Mid-Morning Look

Thursday, January 28, 2021

Stock markets opened higher, recovering from its biggest one day decline in 3-months yesterday and overnight weakness as economic data came in stronger, online trading brokers institute trading restrictions on certain securities and investors try and turn back to fundamentals after a big beat by Apple (AAPL) overnight, while Tesla (TSLA) missed profit views. After rising 14.19 points at 37.21 the CBOE Volatility index (VIX) fell to lows down $7.50 or 20% to $29.70. Apple shares were down even though it reported late Wednesday holiday-quarter sales and profit that beat Wall Street expectations. In politics, U.S. senate democratic leader Schumer says the Senate will begin debate of robust covid-19 bill next week. Gains in some of the major short-squeeze and gamma-squeeze stocks are more muted, while a few names are in the red. Record trading volumes continue – note yesterday cash equity volumes 24.5B shares, U.S. equity options 57.1B contracts, both a record. Online trading brokers trying to reign in on the market madness going on over the last week or so in high short interest positions as Robinhood restricted transactions for certain securities to position closing only, including AMC, BB, BBY, EXPR, GME, KOSS, NAKD and NOK and raised margin requirements for certain securities. Interactive Brokers put AMC, BB, EXPR, GME, and KOSS option trading into liquidation only due to the extraordinary volatility in the markets. In addition, long stock positions will require 100% margin and short stock positions will require 300% margin until further notice. Another busy morning of news and data.

Economic Data

·     US weekly jobless claims fell to 847,000 in latest week vs. est. 875K while prior week revised to 914,000 prior week from 900,000; the 4-week moving average rose to 868,000 from 851,750 prior week; continued claims fell to 4.771 mln in latest week vs. est. 5.054 mln and US insured unemployment rate fell to 3.4% from 3.5%

·     Q4 GDP data was mostly in-line with estimates, reported at +4.0% annualized vs. +4.1% estimate and +33.4% in Q3 as the economic recovery continues at a much slower rate as new restrictions were imposed when the virus resurged. PCE price index +1.5% vs. +2.4% consensus and 3.7% in previous quarter. Core PCE prices +1.4% vs. +1.5% consensus and 3.4% in previous quarter.

·     New Home Sales for Dec rose 1.6% MoM to 842K vs. 871K expected and 829K prior; single-family home sales +1.6 pct vs. Nov -12.6%; median sale price $355,900, +8.0% from Dec 2019; new home supply 4.3 months’ worth at current pace vs. Nov 4.2 months

Sector Movers Today

·     Housing & Building Products; in homebuilders, MTH posted top and bottom line Q4 beat; TOL downgraded to neutral from outperform at Wedbush noting shares have appreciated by 24% this year as anticipate catalysts are well known by investors; NVR misses EPS by wide margin and also a miss on revenue; building products name EXP posts Q4 EPS/rev beat; SWK Q4 results beat and guides FY21 EPS above consensus; PHM 4Q adj EPS $1.49 vs. est. $1.40 on home sales revs $3.1B vs. est. $3.1B, qtrly net new orders +24% to 7,056 homes, order value +33% to $3.3B; WHR shares dropped despite a beat and raise quarter, falling on profit taking

·     Leisure and Gaming; LVS misses Q4 results – posted 67% drop in Q4 revenue to 41.15B 9est. $1.28b) and an operating loss of $211M/net income was $376M during the quarter vs. $783M a year ago on weaker total property EBITDA of $141M; BC raises FY21 adjusted EPS view to $6.00-$6.40 from $5.75-$6.25 after a Q4 beat in the boating sector as well as a Q4 beat for HZO and also raised its guidance – to $4.00-$4.20 from $3.70-$3.90 (est. $3.92); CCL gains as named a new best idea long at Hedgeye

·     Retailers; Trading in GME was restricted on several platforms, including RobinHood and Interactive Brokers; BBBY another high short interest name that has been moving with GME, was downgraded to Market Perform at Telsey and to Neutral at Bank of America; LEVI Q4 EPS 20c vs. est. 15c on revs $1.39B vs. est. $1.34B (-12% on a reported and constant-currency basis, a significant sequential improvement from Q3 net revenues decline of 27%); FLWS reported Q2 adj EPS $1.72 on net revs $877.3M, both widely beating the highest estimates (consensus $1.39 on $755.2M); TSCO reported Q4 EPS $1.64 (est. $1.51) on revs $2.88B (est. $2.72B), comp sales +27.3%, and sees FY21 EPS $6.50-$6.90 (est. $6.52), rev $10.7B-$11B (est. $10.53B), and guides FY21 comp sales to (2%)-1%; Loop downgraded BIG to Hold on Valuation

·     Consumer Finance; MA Q3 adjusted EPS of $1.64 fell from $1.96 a year ago but above the $1.52 estimate as revenue of $4.1B fell 7% Y/Y, but exceeds the consensus estimate of $4.01B/cross-border volume fell 29% Y/Y on a local currency basis; ADS reported Q4 EPS $3.31 (est. $2.41) on in-lines revs $1.11B (-24% YoY), including card services $879M (-22% YoY) and the company sees FY21 total decreasing low single-digits vs 2020; MELI was downgraded to Neutral at Bradesco

·     MedTech and Equipment; SYK reported mixed Q4 results missing Street expectations on the topline though beating on the bottom, and provided an outlook for 2021 slightly shy of the Street; ABT upgraded from Neutral to Buy at BTIG and setting a $140 PT following a strong Q4 result, a blockbuster Diagnostics revenue result that beat consensus by more than $1B, and a bullish outlook for both 2021 and 2022 EPS; DHR Q4 EPS beat by 21c on higher revs as guides core sales growth at +High-single to low-double digit; EW reported 4Q revs $1.192B, in line with consensus and TAVR revenues were $776M, up 2% y/y, roughly in line with consensus; ABMD rises after EPS of $1.35 topped the $1.13 estimate and revs better at $231.7M vs. est. $225.5M – guidance for Q4 revs in-line with ests

·     Semiconductors; positive quarterly results from AAPL a positive for iPhone supply chain QRVO, SWKS, CRUS and AVGO; STM posted Q4 net profit ahead of analysts’ expectations saying it climbed to $582M from $392M last quarter and above est. $547.2M; gross profit for the quarter rose to $1.25B from $1.08B with gm of 38.8%; LRCX posted a big F2Q beat and F3Q raise with strong demand noted in DRAM and foundry, along with continued layer growth in NAND; MKSI, TER, CREE and XLNX among other chip makers moving on earnings results/guidance

Stock GAINERS

·     AAL +13%; reporting Q4 results ahead of expectations despite weaker Q1 rev growth (of -65% to -60% vs. -47.3% consensus and for capacity to be down 45%) – but the high short interest in shares helped boost sentiment

·     ABMD +17%; after EPS of $1.35 topped the $1.13 estimate and revs better at $231.7M vs. est. $225.5M – guidance for Q4 revs in-line with ests

·     AG +29%; WSJ notes that silver prices climbed sharply after the metal became the next target of retail traders driving asset rallies

·     CMCSA +4%; after Q4 revenue of $27.7B topped estimates as broadband demand offset falls in parks and film as added 538,000 broadband subscribers in Q4, compared with analysts’ average estimate of 488,000

·     NOW +6%; reported strong 4Q20 results across multiple metrics and introduced FY21 guidance ahead of consensus for subscription revenue

·     TWTR +5%; upgrade from to Overweight at KeyBanc saying execution is improving, and the combination of a cyclical ad recovery and new products creates potential

Stock LAGGARDS

·     AAPL -2%; despite crushing top and bottom-line as co beat across all segments, except Mac which was in line with expectations $8.68B) while iPhone growth was 17%, versus the Street at ~7%

·     GSX -17%; downgraded to Sell at Goldman Sachs (also down with pullback in some high short interest names that have run higher)

·     LUMN -7% downgraded to underweight at Morgan Stanley amid potential headwinds from rising corporate taxes, a potential minimum corporate tax rate, fading COVID related demand

·     PHM -5%; despite beat on earnings and MTH lower following its beat as homebuilders broadly lower – BZH, KBH – TOL was downgraded at Wedbush on valuation

·     TSLA -4%; misses Q4 profit estimates (80c vs. $1.03 est.) and did not provide a clear 2021 vehicle delivery target weighing on shares overnight

·     WHR -9%; shares dropped despite a beat and raise quarter, falling on profit taking

·     ZYME -20%; presented initial clinical activity for its HER2 bispecific ADC, ZW49, that fell short of investor expectations

Syndicate:

·     Academy Sports (ASO) 12M share Secondary priced at $21.50

·     Agrify (AGFY) 5.4M share IPO priced at $10.00

·     Applied Genetic (AGTC) 16.741M share Spot Secondary priced at $4.45

·     CureVac (CVAC) 5M share Secondary priced at $90.00

·     Ortho Clinical (OCDX) 76M share IPO priced at $17.00

·     Qualtrics (XM) 50.4M share IPO priced at $30.00

·     Seer (SEER) 3.75M share Secondary priced at $67.00

·     Surgalign (SRGA) 25M share Secondary priced at $1.50

·     ZIM Integrated (ZIM) 14.5M share IPO priced at $15.00