Mid-Morning Look

Thursday, August 29, 2024

U.S. stocks had erased earlier overnight losses and held gains following a host of more favorable economic releases. Slightly better GDP and roughly in-line initial jobless claims prompted only a slight shift in Fed rate cut probabilities. Expectations of a 25bps cut went from 65.5% to 67.5%, while the implied probability of a 50bps cut dipped from 34.5% to 32.5%. Yields and the Dollar index gained while gold dipped then erased most of its earlier fade. Sentiment-wise, this morning’s bull-bear spread survey was 24.2 from 27.9 a week ago, with bulls dipping from 51.6% to 51.2% and bears rising from 23.7% to 27%. Early breadth was 1.3:1 in favor of advancers as small caps held gains but underperformed with IWM +0.25% versus SPY +0.31% and QQQ +0.81%. Early S&P sector ETF leaders were Technology, Consumer Discretionary and Communications, while Real Estate, Consumer Staples and Utilities were the primary laggards in the red. NVDA remained down modestly, but MRVL, AVGO, QCOM and AMD rebounded to solid gains versus after-market declines last night.

• US Core PCE Prices Advance actual +2.8% versus previous +2.9% and forecast +2.9%.
• US Initial Jobless Claims actual 231k versus previous 232k and estimate 232k.
• US Advance Goods Trade Balance actual -102.7B versus previous -96.56B and estimate -97.8B.
• US Retail Inventories Ex-Auto Advance actual +0.5% versus previous +0.2%.
• US Wholesale Inventories mo/mo Advance actual +0.3% versus previous +0.2% and forecast +0.3%.

• AAPL +1.91% Citigroup moves AAPL (Overweight, $273 PT) to its top AI pick above NVDA & ANET going into 2025 to align with its AI investing framework; Overnight Nikkei Asia reported that Apple ordered over 10% more iPhones than last year on AI bet as Apple prepares for Sept. 9 launch of 1st iPhones with “Apple Intelligence.”

• BBY +16% following this morning’s double beat, raised guidance and $500M buyback update: Q2 adj EPS $1.34 vs est $1.16 on revs $9.288B vs est $9.244B, comps -2.3% vs est -3.33%, gr mgn 23.5%; guides FY revs $41.3-41.9B vs est $41.808B, comps -3% to -1.5% vs prior -3% to flat, adj op mgn 4.1-4.2% vs prior 3.9-4.1%, adj EPS $6.10-6.35 vs prior $5.75-6.20 and est $6.08.

• NTNX +18% following last night’s double earnings beat: Q4 adj EPS $0.27 vs est $0.20 on revs $548M vs est $536.94M, adj gr mgn 86.9%, adj op mgn 12.9%; guides Q1 revs $565-575M vs est $573.34M, adj op mgn 14.5-15.5%; sees FY revs $2.435-2.465B vs est $2.449B, adj op mgn 15.5-17% and FCF $540-600M. Named a top pick at Piper Sandler today.

• BURL +0.50% after earnings today: Q2 adj EPS $1.20 vs est $0.95, adj EBITDA $205Mm vs est $174.59Mm on revs $2.47B vs est $2.415B, gr mgn 42.8%; guides FY sales +9-10% vs est +9%, comps +2-3%, +100 net new stores, adj EBIT mgn +50-70bps, adj EPS $7.66-7.96 vs est $7.69.

• ENLC +9% OKE to buy GIP’s interest in EnLink Midstream for $3.3B in cash and to seek acquiring rest of EnLink.

• GME +2% In an 8-K filing last night GameStop announced that they were terminating a previously announced credit facility.

• DLTH +16% following an EPS and sales double beat this morning and raised FY24 revenue guidance.

• PYPL +3% Announced an expanded partnership with FI.

• INTC IBM – Intel and IBM collaborate to provide better cost performance for AI innovation; collaboration to deploy Intel Gaudi 3 AI accelerators as a service on IBM cloud.

• CM +5% Canadian Imperial Bank of Commerce Plans to Buy Back Up to 20M Shares

• NVDA -4% after last night’s highly anticipated earnings release. So far 41 analysts have published notes, reiterating their ratings (no up or downgrades) (89% of the 73 that cover Nvidia have Buy ratings) with multiple upward price target changes and “this is a buying opportunity” themes.
• DG -25% on double earnings miss today: Q2 EPS $1.70 vs est $1.79 on sales $10.210B vs est $10.365B, comps +0.5% vs est +2.17%; sees FY net sales +4.7-5.3% vs prior +6.0-6.7% and est +6.02%, comps +1.0-1.6% vs prior +2.0-2.7%, EPS $5.50-6.20 vs prior $6.80-7.55 vs est $7.12; DLTR falls -10% in sympathy.
• PSTG -12% despite earnings beat and slightly raised forward guidance, but investors looked beyond the numbers and focused on Pure Storage’s lower subscription expectations. Price targets lowered by multiple analysts.
• OKTA -17% Last night’s earnings yielded an earnings beat but Okta’s Q3 cRPO guidance of +9% YoY was 200bps below expectations; BofA double downgraded Okta to Underperform from Buy this morning.
• AILE -57% Hindenburg Research publishes its 2nd negative report of the week in the pre-market, stating that the company is “an artificial intelligence SPAC with artificial partners and artificial revenue.”
• BIG -26% Last night Big Lots said it will consider a bankruptcy filing after a revenue slump. Shares are -97% over the past 5 years.
• SSYS -13% after today’s earnings report; the 3D printer maker drastically lowered its FY24 guidance.
• DELL Shares are lower today following a PT change in a note by Morgan Stanely on lower AI server shipments.
• GAP shares are halted pending news, -1% as shares reversed pre-market +5% gains; Gap Inc. was scheduled to report their earnings after the close of trading today and this morning’s 9:15am release surprised the street. Q2 EPS $0.54 vs est $0.40 on revs $3.7B vs est $3.63B; Q2 total comp sales +3%, est. +2.87%; boosts outlook for year gross margin and oper income for FY24.