Mid-Morning Look

Thursday, February 11, 2021

U.S. stock markets open/remain at record highs, with SmallCap related stocks leading, as positive market macro focus remains on low rates, addition fiscal stimulus, improving economic data and better earnings. However, a small portion of the stock market has been solely driven by momentum trading as the impact of the retail investor has moved markets over the last month through Robinhood growth, Reddit and WSB forums. The short squeeze meme names soared meteorically in recent weeks (GME, AMC, BBBY, KOSS) before coming crashing down (still up YTD big but down more than 80%-90% in some cases off highs) and have lost its luster. Silver producers were the next target of the investing herd before also slipping. The latest market craze remains the cannabis space as Reddit users pump names, sending many (TLRY, SNDL, CGC) higher in recent days before profit taking today. Bitcoin mania also grabbing headlines after positive news recently that Tesla was buying $1.5B in Bitcoin and today after Bank of New York said it will hold, transfer, and issue bitcoin and other cryptocurrencies on behalf of its asset-management clients. Bitcoin prices have jumped this week, topping the $48K level (up 66% YTD), boosting names that mine, invest, etc. in the crypto (RIOT, MARA, SI, GBTC, MSTR, OSTK). In other news outside of the latest earnings barrage (which remains generally favorable) Joe Biden spoke to Xi Jinping for the first time since entering the White House and raised concern about China’s unfair economic practices and human rights abuses.

Economic Data

·     Weekly jobless claims fell to 793K from an upwardly revised 812K the prior week (from 779k), which was higher than the 757K consensus; continued claims fell to 4.545M in latest week vs. est. 4.490M and vs. 4.69M prior week; the 4-week moving avg fell to 823,000 from 856,500 prior and U.S. insured unemployment rate fell to 3.2% from 3.3% prior week

Sector Movers Today

·     Retailers; After outperformance on earnings yesterday, UAA was upgraded to OW at Piper who forecasted another 25% upside even after the stock’s +30% YTD performance, Credit Suisse sees the company raising guidance throughout the year as it gains market share in retailers that NKE has de-emphasized, Barclays and Morgan Stanley remain Equal-Weight but upped their targets to $25 from $14 and $23 from $13 respectively, and BTIG reiterated its sell with a $10 target; ADDYY was upgraded to Buy from Neutral at UBS, who says that cleaner inventory in the channel after a painful 2020, new product launches, and a roadmap to margin expansion at March CMD provide upside risk; ELY reported 4Q adj EPS ($0.33) vs. est. ($0.19) on net sales $375Mm vs. est. $337.4Mm, golf club sales +48.5%, golf ball sales +14.3%, apparel sales +8.7%, and did not provide FY21 guidance due to Covid uncertainty; YETI reported Q4 adj EPS 74c vs est. 62c on net sales $275.8M vs est. $353.3M, and sees full-year adj EPS $2.11-2.14 (est. $2.05) with net sales increasing +15-17%; IRBT posted 4Q adj EPS $0.84 vs. est. $0.31 on revs $544.8Mm vs. est. $494.1Mm, and sees FY21 adjusted EPS $3.00-$3.25 vs. est. $2.19 on FY21 revenue $1.635B-$1.675B vs. est. $1.47B; TPX Q4 adj EPS 67c on sales $1.057B both topped consensus (52c on $986M), and its FY21 guidance for EPS of $2.30-2.50 on sales +15-20% were also above consensus ($1.99, +8.5%), and boosted its share repurchase authorization to $400M from $200M; HIBB sees 4Q adj EPS $1.30-1.40 vs. est. $1.09, 4Q comps +21.9% , guides FY22 EPS $5.00-5.50 vs. est. $3.84; LESL 29M Secondary priced at $26.00

·     Pharma movers; cannabis stock the latest market craze (TLRY, SNDL, OGI, ACB, CRON, APHA) as Pot sector continues to be mentioned on Redditt platforms (same platform that sent shirt interest stocks surging in recent weeks) – as shares jumped then fell sharply; ACIU surges after saying its vaccine candidate, ACI-35.030, achieved antibody response against tau protein in 100% of older patients with early Alzheimer’s disease in an early-to-mid stage trial and was safe and well tolerated with no safety concerns; ALNY Q4 revenue more than doubled on stronger drug sales, lifting the company to a narrower net loss and a better-than-expected adjusted loss; PLX enters into an licensing deal with SarcoMed USA Inc to develop PLX’s experimental therapy PRX–110 to treat respiratory diseases through inhaled delivery; MRK is in talks with governments and health authorities about possibly producing Covid-19 shots, the WSJ reported; RHHBY’s arthritis drug tocilizumab cuts the risk of death among patients hospitalized with severe COVID-19, also shortening the time to recovery and reducing the need for mechanical ventilation, results of a large trial showed on Thursday

·     Healthcare Services, MedTech and Equipment; LH posts Q4 adj profit of $10.56, topping the estimate of $8.11 as Q4 rev rose nearly ~52% to $4.5B, above the $3.95B estimate as diagnostic segment rev surged 79.5% to $3.15B, due to higher demand for COVID-19 testing; CERN print was in-line, with revenue and EBIT meeting estimates, while tax rate drove a $0.01 beat on EPS, though guidance for 1Q came in below consensus (downgraded at UBS to Neutral); MOH adjusted EPS of -$0.51 came in below consensus estimates of 86c profit – but normalized EPS in the quarter (excludes the impact of COVID and one-time items) of $3.29 came in above the ~$3.00 projection; FLDM drops as Q4 EPS loss (13c) vs. est. loss (7c); Q4 revenue $44.61M vs. est. $50.72M; guides Q1 revenue $30M-$33M, below consensus $47.62M

·     Software movers; DAO 7M share Secondary priced at $34.00; AVLR reported strong Q4 results with re-acceleration to 35% revenue growth (29% organic), which was above consensus, driven by strong execution across the business, and resiliency in the current COVID-19 environment; QLYS reported solid 4Q results which beat the Street expectations, but overshadowed by the announcement that longtime Chairman and CEO Philippe Courtot will be taking a medical leave; PAYC reported a quality beat as new bookings momentum and stable retention more than offset unemployment headwinds said Keybanc (upped tgt to $500); ZNGA solid beat and raise against a high bar especially post GLUU

Stock GAINERS

·     ACIU +37%; after saying its vaccine candidate, ACI-35.030, achieved antibody response against tau protein in 100% of older patients with early Alzheimer’s disease in an early-to-mid stage trial

·     BK +4%; said it will hold, transfer and issue bitcoin and other cryptocurrencies on behalf of its asset-management clients

·     INFI +32%; after saying its experimental drug candidate, eganelisib, in combination with BMY’s Opdivo was well-tolerated and improved overall response rate

·     MESO +10%; announces phase III trial results for its allogeneic mesenchymal precursor cell therapy rexlemestrocel-L for back pain as study shows treatment may provide safe, durable and effective opioid-sparing therapy

·     PI +21%; reported exceptionally strong results, with March quarter guidance handily beating expectations on the back of endpoint IC strength – adj. EBITDA loss was better-than-expected – beat driven by a 32% q/o/q increase in PI’s Endpoint IC business

·     PINS +4%; after the FT reports MSFT made an approach to PINS about a potential acquisition in recent months, but says the talks are not currently active https://bit.ly/2Ni1mIC 

·     SONO +14%; as 1Q adj EPS $1.17 vs. est. $0.88 on revs $645.6Mm vs. est. $589.9Mm; sees FY21 revs $1.525-1.575B vs. est. $1.46B, sees FY gr margin 46-46.5%

·     ZG +15%; shares jump as delivered a 4Q beat, above-Street guide and a surprising unit profit in the iBuyer business: Premier Agent revenue +35% & IMT margin 48%; Homes revenue beat

Stock LAGGARDS

·     CERN -3%; print was in-line, with revenue and EBIT meeting estimates, while tax rate drove a $0.01 beat on EPS, though guidance for 1Q came in below consensus (downgraded at UBS to Neutral)

·     ELY -6%; reported 4Q adj EPS ($0.33) vs. est. ($0.19) on net sales $375Mm vs. est. $337.4Mm, golf club sales +48.5%, golf ball sales +14.3%, apparel sales +8.7%, and did not provide FY21 guidance

·     FLDM -23%; drops as Q4 EPS loss (13c) vs. est. loss (7c); Q4 revenue $44.61M vs. est. $50.72M; guides Q1 revenue $30M-$33M, below consensus $47.62M

·     QSR -3%; reports adjusted EBITDA of $501M in Q4 to fall short of last year’s $622M mark and miss the consensus estimate of $547M as Tim Hortons system sales plunged 12.9% and comp sales decreased 11.0%, Burger King system sales fell 8.1% and comp sales declined 7.9%

·     TLRY -32%; a little of the air coming out of the Reddit forum cannabis pump

·     TSN -7%; protein producers weak on softer results; PPC Q4 adj EPS 25c vs. est. 33c; Q4 revenue $3.12B vs. est. $3.29B; TSN reported a big earnings miss, but quarterly sales fell short of ests

·     UBER -2%; bar was high post LYFT and even before LYFT, but Delivery business continues impressive trajectory with DaaS gaining traction; 4Q Delivery GB +128% y/y, 2% above Street

Syndicate:

·     Apria (APR) 7.5M share IPO priced at $20.00

·     Ares Capital (ARCC) 13.5M share Spot Secondary priced at $18.12

·     Brookfield Renewable (BEPC) 15M share Secondary priced at $51.50

·     Bumble (BMBL) 50M share IPO priced at $43.00, above its target range, to raise $2.2 billion – was previously aiming to sell 45 million shares at a target price range $37-$39

·     Bioventus (BVS) 8M share IPO priced at $13.00

·     KalVista (KALV) 5.375M share Secondary priced at $36.00

·     Leslie’s (LESL) 29M share Secondary priced at $26.00

·     LoanDepot (LDI) 3.85M share IPO priced at $14.00

·     Nano-X Imaging (NNOX) 3.09M share Secondary priced at $62.50

·     Oak Street Health (OSH) 10.72M share Secondary priced at $56.00

·     Onconova (ONTX) 25M share Spot Secondary priced at $1.00

·     Radware (RDWR) 2M share Block Trade priced at $28.10

·     Signify Health (SGFY) 23.5M share IPO priced at $24.00

·     Varonis (VRNS) 2.3M share Secondary priced at $195.00

·     Youdao (DAO) 7M share Secondary priced at $34.00