Mid-Morning Look

Wednesday, August 11, 2021

S&P 500 and Dow open at fresh record highs as another day of strength in industrials, materials and financials help pace gains following the Senate passing a $1 trillion infrastructure plan yesterday, voting to approve the bill that includes $550B in new funding, and it will now move to the House. Early this morning the Senate Democrats passed the $3.5 trillion budget framework. Tech shares reverse early gains, as the Nasdaq Comp turns negative despite in-line inflation data. The July Consumer Price Index (CPI) was in-line with estimates, though showed another month of rising prices. Gold prices rebound following the CPI data (ahead of July PPI report tomorrow morning), while the dollar slips, and Treasury yields little changed on the day at 1.35% for 10-year. Oil prices fall after reports that the White House will call on OPEC and its oil-producing allies to boost oil production. Also, Iraq plans to increase oil production to eight million barrels per day (BPD) by the end of 2027, citing another report. The CBOE Volatility index sessions lows, down -3.6% around 16.20 with S&P and Dow making new ATHs.

Economic Data

·     Consumer Price Index (CPI) for July shows headline reading MoM rise 0.5% vs. est. +0.5%, while on a YoY basis, headline CPI rises 5.4% vs. est. 5.3%. On the core reading (excludes food & energy), Mom CPI rises 0.3% vs. est. 0.5% and on a YoY basis rises 4.3% vs. est. 4.3%.

Sector Movers Today

·     Bitcoin, FinTech & Payments; COIN Q2 EPS of $3.45 topped ests of $2.33, as trading volumes surge through the quarter on growing adoption of digital assets (trading volume in Q2 was $462B, an increase of 38% compared to Q1) – said sees lower volumes in Q3 from Q2; RIOT said in July 2021 produced 444 Bitcoin, an increase of approximately 771% over its July 2020 production of 51 Bitcoin; as of July 31, 2021, riot held approximately 2,687 Bitcoin; MOGO Q2 revenue growth of 29% to C$13.7M and said it expects growth of 100% to 110% in subscription and services revenue in Q4 2021 (above prior view); EPAY 4Q core EPS $0.27 vs est. $0.26 on revs $122.1Mm vs est. $122.9Mm, subscription revs +15% to $101Mm

·     Software movers; MCFE reported better than expected results, as 2Q revenue growth of 22% easily exceeded our and the Street’s 13-14% growth forecast while adjusted EBITDA and operating margins, CFFO, and uFCF all showed good upside; Unity (U) delivered better than expected 2Q results with sales 13% above consensus and significantly narrowed operating losses while also raised 2021 annual guidance to account for the strong 2Q results; PUBM reported strong 2Q21 results, with revenue and EBITDA above expectations, driven by mobile and video strength (+108% y/y combined). Guidance for the remainder of 2021 was also strong, implying robust follow-through for the rest of the year; TUFN posted Q2 EPS beat and revs $25.7M vs. est. $23.1M, but guides Q3 revs $23.5-27.5M below consensus of $27.96M; SPLK upgraded to Buy at UBS as encouraged by the AWS hires, the Silver Lake investment, the likely return to out-period guidance and stable industry checks; ONTF mixed Q2 results and revised 2H guidance of 5% y/y (vs. 12% prior estimate) was disappointing to investors, as Canaccord downgraded to Hold

·     Transports; airlines in focus after LUV warned it may not be profitable in Q3, as the more infectious Delta variant of the coronavirus hits bookings – now sees Q3 revs to be down 15% to 20% vs. 2019, a cut of about three to four points from its prior outlook issued three weeks ago; DHT upgraded to Buy with $7 tgt at Stifel saying it has proven to be an exceptional operator, has a best in class balance sheet, and with shares having sold off recently we finally believe it represents an attractive entry point

·     Biotech movers; FGEN said the FDA has issued a complete response letter regarding the new drug application (NDA) for roxadustat for the treatment of anemia of chronic kidney disease (CKD); BCRX has withdrawn its public offering of common stock, previously announced on August 9; MRVI said it sees 2021 profit in the range of $1.30-$1.36 per share, above estimates of $1.16 after posted better-than-expected Q2 profit, revenue; IMAB announces positive interim data from its U.S. phase 2/3 study of plonmarlimab (also known as TJM2 or TJ003234) for the treatment of cytokine release syndrome (CRS) in patients with severe COVID-19.

Stock GAINERS

·     COIN +8%; revenue and EBITDA ahead and Street seemed positive on user and engagement metrics and more recent volume trends

·     FUBO +8%; on results as Q2 revenue up 196% to $130.9M tops the $118.3M estimate and said net subscriber additions during Q2 increased by ~91,000 vs a decline of ~1,000 YoY and issued better year rev outlook of $560M-$570M vs. est. $530M

·     GTIM +10%; posts rise in Q3 profit to $1.04 per share from $0.02 in the previous year, thanks to debt extinguishment as revs jump 39.4% yoy as sales for Bad Daddy’s restaurants rise ~64% and issues upbeat guidance

·     LPRO +7%; reported Q2 revenue of $61.1M, well above the $49.2M estimate as it more than doubled the income from its program fees (EPS beat $0.60 vs est. $0.17)

·     NLOK +6%; agreed to merge with the antivirus software provider Avast in a stock and cash deal valued at up to $8.6 billion https://on.mktw.net/3jMGmqg

·     UPST +23%; delivered impressive beats across revenues & margins and raised its FY21 revenue guide to +321% or $750M vs. Street 159% through robust loan volume growth (+1,605% to $2.8B) and improving conversion rates on requests (24% vs. 9% y/y) – upgraded at Citigroup

·     WEN +2%; Q2 adj EPS $0.27 tops $0.18 estimate on better sales $493.3M as restaurant margin 20.3% vs. 14.4% y/y and Q2 global comp sales above views: +17.4% vs. est. +15.2% and U.S. comp sales rise +16.1% vs. est. +13.7% and raises year outlook

Stock LAGGARDS

·     FGEN -3%; after saying the FDA has issued a complete response letter regarding the new drug application (NDA) for roxadustat for the treatment of anemia of chronic kidney disease (CKD)

·     GO -12%; after EPS of 23c missed consensus by 1c, comps of -10% vs. est. -10.6% but QTD (6%) and outlook for 3Q & 4Q down mid-single digit was below expectations (downgraded at MKM

·     HYRE -44%; Q2 rev up 62% YoY to $9.1M, above views, but posts larger EPS loss (-$0.36) and Q2 gross margin of 8.9% well below Davidson estimate of 43.5% on higher insurance claim expenses

·     LUV ; warned it may not be profitable in Q3, as the more infectious Delta variant of the coronavirus hits bookings – now sees Q3 revs to be down 15% to 20% vs. 2019, a cut of about three to four points from its prior outlook issued three weeks ago

·     ONTF -28%; Mixed Q2 results and revised 2H guidance of 5% y/y (vs. 12% prior estimate) was disappointing to investors, as Canaccord downgraded to Hold

·     POSH -12%; Q2 GMV and revenues modestly ahead of estimates while Q3 revenue largely below estimates and warned that its marketing efforts were taking a hit from Apple Inc’s new privacy controls over digital advertising tracking

·     PRGO -12%; slides after Q2 profit and revenue came in below consensus, hurt by lower sales of over-the-counter drugs in the U.S. citing a weak cough/cold season and also sees year EPS at the lower end of its forecast range of $2.50-$2.70 (est. $2.58)

·     SPCE -12%; downgraded to underweight at Morgan Stanley, saying its shares may move down toward a long-term valuation of $25 as it completes a catalyst- heavy period including successful launch and moves into a prolonged period of no flights

·     WIX -14%; on weak guidance – Q2 EPS loss (-$0.28) vs. est. loss (-$0.37); Q2 revs $316.41M vs. est. $311.66M; Q2 total collections were $342.9M, up 29% y/y; online commerce accounted for 35% of Q2 total collections; sees Q3 revenue $311M-$317M vs. est. $325.32M

·     WW -27%; shares tumble on top and bottom-line miss (Q2 EPS $0.12 vs. est. $0.65; Q2 revs $311.4M vs. est. $337M) and lower guidance (sees year EPS $1.10-$1.25 below est. $2.00) saying end of period subscribers in Q2 2021 were down 1.9%