Mid-Morning Look

Wednesday, January 20, 2021

Stocks again jump to fresh record highs for the S&P 500 as well as another big surge in technology, with the Nasdaq Composite spiking to new all-time bests, helped by Netflix (NFLX) earnings overnight (lifting FAANG names) along with another record high for the semiconductor index (SOX). The NFLX results lifting sentiment in other pay subscriber companies (DIS, ROKU, FUBO), while the recent upbeat sentiment on 5G is again lifting chip names. Note Jim Cramer on CNBC (noting massive chip shortage – especially for auto) and Motley Fool names 5G top tech investment space for 2021 – helping the industry. While tech grabbing all the headlines this morning, attention turns to Washington D.C. as Joe Biden is sworn into office as the 46^th President of the United States. The auto space continues upward momentum on more positive analyst comments on TSLA, GM, Ford (F), and auto suppliers. Defensive sectors such as utilities, consumer staples again bringing up the rear in the early going. There is no major U.S. economic data today. The euro slips vs. the U.S. dollar to a session low, while the buck dipped to one-week low vs. the safe-haven Japanese Yen. Overall, the ongoing fear of missing out (FOMO) continues to boost this market, as investors and traders chase performance in a market that has seen a massive bull run from the pandemic lows last March.

Sector Movers Today

·     Bank movers: MS Q4 profit surges ~57% (EPS $1.81 beat the $1.27 est.) as its trading business benefited from volatility in financial markets and revs of $13.6B top the $11.54B estimate and confirms plans to buy back $10 bln of shares this year; ZION quarter was highlighted by the better-than-expected credit metrics and significant reserve release that led to the EPS beat along with stronger deposit growth; BK Q4 EPS 96c vs. est. 91c and reports Q4 revenue $3.84B vs. est. $3.83B; Q4 CET1 capital ratio 13.1%. Reports Q4 book value per share $46.53; CBSH, CFG, FULT among other banks out with earnings results in banks; USB Q4 EPS of 95c, beats by a penny and Q4 provision for credit losses of $441M vs. $635M in Q3; IBKR Q4 adj EPS 69c vs. est. 59c and reports Q4 revenue $599M vs. est. $558.85M; Q4 commission revenue showed strong growth, increasing $120M, or 71%, from the year-ago quarter

·     Semiconductors; Philly semiconductor index (SOX) another record high as chip shortages highlight the industry; semi equipment names taking a breather (AMAT, LRCX, KLAC), lagging in the semi space after massive surge over the last week on rising capex expectations for the industry; ASML Q4 results came in better than expected due to strength in the memory-chip segment; bookings were strong in the quarter at EUR4.2 billion, with both memory and logic contributing to the company’s order intake; 5G push gaining traction after positive comments in sector by Jim Cramer on CNBC (noting massive chip shortage – especially for auto) and after Motley Fool names 5G top tech investment space for 2021 (yesterday) – anything with 5G, or IoT (Internet of Things) seeing mass buying lately: SWKS, QCOM, MRVL, INSG, AIRG, MU, etc

·     Auto sector; TSLA another positive analyst comment as Oppenheimer raises its tgt to $1,036 from $486 citing stock’s huge ongoing rally (sky-rocketed 743% in 2020) and more data than competitors on vehicle safety to validate full autonomous mobility; GM tgt raised to $64 from $48 and Ford (F) to $11 from $9 as both named catalyst call buy ideas at Deutsche Bank, while also raised tgts on auto suppliers (AXL, DAN, GT, LEA, VC, TEN, VNE) and TSLA tgt raised to $890

·     Consumer Staples; PG reported Q2 core eps $1.64 vs. est. $1.51, sees FY organic revs +5% to +6%, up from prior view +4% to +5% and boosts its planned FY21 stock buybacks to up to $10B from a prior range of $7B-$9B; KR downgraded to underweight from equal-weight with $28 tgt at Morgan Stanley; BYND downgraded to Neutral from Buy at BTIG as we believe growth through the retail channel will not be enough to sustain the growth rate and hefty trading multiple in 2021; ELF downgraded to neutral from OW at Piper, stepping to the sidelines following a strong 2020 (ELF shares up 60% vs. SPX +16%)

·     Internet; NFLX shares lead the Nasdaq Comp higher on better subs and FCF guidance while Q4 EPS/sales miss to in-line – Q4 global streaming paid net additions of 8.51M vs. guidance 6.0M; sees Q1 EPS $2.97 above est. $2.10 and says will explore returning cash to shareholders through ongoing stock buybacks, anticipate FY21 to be free cash flow breakeven; BABA rises Jack Ma resurfaced for the first time since China’s government began clamping down on his business empire nearly three months ago (shares od DIS, ROKU, FUBO rallied in sympathy with subs)

Stock GAINERS

·     BABA +6%; rises Jack Ma resurfaced for the first time since China’s government began clamping down on his business empire nearly three months ago

·     CLCT +17%; shares rise after saying sees Q2 preliminary revenues to be ~$35.4M; gross margin is expected to be ~64% and adj. operating income of ~$10M and amends merger agreement to $92 per share https://bit.ly/2NehElS

·     F +4%; among top gainers in the S&P as autos lead rally

·     GOOGL +3%; FAANG names all getting another boost behind NFLX strong results

·     NFLX +14%; price tgts raised by analysts on Wall Street after better subs and FCF guidance while Q4 EPS/sales miss to in-line – Q4 global streaming paid net additions of 8.51M vs. guidance 6.0M; sees Q1 EPS $2.97 above est. $2.10 and says will explore returning cash to shareholders through ongoing stock buybacks, anticipate FY21 to be free cash flow breakeven

·     PENN +6%; was initiated outperform and $128 tgt at Credit Suisse based on four key factors: (1) upside from pandemic-related savings and recent acquisitions as the topline returns, (2) upside to targeted cost savings, (3) better-than-expected margins in sports betting, and (4) PENN’s potential leadership in iGaming.

Stock LAGGARDS

·     BK -6%; Q4 EPS 96c vs. est. 91c and reports Q4 revenue $3.84B vs. est. $3.83B; Q4 CET1 capital ratio 13.1%. Reports Q4 book value per share $46.53

·     BYND -3%; downgraded to Neutral from Buy at BTIG as believe growth through the retail channel will not be enough to sustain the growth rate and hefty trading multiple in 2021

·     FAST -4%; after reporting mostly in-line Q4 EPS and revs

·     GME -4%; profit taking after 100% jump last week in short squeeze

·     KR -2%; and ACI both downgraded to underweight from equal-weight in grocers at Morgan Stanley

·     LAC -14%; 15.9M share Spot Secondary priced at $22.00

·     PLUG -6%; Kerrisdale disclosed a short position in PLUG after the stock’s recent run (it has almost doubled in the past few weeks and is up 15x in the past year)

Syndicate:

·     Bionano Genomics (BNGO) 33.333M share Spot Secondary priced at $6.00

·     BioLineRx (BLRX) 12.5M share Secondary priced at $2.40

·     Fulcrum Therapeutics (FULC) 4M share Secondary priced at $11.00

·     Gevo (GEVO) 43.75M share registered direct offering priced at $8.00

·     Perion Network (PERI) 4.99M share Secondary priced at $11.50

·     Lithium Americas (LAC) 15.9M share Spot Secondary priced at $22.00

·     Syros Pharmaceuticals (SYRS) 5.4M share Secondary priced at $14.00

·     TCR2 Therapeutics (TCRR) 4.59M share Secondary priced at $30.50