neutral amidst what they believe is ongoing growth acceleration in the real estate macro environment (both volume and price driven), a sustainable shift in real estate activity online, and the longer term opportunity for these companies to capture share of industry economics; OPEN 28M share Secondary priced at $27.00, while the WSJ also out with cautious article (said “could Opendoor really be nearly three times better at making money in iBuying than a company with roughly 10 years more experience in online real estate”)

Healthcare

·     Pharma movers; JNJ applied to the FDA for emergency use authorization for its single-shot COVID-19 vaccine; PFE withdrew its an application in India for emergency use of the COVID-19 vaccine it developed with BNTX Reuters reported; TWST was downgraded to underweight at JPMorgan saying they are hard-pressed to handicap the 61.6x calendar 2022 sales valuation, which is now ~2x more expensive than comparable high-growth NGS peers such as TXG (27.9x), GH (29.3x) and ADPT (32.7x); NBIX reported 4Q20 revenue of ~$248M with ~$240M attributable to net INGREZZA sales, below consensus estimates (~$260M); CGC downgraded at Piper on valuation

·     Biotech movers; PTCT announced results from its US Study-045 yesterday after the close, failing to demonstrate a statistically significant improvement in dystrophin expression; TTOO shares rose after the company said its T2SARS-CoV-2 Panel can detect the Brazil variant of the SARS-CoV-2, the virus responsible for Covid-19 infections; in earnings, REGN rises on Q4 EPS beat ($9.53 vs. est. $8.39) as Eylea US net sales +10% to $1.34B; GILD reported 4Q20 revenues of $7.3B vs. est. $7.1B, primarily driven by Veklury ($1.9B vs. est. $1.2B) and also provided first-time 2021 guidance for product sales of $23.7B-$25.1B; SPRO falls as FDA placed a clinical hold on its mid-stage clinical trial of SPR720, its oral antimicrobial therapy being tested in patients with a type of lung disease

·     Secondary and IPO calendar full: ANGN 5M share IPO priced at $16.00; BOLT 11.5M share IPO priced at $20.00; EVAX 3M share IPO priced at $10.00; IMCR 9.936M share IPO priced at $26.00; ITMR 3M share Spot Secondary priced at $22.75; LHDX 9M share IPO priced at $17.00; PHVS 8.27M share IPO priced at $20.00; RYTM 5M share Secondary priced at $30.00; TERN 7.5M share IPO priced at $17.00; VCYT 7.432M share Secondary priced at $74.00; VOR 9.83M share IPO priced at $18.00

·     Healthcare services and providers; CLOV got letter from SEC indicating it is conducting investigation, requesting document, data preservation from Jan 1, 2020, to present; company intends to cooperate with sec’s investigation; SEC letter relates to certain matters that are referenced in Hindenburg research article on Feb. 4, 2021; CAH said it sees year EPS $5.85-$6.10 vs. est. $5.88 (raised fy21 earnings guidance);

·     MedTech and Equipment; VREX revenue rose 4% sequentially, the first sequential gain since COVID, to $177M, beating consensus’ $172M ests and Q2 guidance of $180-200M beat the Street’s $178M and at midpoint our $185M (upgraded at Oppenheimer); ZBH posted Q4 revenue of $2.09B and EPS of $2.11, but just above ests, with the company noting continued pressure from COVID in 4Q though its core business remained strong

Industrials & Materials

·     Materials, Industrial & Machinery; ITW posts Q4 EPS beat with slight revenue growth of ~0.2% Y/Y to $3.48B and organic revenue declined of 0.9% Y/Y and Q4 Operating margin improved by 166 bps to 25.4%, with enterprise initiatives contributing 130 bps; FTV rises after Q4 EPS and revenue beat while guides FY 2021 adj EPS in the range of $2.40-$2.55, the mid-point of which is above estimates of $2.42;

·     Metals & Materials; BERY posts better-than-expected net sales in Q1, organic volume growth of 7% as sales of $3.1B top the $2.9B est. and doubles FY21 organic volume growth outlook to 4%; gold miners rebounded after a rough week with the pullback in gold; industrial metals (FCX) saw a rebound today

Technology, Media & Telecom

·     Internet; SNAP topped the Street’s 4Q:20 expectations for Revenue, DAUs, and adj. EBITDA as demand for its digital ads remained robust during the holidays and the company reached its stretch goal of annual adj. EBITDA profitability and doubled its active advertisers y/y in 4Q; PINS grew revenue +76% y/y in 4Q, topping Street forecasts by more than 9%, while the company also eclipsed a 42% adj. EBITDA margin during the quarter as shares rose early

·     Semiconductors; MCHP reported in-line results and higher guidance, citing strength in Automotive, Consumer, and Industrial (guidance up 8% q/q above consensus $1.39B/$1.64, better than seasonal up 1% q/q and peer TXN guide of down ~3% q/q); SYNA reported solid results and raised guidance as strength in IoT and PC NB more than offset softness associated with the iPhone 12 Mini as per KeyBanc; MPWR delivered strong 4Q20 results and 1Q21 guidance with revenue expected to increase Q/Q by ~$9MM at the midpoint of guidance despite the March quarter typically being seasonally weak.

·     Software movers; Unity Software (U) shares slide despite a smaller-than-expected loss and better revs as said expects a ~3% revenue hit from Apple’s new IDFA policy, which weighed; NLOK reported strong F3Q results, growing the installed base and overachieving on revenue / EPS, while F4Q was guided above Street estimates (even excluding Avira contribution); PLTR and BP have extended their partnership to support BP as it works towards its ambition to become a net zero company by 2050 or sooner; NEWR downgraded by two analysts on lower revenue build visibility and a now more balanced risk/reward following inline F3Q results (vs. a positive pre-announcement) but a softer-than-expected F4Q outlook (ARR flat q/q); PCTY posted another solid quarter, beating expectations as strong net-new business offset lackluster employment growth within the installed base, but March quarter guidance was modestly below expectations as management forecasted a $3.5-$4M headwind; ZEN reported better-than-expected 4Q20 results with non-GAAP EPS of $0.11 (consensus $0.15), revenue of $284M (consensus $278M), a deceleration to 23% growth from 24% last quarter, and RPO of $925M, which came in above our estimates of $679M, an acceleration to 44% growth; BILL posted strong results highlighted by 59% core revenue growth and 5,600 net new customer additions, continuing a three-quarter trend of strong adds

·     Internet security sector; FTNT reported an upside 4Q, as billings, revenue, OMs and CFFO all nicely exceeded Street expectations. As well, 2021 billings and revenue guidance was better than expected – product rev growth rebounded to +20% y/y in Q4 from a low teens pace in Q2 and Q3; PFPT Q4 EPS 51c vs. est. 42c; Q4 revenue $275.13M vs. est. $269.28M; Q4 billings of $374.9M, up 8% year-over-year; sees FY21 EPS $1.91-$1.99 vs. est. $2.05

·     Media movers; NWSA said Q2 was the most profitable quarter since the company’s reorganization seven-plus years ago, even as quarterly revenue declined by 3% YoY; net income rose to $261 million from $103 million in Q2; MSGN upgraded to Outperform at Macquarie following its Q4 profit beat with $20 tgt; LGF posted a surprise Q3 profit as adj EPS 21c beat est. (11c) loss and revs $836.4M also topped est. $776.47M; ATVI delivered a strong F4Q20 and better than consensus F1Q21 and FY21 guidance, amplifying a structural lift from their Call of Duty franchise, sending shares higher

·     Comm & Telecom movers; TMUS reported postpaid net adds of 1.6M (0.8M phone), postpaid phone churn of 1.03% was flat y/y, revenue of $20.3B beat $19.9B est. and adjusted EBITDA of $6.75B beat consensus $6.52B; VSAT upgraded to outperform at William Blair citing potential upside from a deal with Delta Air Lines choosing ViaSat over Starlink;

·     IT Services & Consulting; TDC shares soar after Q4 EPS of 38c topped the 25c view on better revs $$91M vs. $475M) and said Q4 recurring revenue rose 9% to $383M (guides Q1 38c-40c vs. 33c estimate)