Mid-Morning Look

Wednesday, January 10, 2024

U.S. stocks are mixed, with the S&P 500 and Nasdaq wavering between gains and losses early, while the Russell 2000 Smallcap index underperforms as investors await tomorrow’s CPI inflation report for the next clue on potential interest rate cut timing by the Fed. The same big cap tech names are again pacing the market gains for Nasdaq as NVDA, AMZN, META, MSFT, GOOGL all pushing higher after selling off the first few days of 2024. Meanwhile, 2023 laggards such as Smallcaps and energy, which started the New Year off strong, has once again found downward momentum. Treasury yields mostly steady, with the 10-yr at 4% into the CPI data Thursday while Bitcoin prices slip awaiting the SEC decision for ETF likely today. No massive moves for any one sector as investors/markets remain in “wait-and-see” mode until tomorrow. In addition to the CPI report tomorrow, Wall Street gets the PPI inflation data on Friday as well as the start of banking earnings. Investors will closely monitor comments by New York Fed President John Williams later today as well.

• Internet: Goldman Sachs made several changes: assumed coverage of EBAY (Sell), CHWY (Buy), RENT (Buy) saying they remain cautious on the eCommerce sector amidst a continued shift of consumer budgets away from discretionary goods, competition from Asia-based platforms, and consumer preference for platforms with scale. Goldman downgraded ETSY to Neutral, initiated on RVLV at Sell based on current industry headwinds in the high-end online apparel space. SNAP price tgt raised to $13 from $7 at Morgan Stanley (but remain underweight) citing better near-term ad trends, China-based spend, AMZN partnership, and AI.
• Housing: HD upgraded to Outperform at Wedbush and raise tgt to $380 from $330 saying although home improvement retail demand weakened in 2023 believes many of the downward key drivers are bottoming or reversing, which should translate to stronger demand in 2024. In Homebuilders: LEN raised the annual dividend to $2.00 from $1.50 per share and increases its stock repurchase program by $5B. ZG was downgraded from Buy to Neutral at Bank America but raised tgt to $60 from $47 saying believes the stock is pricing a steady recovery in housing in 2024 (shares are up over 40% y/y), near record low home affordability could limit volume upside (even w/ lower rates) and real estate commission lawsuits are an overhang. KBH expected to report earnings after the close tonight.

• AZZ +7%; forecasts FY adj. EBITDA $315M to $335M, above prior forecast $300M to $325M and boosted its FY sales view to $1.45B to $1.55B, from prior $1.4B to $1.55B.
• GDRX +14%; after rev guidance above views; sees Q4 revs $195M-$197M, above prior forecast $188M-$194M and FY revs $749M-$751M, topping forecast $742M-$748M.
• ISRG +6%; after guiding Q4 sales of $1.93B, topping consensus of $1.87B and saying procedures with its surgical robot da Vinci rose 21% in Q4 while expects worldwide da Vinci procedures to rise ~13% to 16% in 2024 from 2023.
• MASI +2%; guided 2024 revenue to $2.05B-$2.17B, above est. $2.09B and Q4 revs $541M-$551M vs. est. $537M.
• LEN +3%; raised the annual dividend to $2.00 from $1.50 per share and increases its stock repurchase program by $5B.
• PSMT +11%; on results as Q1 adj EPS $1.24 vs est. $1.09 on revs $1.17B vs est. $1.158B; comps +8%.
• SGH +12%; as Q1 EPS $0.24 and sales fell -41% y/y to $274.2M; forecasts Q2 net sales $260M to $310M and EPS $0.15-$0.35; board of directors approved a $75 mln share repurchase authorization.

• CHRS -7%; terminated its TIGIT Program collaboration with Junshi Biosciences; despite termination with Junshi biosciences on TIGI, said to continue to support patients in its current studies involving CHS-006.
• DCGO -32%; after Fuzzy Panda Research disclosed a short position in the company saying billing practices amounted to Medi-Cal and Medicare Fraud, citing former employees. http://tinyurl.com/y3jm69h6
• MDRX -11%; lowered full-year revenue view to $608M-$622M from prior view $615M-$635M and cut its FY adj EPS view to $0.79-$0.88 from the prior $0.80-$0.90 view.
• ON -4%; along with weakness in WOLF, both pressured on AEHR guidance (involved in SiC chip sector).