Mid-Morning Look

Thursday, August 12, 2021

Stocks overall mostly lower as another jump in inflation (PPI) and calls from Fed members yesterday (Kaplan and George) for the central bank to move ahead with reducing monetary stimulus, citing expectations for continued labor-market gains, weigh on sentiment. Rising Delta variant cases and fears it could lead to further lockdown restrictions also remains a market concern. Still, the Dow Jones Industrial Average briefly hits intraday record high before retreating following mixed economic data as jobless claims slip but the hotter-than-expected PPI report remains a concern. The S&P 500 index also dips, slightly below its all-time closing high yesterday. The producer-price index jumped for the sixth month in a row, offsetting yesterday’s consumer prices report (CPI) that had suggested that pricing pressures may be moderating somewhat. Vaccine stocks initially rebound after selling pressure Wednesday after a group of advisors to the CDC is scheduled to meet Friday to discuss whether people who are immunocompromised should receive COVID-19 booster shots – but the group rolled again. Semi space pressured, led by weakness in Micron (MU) after an analyst downgrade on DRAM concerns. Seeing some profit taking in Bitcoin related names, industrials and metals which have been market drivers higher over the last few days, while software names among the early leaders.

Economic Data

·     Inflation data “hotter” as Producer Price Index (PPI) MoM for July rose 1.0% vs. est. 0.6% and on a YoY basis, spiked to 7.8% vs. est. 7.3%; the core PPI (ex: food & energy) rose 1.0% MoM vs. est. 0.5% and on a YoY basis rose 6.2% vs. est. 5.6%

·     Initial Jobless Claims fell -12K to 375K vs. 378K consensus (revised to 387K from 385K prior); the 4-week moving average was 396.25K, up 1,750 from the previous week’s average of 394.5K; U.S. insured unemployment rate was 2.1%, down from 2.2% last week; continuing claims of 2.866M lower than 2.980M prior and lower with 2.880M consensus

Sector Movers Today

·     Auto sector; NIO Q2 non-GAAP EPS loss (-$0.03) vs. est. loss (-$0.11); Revenue of $1.31B (+127% Y/Y) beats by $20M; said achieved a record-high quarterly delivery of 21,896 vehicles in Q2; FSR announces private offering of $600 mln 5-yr convertible notes; VRM reported strong 2Q:21 results with eCommerce units sold growth ~410bps ahead of consensus while eCommerce GPPU advanced +153% y/y; RIDE posted a $108 million loss for Q2, revised its financial outlook and said it was talking to strategic partners, while RBC Capital lowered ests, reiterated its underperform and cut its price tgt to $1 from $5; NKLA awarded an approximate $2 million grant from the U.S. Department of Energy to advance its research into autonomous refueling technologies for future hydrogen fueling stations; BLNK top-line beat with rev 66% vs. Street and 43% while reported 2Q EPS of ($0.32) compared to Street mean of ($0.16)

·     Internet; EBAY reported a decline in active buyers in Q2, in another sign of softening e-commerce trends – also guides Q3 revs $2.42B-$2.47B below the est. $2.92B); BIDU Q2 earnings beat was trumped by Q3 revenue guidance that missed consensus expectations at the midpoint (sees Q3 revs $4.7B-$5.2B vs. est. $5.14B); CPNG posted a Q2 EPS loss of (30c), wider than est. (15c) loss on revs $4.48B vs est. $4.45B as a fire at one of its fulfillment centers in South Korea resulted in inventory and equipment losses of nearly $300M, though Deutsche upgraded shares to Buy with a $44 PT this morning; COUR 7.9M share Block Trade priced at $37.25; DIBS shares tumble after 2q loss is wider than expected; Reddit will raise up to $700 million in a fundraising round led by Fidelity Management, the social media network said on Thursday, cashing in on a jump in its influence in the financial world to triple its valuation to over $10 billion.

·     Vaccine news: shares of vaccine makers PFE, MRNA, BNTX, NVAX, AZN active after a group of advisors to the CDC is scheduled to meet Friday to discuss whether people who are immunocompromised should receive COVID-19 booster shots. This is the main item on the agenda for the CDC’s Advisory Committee on Immunization Practices meeting; in another report, no new cases of a rare and severe blood clots following vaccination with AZN’s Covid shot have been reported in Britain in recent weeks after a decision to restrict its use in under-40s, British scientists said on Wednesday as per Reuters

·     Consumer Staples; UTZ slides after warning on near-term cost pressure before pricing actions kick in – overshadowing a Q2 revenue beat – warns on higher than planned inflation across key input costs across commodities, transportation and labor; CORE said the waiting period under the HSR act for PFGC’s planned purchased expired on Aug. 9 and the closing conditions for the deal have been satisfied; GRWG falls despite revs rising ~190% YoY to $125.9M, driven by a ~60% increase in same-store sales while gross margin reached ~28.4% from ~26.4% YoY; in tobacco, MO that it will raise list prices on its cigarettes between $0.14-$0.17 as per RBC Capital

Stock GAINERS

·     DDS +3%; Q2 EPS $8.81 crushed est. $0.80 on sales $1.57B vs est. $1.34B, retail gross margin 41.7% vs est. ~33%

·     HIMS +15%; reported Q2 revs that rose 69% to $60.7M from $52.3M a year ago and above the $56.5M estimate on better year rev outlook of $251M-$255M (est. $226.3M)

·     OPEN +10%; after Wedbush added it to its Best Ideas List after last night’s earnings report with Q2 EPS loss (24c) beating est. (34c) loss on revs $1.2B vs est. $1.09B, adj EBITDA $26M vs ($2M) in Q1, and sees Q3 revs $1.8-1.9B, above est. $1.52B

·     PLTR +10%; Q2 adj EPS $0.04 vs. est. $0.03; Q2 revs rise 49% YoY to $375.6M vs. est. $353.2M; backs Annual Revenue growth of 30% or greater for 2021 through 2025 and raises its full-year free cash flow outlook from above $150 million to above $300 million

·     SONO +5%; beat and raise with solid GM’s rose with a rise in premium products and still impacted by supply issues

·     XONE +38%; to be acquired by DM in deal valued at $575M, consisting of $192M in cash and $383M in DM stock, with a per share price of $25.50 https://on.mktw.net/3jJbp6e

Stock LAGGARDS

·     BIDU -4%; after Q3 revenue guidance that missed consensus expectations at the midpoint (sees Q3 revs $4.7B-$5.2B vs. est. $5.14B)

·     BLNK -10%; top-line beat with rev 66% vs. Street and 43% while reported 2Q EPS of ($0.32) compared to Street mean of ($0.16)

·     GOCO -38%; as missed 2Q21 EBITDA targets and lowered EBITDA guidance on significantly higher CC&E costs, which are running ~$50MM ahead of plan for the year, prompting downgraded at three firms (CSFB, RAJA, Evercore)

·     MU -7%; DRAM industry call at Morgan Stanley as the firm downgraded MU to equal-weight from overweight with $75 tgt while also downgraded Hynix to Underweight and both Nanya Tech and Winbond from OW to EW saying this is a cyclical rotation and valuation call for DRAM

·     UTZ -3%; cut its year adjusted EPS and Ebitda forecasts and reported mixed quarterly results, including greater-than-expected pressure from commodity, transportation, and labor costs.

Syndicate:

·     Coursera (COUR) 7.9M share Block Trade priced at $37.25

·     Cushman & Wakefield (CWK) 12.5M share Spot Secondary priced at $18.45

·     Easterly Government Properties (DEA) 6.3M share Spot Secondary priced at $21.75

·     Fulcrum Therapeutics (FULC) 6.6M share Secondary priced at $19.00

·     Gates Industrial (GTES) 25M share Secondary priced at $16.00

·     KnowBe4 (KNBE) 10.43M share Secondary priced at $20.75

·     OneMain Holdings (OMF) 7M share Spot Secondary priced at $57.30