Closing Recap

Tuesday, March 02, 2021

Equity Market Recap

·     U.S. stocks slipped on Tuesday, giving back only a portion of the prior day advance, as investors locked in some profits following the biggest one-day daily percentage gain in 9-months for the S&P 500. Investors basically hit the “pause” button after the massive surge Monday, as Treasury yields again eased (10-year to 1.41% from highs of 1.6% late last week) and hopes rise for the Senate passing the $1.9T stimulus deal. Inflation remains a hot topic as hopes for a V-shaped recovery in the economy have given way to fears of a V-shaped recovery in yields. This has led to pain in the long end of bond markets. U.S. Federal Reserve Governor Lael Brainard said she was closely watching bond markets and would be concerned if a recent rise in yields continued and began to constrain economic activity. Another hot topic remains the SPACE craze, as there have been 175 SPAC deals announced so far in 2021, with $56B raised in IPO Capital, according to CNBC (while many of them have come down in value recently). In vaccine news. Texas said they ended the mask mandate and says all businesses can open 100%.

·     Top stock stories: TGT posted a strong beat in retail for holiday quarter, but shares fell after saying categories consumed mostly at home, including food and beverage and essentials could see some softness as we emerge from the crisis; autos GM, F outperform while EV stocks LI, NIO, XPEV decline following earnings and/or monthly delivery updates; FGEN drops as the FDA announced it will hold an advisory-committee meeting to review FibroGen and AstraZeneca’s new-drug application for Roxadustat; ZM shares jumped as much as 10% before turning negative midday today despite beat and raise quarter on tougher comps going forward; NVAX slipped as reported a wider-than-expected fourth-quarter loss but its sales beat Wall Street expectations.

Commodities, Currencies and Treasuries

·     Oil prices sunk into the close, as WTI crude settled below $60 per barrel, down a second day after falling $0.89 or 1.47% to settle at $59.75 per barrel and Brent crude dropped $0.99 or 1.55% to settle at $62.70 per barrel.  OPEC Secretary General Mohammad Barkindo said at a technical OPEC+ meeting that producers must emphasize "cautious optimism." Last week, both WTI and Brent touched their highest since January 2020. The rally faded on expectations the Organization of the Petroleum Exporting Countries and allies in the group known as OPEC+ would produce more oil from April, easing last year’s deep supply cuts.

·     Gold prices ended near the highs of the day, rising $10.60 or 0.6% to settle at $1,733.60 an ounce, snapping its 5-day losing streak and recovering from its worst closing levels since last June, getting a boost in the afternoon as the dollar slid from 3-week highs. The euro recovered off 3-week lows below 1.20 against the dollar, as Treasury prices were little changed most of the day, as the 10-year yield was last around 1.41% (well off last week highs above 1.6%). Despite the U.S. Federal Reserve being very accommodative with stimulus, with low rates for the extended period of time, in the short term we had to deal with these rising short-term rates.

Sector News Breakdown

Consumer

·     Retailers; TGT Q4 EPS $2.67 vs. est. $2.54 on revs $28.34B (+21.1% YoY) vs est. $27.48B, comp sales +20.5% (est. +16.4%), same-day deliveries and pickups +212% YoY, and full-year sales rose by over $15B – shares fell post conference call after saying categories consumed mostly at home, including food and beverage and essentials could see some softness as we emerge from the crisis (shares of COST, WMT moved); KSS reported Q4 Adjusted EPS $2.22 vs. est. 98c (range 69c to $1.05) on in-line sales $5.88B; CHS posted a Q4 EPS loss of (68c) on net sales $386.2M, missing expected $447.5M, as comp sales fell -24.9% vs +2.2% YoY; ANF reported Q4 adj EPS $1.50 (est. $1.24) on in-line sales $1.12B, and announced plans to resume share buybacks; KTB Q4 adj EPS $1.23 vs est $0.97 on revs $661M vs est $646.1M, guided FY21 adj EPS $3.50-3.60 (est $3.18), sees FY21 revs increasing low-double digits; LL Q4 adj EPS $1.06 more than doubled the 50c est. on revenue $304.21M vs. est. $296.51M, and did not provide FY21 guidance

·     Auto sector; Ford (F) and GM outperformed while electric vehicle names lagged; LI delivered 2,300 Li ONEs in February 2021, representing an increase of 755.0% YoY; recorded 5,379 deliveries in January 2021; XPEV delivered a total of 2,223 Smart EVs in February, consisting of 1,409 P7s, the company’s smart sports sedan, and 814 G3s, its smart compact SUV. Vehicle deliveries in January and February combined represented a 577% increase year-over-year; TM said it plans to sell as much as 500 billion yen ($4.7 billion) in yen and foreign currency sustainability bonds, in what would be one of the biggest offerings globally in the booming market to fund environmental and social projects; NIO shares slip after co expects slowing EV sales growth in q1, posts wider-than-expected loss; Volvo said to sell only all-electric vehicles by 2030; in auto retail, AZO Q2 comparable sales +15.2% well above the estimate +8.20% along with EPS beat ($14.93 vs. $12.39 y/y, estimate $12.83); GP negative mention by White Diamond Research saying with recent negative events for the company that will make things even worse in 2021, we have a $5 one-year price target; EV battery stocks (CHPT, BLNK) fell after utilities AEP, D, DUK, ETR, SO said they plan to add electric vehicle fast chargers to connect Atlantic coast, Midwest, gulf coast and central plains destinations

·     Housing & Building Products; SKY was downgraded to neutral at Wedbush noting shares are within 5% of their price target, and do not see a developing catalyst to increase it; JELD 8M share Spot Secondary priced at $29.25; in flooring, LL Q4 adj EPS $1.06 topped the est. 50c and Q4 revenue $304.21M vs. est. $296.51M; not providing guidance for the year at this time

·     Consumer Staples; EL announced offering and pricing of $600 mln aggregate principal amount of 1.950% senior notes due 2031; BYND announced its intention to offer, subject to market and other conditions, $750,000,000 aggregate principal amount of convertible senior notes due 2027 in a private offering; separately, Citigroup upgraded BYND to Buy as consider the issues that impacted 4Q to be mostly temporary, and expect that once we are past COVID, BYND’s top line momentum can get back on track

·     Leisure and Gaming; casinos active (WYNN, MLCO, LVS) as gross gaming revenue in Macau was up 135.6% in February to $915M compared to a year ago when the global pandemic impacted travel. Due to the fewer amount of days in February, GGR was higher during the month than January GGR on a daily basis. The two-year comparison didn’t look as sharp as February GGR was down 71% compared to the pre-pandemic tally seen in 2019; in regional gaming, shares of IGT and SGMS both active following earnings results; cruise lines CCL, NCLH, RCL all upgraded to outperform from neutral at Macquarie as we see a positive catalyst horizon

Energy

·     Energy stock movers; energy stocks were among the best names in the S&P after modest selling pressure Monday as oil prices tried to recover; Barclays upgraded ENBL to Equal-Weight with a $7 target from UW with a $5 target; MUR announced an offering of $550M senior notes due 2028; XOM positive comments at Goldman, as firm raises tgt to $61 and reit buy

·     Alternative Power, Utilities & Solar; Barclays downgraded PLUG to Underweight with a $29 target as the market is overpricing the company’s ambitions at its current valuation; Raymond James upgraded AY to Outperform with a $47 target as the stock’s recent 17% pullback in recent weeks is overdone given the company’s CAFD growth, strong pace of equity investments, top ESG standing and strong visibility on longer-term growth; WTRG filed a mixed securities shelf; Truist lifted their target on SPWR to $42 from $31 after increasing their revenue expectations for 2021 even though they reduced their Q1 expectations as they see growth accelerating in the 2H

Financials

·     Bank movers; JPMorgan added PNFP to its Analyst Focus List as a growth idea and one of their top overall ideas, lifting its price target to $100 from $87 as they see the bank as well-positioned for top-line growth compared to other regional banks and its entry into Atlanta as the biggest opportunity for growth in the company’s history; FRC 1.75M share Spot Secondary priced at $166.50; MS filed prospectus related to resale from time to time by selling stockholders up to 2.3M shares of common stock and was also upgraded by Daiwa to Outperform with a $86 target; Wedbush raised their target on SI to $175 from $150 after their meetings with management reinforced the view that the bank is building its moat as the go-to bank for cryptocurrency market participants, and they distinguish the bank aspiring to be the transactional-focused bank of crypto vs SBNY who is emerging as the go-to deposit-taking bank of the crypto market; In Canadian banks, Bank of America downgraded RY to Neutral and upgraded BMO to Buy, and CIBC upgraded BNS to Outperform, joining BMO, TD, CWB as banks they rate at OP in what they see as a buy-the-banking-sector moment at this point in the cycle; PACW filed mixed shelf

·     Insurance; LMND reported a Q4 EPS loss (60c) that was narrower than the expected (64c) loss on revenue $20.5M that also beat estimated $19.12M, Q4 customer count topped 1M (+56% YoY), Q4 gross earned premium $50M (+92% YoY), and sees FY21 revenue $114M-$117M (est. $111.33M), FY21 gross earned premium $270-275M, and FY21 adj. EBITDA ($173M)-($163M) vs. ($97.9M) in FY20; PRU files mixed securities shelf; JMP reiterated HCI at OW and lifted their price target to $90 from $60 after they sold an 11.75% stake in its subsidiary TypTap for $100M, giving an implied $850M valuation

·     Consumer Finance; RPAY Q4 adj EPS 17c on revs $41.4M, both of which beat estimates (11c, $38.72M), card payment volume $4.0B (+16% YoY), sees FY21 revs $178M-$188M (est. $185.5M) and card payment volume $17.5B-$18B, and the stock was upgraded to OW by Wells who sees it as attractively valued as the company should be able to gain market share and achieve their growth of mid-high teens organic gross profit growth; MA files for a 3-part notes offering but did not disclose the size in an SEC filing; SQ said it has officially commenced banking operations and its Square Financial Svcs will be the primary provider of financing for Square sellers across U.S.; RKT shares surged more than 70% by midday as CNBC Najarian notes call buying option activity

·     REITs; SITC 15M share Spot Secondary priced at $13.20; EXR was upgraded to Outperform with a $145 target at BMO after they posted the strongest 4Q20 (16.5% Y/Y norm FFO growth) and 2021 guidance (12.7% Y/Y FFO growth at midpoint) versus peers, and whose valuation is attractive given stronger than expected storage demand that is benefiting from a white-hot housing market, improving macro backdrop, and sticky COVID-19 demand; UNIT Q4 adj FFO 42c on revs $275.3M vs est. $266.3M and sees FY21 FFO $408-420M (est. $442.3M) on revs $1.08-1.09B (est. $1.08B)

Healthcare

·     Pharma movers; FGEN fell as the co and partner AZN were expecting the FDA to make a final decision on a new anemia drug later this month, but the agency announced an Adcom will now be held for Roxa which means no NT approval and more pushout from 3/20 PDUFA; NBIX fell after Luvadaxistat did not meet primary endpoint in the Phase 2 INTERACT study while Luvadaxistat met secondary endpoints of cognitive assessment; EYEN said the FDA accepted its new drug application for MydCombi, a fixed combination mydriatic pupil dilation agent for potential use in comprehensive eye exams.

·     Biotech movers; NVAX slipped as reported a wider-than-expected fourth-quarter loss but its sales beat Wall Street expectations; INO slips after saying it plans to respond to U.S. FDA’s questions related to a clinical hold on co’s late-stage COVID-19 vaccine trial in May, compared with its previous timeline of March; CERC rises after saying final analysis showed a mid-stage trial of its monoclonal antibody, CERC-002, met the primary efficacy main goal vs placebo in COVID-19 patients with acute respiratory distress syndrome; MESO raises $110M led by us strategic investor group, to issue 60 mln shares in private placement at a$2.30 per share; SRNE receives FDA clearance to start clinical trial of anti-cd47 antibody, discovered from fully human g-mab library, for treatment of multiple malignancies

·     MedTech & Equipment; OSUR reported solid Q4 results ahead of guidance and estimates and said the long-awaited antigen test is set for submission for Emergency Use Authorization by the end of March.

Industrials & Materials

·     Transports; UNP removes prior Q1 guidance of low single digit volume growth due to recent winter storms across network; KSU said it sees earnings per share of $9.00 or better in 2021 and $10.50 to $11.00 in 2022 (est. for 2021 EPS was $9.01); said it sees free cash flow of about $700 million in 2021 and 2022; WKHS active after Ohio Congressman U.S. Reps. Tim Ryan of Howland and Marcy Kaptur of Toledo, and U.S. Sen. Sherrod Brown wrote to President Biden asking him to review the USPS award to OSK for next-gen trucks

·     Metals & Materials; in chemicals, DOW upgraded from Equal Weight to Overweight at Wells Fargo as believe the combination of strong demand and the impact from the recent Winter Storm Uri supply will drive upside to earnings in 2021E; Wells also upgraded LYB to overweight tgt $130, believe demand for chemicals is strong, coupled w Uri supply should prove to be a positive catalyst for margins in 2021; MP shares got a midday spike as Morgan Stanley analyst spoke positively on the shares

Technology, Media & Telecom

·     Internet; SE said its loss widened for Q4 as expenses rose, though revenue increased and the company expects 2021 e-commerce revenue to more than double from 2020 – revenue rose to $1.57 billion from $777.2 million; SABR says seen some recent improvement in key volume metrics as air bookings in February 2021 showed sequential improvement vs. Jan; AKAM upgraded to OW and establishing a $119 PT at Keybanc; MELI Q4 GMV came in at $6.57B vs. the Street’s $6.35B as Brazil grew 84% vs. our 65%, Argentina grew 185% vs. our 145% and Mexico 110% vs. our 100%; PINS said in the U.S. we had 10 million monthly active users in 2020, double the number the year before

·     Semiconductors; Philly semi index (SOX) dropped over 2% in a bout of profit taking after surging the day prior; generally quiet day of news in the space; EMAN awarded new patent for DPD ™ direct patterning OLED Microdisplay technology

·     Hardware & Software movers; ZM rises after q4 results handily top consensus (Q4 EPS $1.22 vs. est. 79c; Q4 revenue $882.49M vs. est. $811.77M) with better q1 guidance (Q1 EPS 95c-97c vs. est. 72c and sees Q1 revenue $900M-$905M vs. est. $804.78M); PERI rises after raising its FY rev outlook to $370M-$380M and adjusted EBITDA guidance due to expected 31% year over year revenue growth in the first quarter of 2021; UPLD acquired BlueVenn, a cloud-based customer data platform for $51.9M in cash; AI posted a smaller than expected Q3 EPS loss on better revenue, but shares pullback following strong run post IPO (narrow beat) – overall had mixed Q where billings and net income missed; APPF slips after a mixed Q and no guidance due to limited visibility

·     Media & Telecom movers; NLSN rises after ROKU said it will buy Nielsen’s advanced video advertising business, which includes automatic content recognition and dynamic ad insertion technologies; ROKU also files to sell $1B in common stock; GAIA solid quarter, demonstrating consistent execution growing 27% Y/Y topline, 22% Y/Y subs, and generating positive net income and free cash flow.

·     Hardware & Component news; DDD shares tumbled in 3D space after Q4 earnings missed estimates though sales of $172.7M beat the $168.5M estimate); SWCH shares fell after Q4 revenue $127.7M missed the est. $131.3M (was downgraded at Raymond James following the Q4 results); INSG tumbles on mixed results; Q4 EPS loss (14c) vs. est. 0c; Q4 revenue $86.1M vs. est. $83.81M (downgraded at both Stifel and Canaccord); AAOI downgraded to hold at Needham think the $35 million At the Market Offering represents overhead supply that reduces the upside