Mid-Morning Look

Tuesday, August 20, 2024

U.S. stocks edged higher on the open, looking to extend the incredible run off the early August lows, with the S&P 500 (SPX) now less than 1% away from its prior 5669.67 ATH made 7/16. The S&P 500 and Nasdaq are also looking to extend their winning streaks to 9-days, and coming into the day, while the Nasdaq 100 about 5% from ATH, while the 50-dmas are well in sight for Semis (SOX). While stocks opened higher, they have since pulled back with major averages down between -0.2% and -0.5% ahead of potential key catalysts later this week. U.S. investors await the Jackson Hole Symposium this week, while off-quarter earnings continue to print well (PANW, FN, WMT, in recent week). Gold prices climb to fresh record highs with focus on Jackson Hole where Fed Chairman Powell will speak at the gathering in Wyoming on Friday at noon (note gold prices are up more than 20% so far this year). In other central bank news, in Sweden, the Riksbank became the latest central bank to cut rates as it cut by 25bps and signaled more cuts to come. Software stocks get a bump following better earnings and results from PANW overnight. Bitcoin prices bouncing over 2% back above $60,000 while the dollar index (DXY) extends losses to 7-month lows. Markets still quiet today; few Fed speakers later this afternoon and a handful of earnings to watch this week in retail and software, but all eyes fixated on Chairman Powell later this week.

• In Financial Payments/Services: ALIT and AVDX both downgraded to Neutral from Overweight at JP Morgan as they shift their preferences somewhat and lean more cautious on upside drivers, preferring names with more visible, defensible growth and higher earnings quality; says see the least upside to PAYX, WU, and LSPD, respectively; said see the fastest CY24-26 revenue growth at TOST (25%), RELY (+24%), and MQ (23% gross profit); said names they see the most upside to new 2025 targets include RELY, SQ and BILL.
• In Home Improvement Retail: LOW cuts its full-year guidance to $11.70-$11.90 from $12.00-$12.30 (est. $12.14) and lowers its FY24 revenue view to $82.7B-$83.2B from $84B-$85B (est. $84.15B) and FY24 comparable sales view to down 3.5%-4% from down 2%-3% saying the frozen housing market keeps consumers on the sidelines; reported Q2 adjusted EPS $4.10 vs. consensus $3.97 and revs $23.59B vs. est. $23.9B; Q2 comp sales decreased (-5.1%).

• BTBT +15%; after Q2 revs soared 220% to $29M topping consensus, driven by its high-performance computing (HPC) services business and higher bitcoin price; also signs deal for cloud gaming provider Boosteroid to buy GPU servers with a five-year service duration.
• FN +16%; strong earnings results, follows recently better results from LITE and talked about positive 800G AI driving the beat and raise with telecom still lagging but getting more stable ahead.
• HA +10%; shares rallied after ALK said its proposed merger with the company has cleared a regulatory obstacle with the U.S. Department of Justice, just days after it agreed to extend a review period of the $1.9 billion deal.
• LLY +3%; said its weight loss drug reduced the risk of developing Type 2 diabetes by 94% in obese or overweight adults with pre-diabetes compared to a placebo, according to initial results from a long-term study.
• PANW +6%; Q4 revenue beat by 1%, billings beat by 2%, RPO met, and margins beat and mgmt transitioned guidance to an RPO basis and expects 19-20% growth for both FQ1 and FY25, both slightly below consensus but about in line with investor expectations.
• TSLA +1%; shares rallied early after the European Commission cut its planned tariff on imports of the company’s electric vehicles from China. In a statement, the European Commission said it plans to grant an individual duty rate of 9% to Tesla as an exporter from China.

• DXCM -6%; along with weakness in other diabetes/insulin stocks PODD, TNDM after LLY said its weight loss drug reduced the risk of developing Type 2 diabetes by 94% in obese or overweight adults with pre-diabetes compared to a placebo.
• EL -4%; several analysts lower price tgt following mixed results/guidance the day prior.
• GOVX -26%; after saying it entered agreement to sell 1.7M shares to a certain institutional investor in registered direct offering for $8.5M gross proceeds to fund working capital, general purposes; the sale price of $5 represents 30% discount to stock’s last close of $7.15.
• PARA -2%; Edgar Bronfman Jr. submitted a roughly $4.3B rival bid to take over PARA through the acquisition of National Amusements, the family holding company that owns a controlling stake in the media company. Bronfman’s offer includes $2.4 bln in debt and equity for National Amusements.
• PINC -2%; Q2 results topped views but guided FY25 well below consensus as sees FY25 adjusted EPS $1.16-$1.28 vs. consensus $2.22 and sees FY25 revenue $930M-$1.02B vs. consensus $1.26B.