Mid-Morning Look

Monday, May 06, 2024

U.S. stocks starting off the week strong after the S&P 500 gained 0.55%, the Nasdaq climbed 1.43%, and the Dow climbed 1.14% last week, while Smallcaps led. The S&P and Nasdaq are both coming off their best days since late February as investors put a weak April behind them. The S&P 500 index (SPX) tops its 50-day moving average of 5,131 this morning, while Smallcaps also adds to early strength in May, rising over 1% as the Russell 2000 reclaims its 50-day moving average resistance of 2,040. The Nasdaq 100 (QQQ) tops its 50-day moving average of $436.40 as technology/semi strength lead the Nasdaq. No major U.S. economic data today (or this week for that matter after big jobs data last week showed a mixture economic picture and hotter inflation the week prior). Fed speakers resume their rate talk this week returning from their “blackout period” last week prior to the FOMC meeting. Early stock strength broad-based with only Consumer Staples weaker given reactions to food related earnings (TSN, THS), while Industrials and Energy stocks lead. Treasury yields are down around 4.5% on the 10-yr, gold prices resume bounce and oil is higher. Not a ton of news this morning, several global markets closed overnight (UK, Japan) as we head into another busy week of earnings.

• In Casino/Gaming: CHDN shares active after waging total released for the Kentucky Derby this weekend, which according to JMP Securities historically accounts for 25-30% of EBITDA for the full year, now closer to 10-15% with the outsized growth in other areas of the business. Churchill Downs expects Derby Week EBITDA to increase $26M to $28M YoY, compared to $15M growth in 2023. CHDN said wagering from all sources on Saturday’s Kentucky Derby day program set a record of $320.5M, beating last year’s record of $288.7M. All-sources wagering on the Kentucky Derby race was a new record of $210.7M, beating the previous record of $188.7M set in 2023. MLCO upgraded from Equal Weight to Overweight at Morgan Stanley saying they saw stabilizing/improving market share trends in March/ April and risk/reward appears attractive vs peers.
• In REITs: CPT was upgraded from Underweight to Neutral at Piper and raised tgt to $110 from $90 in multi-family REITs saying jobs in the Sunbelt are proving stronger than expected and thus managing the record supply better than originally believed heading into this year. Piper is also reiterating its OW on ESS, as it believes they, along with OW-rated AVB, are best positioned for further upside this year. MAA was upgraded to Outperform from Neutral at Wedbush and raise tgt to $154 from $135 in multifamily REITs following its initial take last week that pointed to its expectation of continued momentum through the supply headwinds in the Sunbelt. MPW shares fell as Steward Health files for Chapter 11 bankruptcy, to get $75M from Medical Properties Trust (MPW) https://tinyurl.com/hvy6fyru

• GRFS +6%; said it has completed all domestic, overseas government approval procedures for selling 20% stake in Shanghai RAAS to Haier; says it expects the deal to be finalized by June.
• MU +4%; as semis rally; positive comments by two analysts’ today in DRAM/memory sector (STX/WDC up in sympathy).
• NVDA +2%; as semiconductors resume upward momentum after weak April, as shares top $900 for the first time since April 15^th amid broad strength in semis (SOX +1.5%).
• PRFT +53%; after entering into a definitive agreement to be acquired by an affiliate of BPEA Private Equity Fund VIII, part of EQT AB, in an all-cash transaction valued at approximately $3.0B. Under the terms of the agreement, Perficient stockholders will receive $76.00 per share in cash for each share of common stock.
• UBER +3%; ahead of shareholder meeting this morning and positive comments at Morgan Stanley saying its growth-adjusted multiple is now lower than LYFT/CART, creating an attractive entry point.
• X +2%; after the European Commission approved U.S. Steel’s $14.9 billion buyout by Nippon Steel as the commission concludes that the transaction will not raise competition concerns, given the companies’ limited market positions resulting from the proposed transaction.

• BNTX -1%; posted Q1 loss of EUR1.31 a share, down from earnings of EUR2.05 recorded in the year ago quarter as total revenue of EUR187.6M dropped from EUR1.277B the year prior as sales of its Covid-19 vaccine fell; reiterated guidance.
• BOWL -17%; shares fell as earnings missed as company guides to low end of fiscal year range.
• EYPT -36%; after saying topline results from a Phase 2 clinical trial evaluating Duravyu in non-proliferative diabetic retinopathy didn’t meet the pre-specified primary endpoint.
• view to $3.01-$3.11 from $3.15-$3.25 and saw Q2 EPS $60-$0.65 vs. est. $0.75 (posted Q1 rev beat and higher rev guide).
• KRYS -3%; after Q1 revs $45.2M missed the $47.4M estimate; continues to anticipate $150M to $175M of R&D and SG&A expenses for the year.
• LYRA -92%; after saying lead experimental therapy, LYR-210, did not meet the main goal of a late-stage trial testing it for the treatment of chronic rhinosinusitis, a long-lasting sinus inflammation.
• TSN -7%; pulls back off 52-week highs on profit taking; reported Q2 profit above expectations ($0.62 vs. $0.39 est.) saying strength in beef (vols rose 2.8%) and pork (Vols +2.9%) sales offset weakness in chicken as overall prices increased 1% while volume declined 1.5%; maintained its revenue growth outlook unchanged at relatively flat vs. $52.88B in the prior year; shares fell after inflation impact comments.