Mid-Morning Look

Friday, February 25, 2022

U.S. stocks opened higher, extending a pre-market rebound (after overnight declines) on reports that Russia was sending a delegation to Minsk for Ukraine talks a day after they invaded the country. A massive rally yesterday (Nasdaq went from down -3% to settle over 3%) came on strong volume after oversold conditions, as fear remains absent in markets overall (VIX remains under 30) despite the selling pressure earlier this week on macro concerns. While all eyes are fixed on the events in Ukraine, the invasion, the sanctions, the impact on commodity prices (oil, platinum, uranium, what, corn), still concerns ahead with the March FOMC meeting around the corner. The market is back to pricing in over six rate hikes this year, with uncertainty of March will see a 25-bps hike (100% priced according to Fed Fund Futures) or a larger 50bps with sentiment being the Fed is behind the curve fighting inflation. Military action in Ukraine remains intense, with significant fighting near the northeastern city of Kharkiv and Russia pressing on the capital Kyiv today. The Stoxx Europe 600 Index surged almost 2%, rebounding from a technical correction on Thursday. Both the U.S. and European Union stepped up sanctions on Russia as the attacks on Ukraine intensified. Choppy action early into the weekend.

Economic Data

·     Durable Goods Orders for Jan/P rose +1.6% vs. est. 0.8% and prior -0.7%, while Durables Ex Transportation rose +0.7% vs. est. +0.4% and prior +0.6%; Capital Goods Orders Non-Def Ex Air rose +0.9% vs. est. +0.3% and Durables ex-defense orders +1.6% vs. est. +0.1%

·     Personal Income for January 0.0% vs. est. -0.3% (prior +0.3%), while Personal Spending for Jan rises +2.1% vs. est. +1.6% (prior -0.6%); Real Personal Spending rises +1.5% vs. est. +1.2%; the personal saving rate 6.4% pct vs. Dec 8.2%

·     Inflation data shows: Overall PCE price index for Jan rose +0.6% vs. Dec +0.5%; and Jan core PCE price index +0.5% in-line with consensus; Jan PCE price index y/y rose +6.1% vs. Dec +5.8% and core y/y up +5.2% vs. est. +5.1%

·     Pending Home sales index for January fell -5.7% well below the +1% estimate and Jan Pending Home sales -9.5% from January 2021

·     University of Michigan surveys of consumers us consumer sentiment final February 62.8 vs preliminary 61.7 and final January 67.2; current conditions index final February 68.2 vs preliminary 68.5 and final January 72.0

Sector Movers Today

·     Financial Services; EVTC posted Q4 adj EPS 72c vs est. 62c on revenue $155.2M vs est. $146.4M, raised its buyback plan to $150M, acquired Chilean payments solution company BBR for ~$60M, and extended its relationship with Popular; INTU Q2 results were weaker than consensus with EPS $1.55 below est. $1.85 and revs $2.7B shy of est. $2.73B while reiterating FY guidance below estimates; NRDS posted a quarterly beat in its first report as a public company with personal loans rev and credit card partner budget outpacing pre-Covid levels and guidance also topped consensus views; OPEN Q4 EPS (31c) was wider than est. (18c) on revs $3.8B vs est. $3.2B, guides Q1 revs $4.1-4.3B vs est. $3.3B, adj EBITDA $30-40M vs est. $11.8M

·     Software movers; ADSK reported 4Q results slightly ahead of consensus expectations, while FY23 guidance was roughly in line with recently lowered expectations given the macro backdrop and FX rates; VMW reported F4Q results ahead of consensus expectations, with a top-line beat and lower expenses driving outperformance down the P&L and helping cash flow; EVBG plunges as posted a Q4 net loss of $2.1M (vs. $0.6M income y/y) and issued a mixed guidance for FY22 with downside guidance for Q1 EPS loss and sales

·     Consumer Staples; BYND slides as 4Q rev in line/slightly better but big margins miss of 14% and adj EBITDA miss and sales outlook for 2022 $560M-$620M vs est. $637.3M; MNST strong 4Q sales (+12.9%), beating the street (+11.2%) but missed slightly on EPS with extremely low gross margin down nearly -400 bps YOY and more than -600 pts vs. 4Q19 to 53.9%; SFM Q4 EPS $0.32 vs. est. $0.30 as sales fell 7% y/y to $1.49B vs. est. $1.47B with better year PS view; PM said it has temporarily suspended operations in Ukraine, including at its factory in Kharkiv, in the wake of Russia’s invasion of the country

Stock GAINERS

·     ETSY +7%; top/bottom line beat (Q4 EPS $1.11/$717.1Mm vs est. $0.79/$685.5Mm), though guidance disappoints as sees Q1 revs $565-590Mm vs est. $629.5Mm – but boosted its transaction fee on the Etsy.com marketplace to 6.5% from 5.0% previously, effective April 2022

·     FTCH +30%; mixed quarter for EPS/sales, but shares rebound after falling -55% YTD coming into the print which showed Digital Platform GMV rose 22% y/y, coming in at the top end of guidance for 18-22% growth and maintained its view for ~30% growth in 2022

·     KAR +37%; agrees to sell its ADESA U.S. physical auction business to CVNA in all-cash deal valued at $2.2B as agreement will allow it to focus on its digital marketplaces portfolio

·     LPRO +14%; Q4 EPS 23c vs est. 16c on revs $51.6M vs est. $43.1M, sees FY22 revenue $210M-$240M vs est. $231.5M and total certified loans rising over 20% at the midpoint of its guidance

·     MNST +4%; strong 4Q sales (+12.9%), beating the street (+11.2%) but missed slightly on EPS with extremely low gross margin down nearly -400 bps YOY and more than -600 pts vs. 4Q19 to 53.9%

·     PLTK +11%; after the mobile videogame firm said it has retained The Raine Group as financial advisor to assist with strategic review process while also reported Q4 revs rose to $649M from $563.5M y/y (est. $637M

·     SQ +16%; Q4 EPS 27c vs. est. $0.25 on revs $4.08B vs. est. $4.06B; Q4 transaction-based revenue in-line $1.31B, gross payment volume $46.33T, for Jan/Feb they expect Cash App profit to grow on a YoY and two-year CAGR basis and Square GPV to be up 35% YoY

Stock LAGGARDS

·     BYND -11%; slides as 4Q rev in line/slightly better but big margins miss of 14% and adj EBITDA miss and sales outlook for 2022 $560M-$620M vs est. $637.3M

·     COIN -3%; reported Q4 revs $2.49B vs est. $1.94B, monthly transacting users +54% from Q3, trading volume +67% YoY to $547B, though forecast a sequential slowdown in Q1 due to volatility in crypto and the loss of market cap

·     DELL -9%; after missing on F4Q (Jan) EPS and F1Q (Apr) guidance

·     EVBG -37%; plunges as posted a Q4 net loss of $2.1M (vs. $0.6M income y/y) and issued a mixed guidance for FY22 with downside guidance for Q1 EPS loss and sales

·     FL -32%; sees 2022 adjusted EPS between $4.25 and $4.60, lower than analysts’ estimate of $7.56 and expects comparable sales in 2022 to be down 8% to 10% as dealing with higher costs – also said no single vendor is expected to represent over 60% of its purchases for fiscal 2022, as co’s top supplier NKE ramps up focus on its direct-to-consumer channel

·     INTU -3%; as Q2 results were weaker than consensus with EPS $1.55 below est. $1.85 and revs $2.7B shy of est. $2.73B while reiterating FY guidance below estimates

·     LPSN -27%; downgraded by a handful on Wall Street analysts after quarterly results and a weak outlook (~10% guide down from its initial outlook)

·     ZS -21%; after a stellar run, 2Q was mixed as billings rose a strong +59% y/y but below the 70% the last 4-quarters weighs as Federal contracts not closing, a lack of mega deals, and duration contracting sequentially were called out as issues