Mid-Morning Look

Wednesday, February 16, 2022

U.S. stocks are pulling back after yesterday’s big bounce, with weakness in technology, healthcare and communication services somewhat offset by gains in energy (biggest gainer after lagging the last 2-days), financials, materials as well as defensive utilities and consumer staples. A handful of stocks absolutely battered this morning following earnings results and/or guidance, including VIAC, MASI, WIX, SHOP, RBLX among the hardest hit, while a few see strength post results including DVN, GNRC, AYX and UPST. Macro picture continues to drive broader markets, especially in Europe as the U.S. said there is no evidence of Russia pullback from Ukraine border (commentary of easing tensions yesterday was a main market driver). Meanwhile economic data continues to show surging prices/inflation as U.S. import prices increased by the most in nearly 11 years in January, rising 2.0% vs. est. +1.3% (after Dec fell -0.4%) amid a jump the cost of energy products and strained supply chains. All eyes on the Fed March meeting, with increased risk of a more aggressive rate hike (some Wall Street shops calling for 50-bps hike) as they try and get rising prices under control – and of course the geopolitical headlines overseas. Reopen plays seeing more strength with 52-week highs for EXPE, HLT, MAR while the MRNA CEO said on CNBC that its “reasonable” to think pandemic may be in final stages.

Economic Data

·     Retail sales rose an adj +3.8% in January from the previous month, far outpacing economists’ forecasts for a +2.1% increase (Dec revised to -2.5% from -1.9%), along with rapidly accelerating prices, with inflation jumping 7.5% on an annual basis in January. Retail sales x-autos rose +3.3% vs. est. +0.8% (Dec revised to -2.8%). January’s figure is a 13% year-over-year increase.

·     U.S. import prices increased by the most in nearly 11 years in January, rising 2.0% vs. est. +1.3% (after Dec fell -0.4%) amid a jump the cost of energy products and strained supply chains. In the 12 months through January, prices accelerated 10.8% after rising 10.2% in December. Petroleum prices surged 9.5%, while the cost of imported food accelerated 3.6%. Export prices advanced 2.9% in January 9vs. est. +1.3%) after dropping 1.6% in December.

·     Industrial production rose 1.4% v. est. +0.4% and vs. December unrevised at (-0.1%); Jan mining output +1.0% vs. Dec +1.5% and utilities output +9.9%; Capacity utilization jumps to 77.6% from 76.8% and vs. December at 76.6%

Sector Movers Today

·     Casinos, Gaming, & Leisure sector; cruise operators CCL, NCLH, RCL add to recent gains after the CDC reduced its warning to level three from four in response to a decline in onboard COVID-19 cases, but still recommended that people who were not up to date with vaccines avoid cruises; SEAS said late Tuesday its offer to acquire amusement park operator FUN has been rejected and SeaWorld does not see a path to a transaction; in casino, WYNN reported a mixed 4Q21 result, with solid upside in Las Vegas and Boston offset by lower than forecast EBITDA in Macau (bad debt provision a drag) and to sell real estate of Encore Boston Harbor for $1.70B; CRSR will replace FMBI in the S&P SmallCap 600 effective the opening of trading on Friday, February 18; LVS was downgraded to BB+ at S&P, outlook negative

·     Retailers; CROX posted a Q4 EPS beat of $2.15 vs. est. $2.00 on slightly better revs but guidance weighs on shares as sees year adj EPS about $9.70-$10.25 vs. est. $10.11 and Q1 revs below views; in research, JWN downgraded to in-line from Outperform and Macy’s (M) upgraded to outperform from in-line at Evercore/ISI; heading into earnings season soon for retailers (WMT tomorrow); as Deutsche Banks said AEO, BBWI, M top ideas but lowers tgts for AEO, BURL, FL, GPS, JWN, KSS, M, ROST, TJX, URBN saying overall they expect in line reports for 4Q as the Omicron surge and higher than expected freight and supply chain costs are likely to keep a lid on any upside this quarter. Looking ahead, they anticipate 1Q guidance to come in below Street

·     Internet; social media stocks FB, SNAP, TWTR, PINS slump after GOOGL plans to adopt new privacy restrictions to curtail tracking across apps on Android smartphones, following AAPL in putting restraints on an advertising industry, including FB, that has covertly collected data across billions of mobile devices; SHOP Q4 adj EPS $1.36 vs est. $1.26 on revenue $1.38B vs est. $1.34B, GMV $54.1B vs est. $52.6B but sees headwinds in 1H22 due to the belief that the acceleration of e-commerce driven by Covid-19 will not repeat itself in the first half of 2022 and also forecast its annual rev growth will be below 2021’s 57%; WIX Q4 loss widened to (37c) per shares from (3c) YoY and vs est. (38c) on revenue $328.3M vs est. $331M, sees Q1 revenue $338-343M below est. $353.5M, and was downgraded to Neutral at Guggenheim; TTD Q4 ad EPS 42c vs est. 27c on revenue $395.6M vs est. $389.3M, sees Q1 revenue at least $303M and adj EBITDA about $91M, ahead of respective estimates of $287.2M and $80.9M; ZI Q4 adj EPS 18c vs est. 13c on revenue $222.3M vs est. $207.7M, sees Q1 revenue $226M-$228M vs est. $215.6M and FY revs $1.01B–$1.02B vs est. $982.2M; AKAM reported 7% normalized rev. and 10% EPS growth, respectively. 2022 guidance is a bit weak, at a normalized ~6% growth, with margins declining by 200 bps

·     Industrial & Machinery; GNRC Q4 adj EPS $2.51 vs. est. $2.40 on revs $1.07B vs. est. $1.02B, sees 2022 revenue growth 32%-36% that implies a midpoint of $5B vs est. $4.71B; VMC Q4 adj EPS $1.25 vs est. $1.20 on in-line revs $1.61B, sees 2022 aggregates shipments +5-+7% below est. +7.49% and adj EBITDA $1.72-$1.82B vs est. $1.76B; WAB Q4 adj EPS $1.18 vs est. $1.17 on revs $2.07B vs est. $2.18B, guides FY adj EPS $4.65-5.05 vs est. $4.87 and revs $8.3-8.6B vs est. $8.46B; OC reported a strong Q4 with adj EPS $2.20 and revenue $2.13B ahead of ests. $1.91 and $2.04B, sees Q1 YoY growth from 1Q20’s sales of $1.92B (est. $2B); MRC Q4 adj EPS 17c topped est. (2c) loss on sales $686M vs est. $685M and is targeting FY22 revenue of at least $3B (est. $3B) and adj EBITDA at least $190M (est. $182M)

Stock GAINERS

·     ABNB +3%; reported strong 4Q21 results as bookings, revenue, and EBITDA respectively came in 2%, 5%, and 21% above consensus despite Omicron likely impacting December bookings

·     AYX +6%; posted a Q4 beat and above-consensus guide on revenue and ARR, and below-consensus EPS outlook due to dilution from Trifacta as large deal activity was particularly strong

·     CRSR +7%; will replace First Midwest Bancorp Inc. (FMBI) in the S&P SmallCap 600 effective prior to the opening of trading on Friday, February 18

·     DVN +5%; adj. EPS of $1.39 beat consensus estimates of $1.24 on a mix of items including strong production and lower opex / production taxes vs estimates. Total production of 611 Mboe/d topped management guidance of 583-601 Mboe/d

·     GNRC +8%; Q4 adj EPS $2.51 vs. est. $2.40 on revs $1.07B vs. est. $1.02B, sees 2022 revenue growth 32%-36% that implies a midpoint of $5B vs est. $4.71B

·     LSCC +3%; results and near-term outlook beat consensus expectations handily with year-over-year growth metrics up strongly – margin and profitability metrics continue to improve

·     UPST +28%; reported better-than-expected 4Q21 results as revenue growth reaccelerated to +252% Y/Y, EBITDA margins expanded 1,200bps Y/Y to 30%, and the company announced a share repurchase authorization

Stock LAGGARDS

·     AKAM -4%; reported 7% normalized rev. and 10% EPS growth, respectively. 2022 guidance is a bit weak, at a normalized ~6% growth, with margins declining by 200 bps

·     CF -5%; earnings miss on top/bottom line, as Q4 EPS $3.27 below est. $3.55 and revs $2.54B vs. est. $2.63B while projects capex for full year in range of $500-$550M vs. est. $464M

·     FB -2%; along with TWTR, SNAP, PINS after GOOGL said it is going to limit tracking by apps like AAPL, pressuring the likes of social media related companies

·     FUN -9%; after SEAS said late Tuesday its offer to acquire the amusement park operator has been rejected and does not see a path to a transaction

·     MASI -30%; after earnings – BITG said consumer tech acquisition leaves us with more questions than answers; strategy to be revealed later this year

·     MRTX -13%; after announcing that the FDA has accepted its NDA for adagrasib in 2L NSCLC with a PDUFA of 12/14/22, but feedback suggests the timeline for the review is later than expectations

·     RBLX -20%; posts a 20% rise in bookings in Q4 to $770.1M but was below the $772M consensus estimate while Q4 loss widens y/y to $143.3M from $58.7M

·     SAGE -12%; slides after Phase III Coral study meets primary and key secondary endpoints, though focus on durability – Wall Street raised questions about the durability of the experimental treatment for major depressive disorder that Sage is developing with BIIB

·     SEDG -2%; posted mixed 4Q results while guiding revenue ahead of expectations with GM 170bps below consensus at midpoint as the company works to push through prices increases to offset component cost increases and lower expediting expenses

·     SHOP -15%; Q4 adj EPS $1.36 vs est. $1.26 on revenue $1.38B vs est. $1.34B, GMV $54.1B vs est. $52.6B but sees headwinds in 1H22 due to the belief that the acceleration of e-commerce driven by Covid-19 will not repeat itself in the first half of 2022

·     TOST -16%; reported strong 4Q results that came in above expectations on the top-line and in-line on EBITDA with 74% y/y growth in ARR, and 124% y/y growth in GPV, but issued light 1Q/FY22 guide on EBITDA

·     VIAC -19%; after Q4 adj EPS of $0.26 missed estimates of $0.43 on revenue $8B vs est. $7.5B; added 9.4M global streaming subscribers led by Paramount+ reaching over 56M subs as streaming revenue rose +48% YoY

·     WIX -22%; Q4 loss widened to (37c) per shares from (3c) YoY and vs est. (38c) on revenue $328.3M vs est. $331M, sees Q1 revenue $338-343M below est. $353.5M, and was downgraded to Neutral at Guggenheim