Mid-Morning Look

Wednesday, April 22, 2020

U.S. equities are moving higher, looking to snap its longest losing streak in 3-weeks, getting a boost with a bounce in oil prices and after the Senate passed a $484B virus relief bill which adds to the Payroll Protection Program for small businesses and also provides aid to hospitals and funding for COVID-19 testing. The $350B PPP ran out of money last Thursday after less than two weeks. The House is set to vote on the bill this Thursday. And President Trump said he’ll sign the legislation. Also helping market sentiment are reports that Governors in Georgia, South Carolina and Tennessee are among the first to attempt to reopen their economies. Earnings a bright spot overnight for tech sector with SNAP, NFLX beating results, while CMG jumps in restaurant space and life science names TMO, DGX rise on results. Earnings just getting heated up with a busy slate of numbers tonight as well, while many companies withdrawing their guidance for the year due to COVID-19 uncertainty. Energy stocks are pacing market gains for a change given a bounce in oil prices after yesterdays near 50% decline in prices.

Treasuries, Currencies and Commodities

·     In currency markets, the U.S. dollar a modest pullback after strong gains Tuesday, falling vs. emerging markets as oil prices rebound; commodity prices generally higher after bloodbath the last few sessions, as gold resumes spike back to around $1,750 an ounce and oil jumps. Treasury prices stay well bid, with the 10-year yield holding under 0.6% with no economic data.

Sector Movers Today

·     Energy stocks were market leaders for a change, as the volatility in the commodity space and in prices (oil, gasoline, heating oil) remains “off the charts” crazy, with massive 30-50% swings in the physical commodity the last few sessions; shares of HAL, FANG, CXO, PXD among early S&P 500 top gainers despite news in the space generally quiet. Note yesterday, President Trump did says he was working on a plan to make money available to the oil industry while the Texas Railroad Commission delayed a vote to force producers to cut

·     Medical equipment and devices; MDT said it expects COVID-19 disruptions to significantly impact its results for fiscal Q4 ending April 24 citing the diversion of hospital resources to fight the pandemic; DGX Q1 revs of $1.82B beat the $1.75B estimate on a 5c EPS beat while suspended buybacks/dividends and said it has started testing blood for COVID-19 antibodies using tests made by ABT and PKI reported 1Q results, with revenue ($6.23B vs. $6.17B est.) and EPS ($2.94 vs. $2.80 est.) both ahead of street, with organic revenue growth was 2%, at the higher end of the company’s 1% to 2% preview from earlier in April; EXAS provided preliminary 1Q revenue of $348M above est. $342M while noting test orders in the first 20 days of April had declined -63% YoY, the company indicated it was sensing stabilization in this decline

·     Semiconductors; TXN posted an expected weaker JunQ top-line guide down 13% q/q (down 21% y/y) and said it is approaching JunQ guide similar to 2008 financial crisis with customers’ limited ability to forecast, but building inventory (said MarQ PC-Servers strong and expected strong into JunQ, offset by weak Auto-Industrial); INTC tgt raised to $62 from $53 at Jefferies as expects it will beat its revenue forecast in the quarter, with the data-center business a particular bright spot; TER rises after better results last night in semi equipment space with solid 1Q beat, with revenue and EPS above our and consensus estimates. It also guided 2Q well above consensus

·     Mortgage lending and services; the Federal Housing Finance Agency (FHFA) announced support measures for mortgage servicers, which should limit their advance commitment exposure to long-term forbearance requirements; BTIG noted announced initiatives to provide liquidity to mortgage servicers by putting in place a 4-month advance obligation limit for loans in forbearance (positive for COOP, NRZ, OCN) – BTIG also said mortgage insurers (RDN, ESNT, MTG, NMIH) should have been positive for them as well

·     Software movers; MANH delivered a solid EPS beat, with a FY revenue outlook that reflects a more challenging environment with an implied 22% q/q decline in services; SCPL upgraded to neutral at Bank America based on positive revs and download data that could boost sentiment and/or drive positive Street est. revisions in 2Q/2020 while ZNGA downgraded to underperform as it has outperformed their entire video game coverage (up 23% vs. 5% YTD) on equally positive engagement and revenue data/now trades at ~23x 2021 EPS (~4.6x PEG) vs. digital publishers at ~12x (~1.5x PEG) and traditional publishers at 22x (~1.2x PEG).

Stock GAINERS

·     BNTX +13%; after Germany’s Paul-Ehrlich Institute signed off on a Phase 1/2 clinical trial evaluating its COVID-19 vaccine program, BNT192, for the prevention of the respiratory infection, the first such study there

·     CMG +6%; analysts raise tgts across the board with many noting comp store sales were -30% entering April & further improved to the down high-teens range for the week ended 4/19

·     DGX +6%; Q1 revs of $1.82B beat the $1.75B estimate on a 5c EPS beat while suspended buybacks/dividends and said it has started testing blood for COVID-19 antibodies

·     EXPE +6%; after the WSJ reported the co is nearing a deal to sell a stake in itself valued at about $1B to private equity firms Silver Lake and Apollo

·     INTC +5%; bounce in semiconductors while tgt raised to $62 from $53 at Jefferies as expects it will beat its revenue forecast in the quarter, with the data-center business a particular bright spot

·     SNAP +24%; Q1 results impressed with a 5M DAU beat and 9% revenue beat – revs $462Mm vs. est. $430Mm and 1Q DAUs 229Mm vs. est. $223.8Mm (shares of TWTR, PINS rise in sympathy)

·     TER +1%; after better results last night in semi equipment space with solid 1Q beat, with revenue and EPS above our and consensus estimates. It also guided 2Q well above consensus

Stock LAGGARDS

·     AEO -10%; said it sees current quarter results significantly impacted by COVID-19/said that it has the liquidity to sustain the company beyond FY20

·     BIIB -11%; after saying Alzheimer it expects to complete the U.S. filing for its Alzheimer’s drug aducanumab in Q3, a marked shift from guidance late last year that the submission would come in early 2020

·     IBKR -10%; Q1 revs of $581M just missed ests on EPS beat but fell after noting it booked an $88M loss due to some customers who were long oil and lost way more than the equity in their accounts

·     IRBT -4%; cut to underweight at JPMorgan as believe underperformance is unjustified owing to a weaker than expected start to the year (1Q preannouncement) and likely significantly reduced near-term consumer spend

·     M -4%; is looking to raise as much as $5B in debt by using inventory as collateral for $3B and real estate to bring in $1B-$2B, CNBC reported last night

·     NFLX -3%; reported a record high Q1 global subs of 15.8MM, smashing estimates for around 8MM, driven by accelerating Sub Adds across each region, and Q2 guide of 7.5MM Sub Adds well exceeds Street expectations (stock had rallied into numbers – announced debt offering)

·     UAL -6%; 39.25M share secondary priced at $26.50 among first airlines to sell stock