Mid-Morning Look

Tuesday, January 12, 2021

U.S. equities are edging slightly higher as the S&P 500 and Dow look to make it a 5^th day of gains in the last six (snapped 4-day win streak Monday), while Smallcaps outperform with the Russell 2000 up over 1%, led by another spike in energy stocks on rising oil prices and positive analyst commentary. Not far behind Energy are Financials (ahead of earnings later this week) & Consumer Discretionary, while commodity prices are mostly higher and Treasury yield extend gains (10-year up at 1.17%). In Washington, the House is set to vote on a resolution for Vice President Mike Pence to invoke the 25th amendment to remove President Donald Trump. Megacap tech stocks are mixed, but Tesla is bouncing back from yesterday’s plunge, when it snapped an 11-session win streak. Headlines dominated for a second straight day in retailers and healthcare companies ahead of presentations at the ICR Conference and JPM Healthcare conferences. The dollar edges lower as its recent rally runs out of steam.

Sector Movers Today

·     Auto sector; NIO announces $1.3B convertible senior notes offering; NIO downgraded to Neutral from Buy at Citigroup but raise tgt to $68.30 from $46.40 after the company unveiled its first sedan model, the ET7, at its Nio Day event on January 9 saying its good but not enough to make any critical changes from Tesla’s challenge; XPEV said it entered into a strategic cooperation agreement with five Chinese commercial banks pursuant to which it will obtain a credit line of RMB12.8 billion ($1.98 billion) with an extensive range of credit facilities; ACTC rises after saying it is taking commercial electric vehicle technology company Proterra Inc. public in a transaction that values Proterra at $1.6 billion; GM launches Brightdrop electric delivery vehicle business

·     Energy stock movers; Mizuho initiated Neutral ratings on BP and TOT and RDSat Buy in European energy while upgrading COP and OXY to Buy and assuming CVX at Buy and XOM at Neutral in US companies as oil and gas is still in the early stages of a secular bull market driven by improving demand and sustained by structural underinvestment in supply due to the fear of peak demand, and they expect Brent to average $60/bbl in 2022 with $70 upside by that year-end; Mizuho also upgraded CLR to Neutral with a $24 target and MRO to Buy as their current oil price forecasts would be beneficial to these companies; RBC says PXD remains a favorite idea given their strong balance sheet, core assets that generate visible FCF, and acreage that is mostly on fee lands, and ESTE provides an attractive balance of small-cap oil beta coupled with a peer-leading balance sheet and strong margins; TPH upgraded SWN, RRCand AR to Buy

·     Bank movers; UBS sees some holes in the narrative that has driven large cap banks’ 9% rally in the first week of 2021 and names WFC as their top pick, still likes C (Citi) and raised its target to $88 from $54 given its discounted valuation, and downgraded CFG to Neutral on valuation and revenue pressures, leaving RF as their only Buy-rated regional bank; Piper initiated PACW at OW with a $40 pt on its above-average pre-provision profitability and credit leverage and on its valuation that is currently at a discount versus peers but could regain its historical premium; NTRS was downgraded to Underperform on muted growth and elevated valuation at Bank of America, who also upgraded SCHW to Buy and raised their target to $68 from $52 on strong business trends, synergies from the recent AMTD acquisition, and eventual rate raises

·     Leisure and Gaming; IGT upgraded to Buy from Hold and setting a target of $21 at Argus saying following the sale of its Italian gaming business, IGT will focus on its core business-to-business division and right size its operations; in lodging, DRH and XHR both upgraded at Raymond James while downgraded HST and RHP while adj. estimates as expect business transient and group travel to come back later and slower than we had previously hoped; FUBO rises after saying it plans to launch free-to-play gaming experience this summer; LVS announced Chairman and CEO Sheldon G. Adelson passed away last night at the age of 87; DKNG and PENN jump on reports online sports betting legislation might be on the table in Texas this year

Stock GAINERS

·     ACI +2%; posted Q3 earnings beat expectations and the company raised its full-year expectations (now expects fiscal full-year 2020 identical sales growth of 16.5%, up from 15.5% previously, and adjusted EPS in the range of $3.05 to $3.15, up from $2.75 to $2.85 previously)

·     ACTC +78%; after saying it is taking commercial electric vehicle technology company Proterra Inc. public in a transaction that values Proterra at $1.6 billion – the stock expected to trade on the Nasdaq under the ticker symbol PTRA

·     CMD +4%; STE agreed to buy CMD for about $3.6 billion in cash and stock in a deal that would combine two big providers of sterilization products; transaction is valued at $84.66 per Cantel share, based on Steris’s closing price of $200.46 a share Monday https://on.mktw.net/3oF41dc

·     ETSY +13%; setting new record high, up for 4^th straight day – yesterday, Jefferies had said November and December traffic on ETSY accelerated to nearly 100%, up from 57% in October and representing the highest level of monthly growth since they started measuring traffic 2 years ago

·     FUBO +16%; after saying it plans to launch free-to-play gaming experience this summer

·     GM +7%; announced today a new business, BrightDrop, which will offer an ecosystem of electric first-to-last-mile products, software and services to empower delivery and logistics companies to move goods more efficiently

·     OXY +7%; upgraded to Buy at Mizuho (along with other upgrades for CLR, MRO) and as oil prices surge on the day, lifting energy – among top S&P 500 gainers

·     PLUG +15%; as announced plans with Renault to launch a 50-50 joint venture based in France for the research and development, manufacturing and sale of fuel cell-powered vehicles and hydrogen turn-key solutions in the coming years

·     TSLA +6%; rebounds after having its 11-day winning streak snapped yesterday

Stock LAGGARDS

·     BSX -4%; sees Q4 prelim sales about $2.71B vs. est. $2.86B, which represents a decline of about 6.8% on a reported basis and down 8% on organic basis

·     LLY -2%; gives back some of yesterdays gains following better Alzheimer drug study data

·     LMND -6%; after announced offering of 4.524M shares of common stock

·     MA -2%; weakness early in credit card names (Visa as well)

·     O -2%; as 10.5M share Spot Secondary priced at $57.05

·     ZM ; announces offering of $1.5B of Class A common stock