Mid-Morning Look

Monday, May 08, 2023

U.S. stocks with a slightly slower start to kick off the trading week that should focus on the consumer price index (CPI) inflation report on Wednesday 5/10 and PPI 5/11, as well as more headlines pertaining to the U.S. debt ceiling. Roughly 85% of the S&P has reported earnings thus far this quarter and Bank America said Q1 is tracking a 5% EPS beat, surprise ratios are well above avg, and guidance is strong where Industrials and Health Care lead. Busy earning tonight and tomorrow and then begins to slow until retail earnings kick in the next week or two. Treasury yields higher with 2-yr +4.8bps to 3.97% and 10-yr +5bps at 3.5%. Oil prices rise with WTI crude up over 2% at $72.94 per barrel, after posting its third straight weekly fall where the high last week. The U.S. dollar remains depressed, boosting precious metal prices early. Regional banks erase early gains as the KRE slides to lows. The S&P 500 index snapped a four-day losing streak on Friday after having tested its late-April trough late last week.

Economic Data

·     U.S. March wholesale inventories revised to unchanged (consensus +0.1%) from +0.1% and wholesale sales fell -2.1% vs Feb +0.4% (prev +0.4%); March stock/sales ratio 1.40 months’ worth vs Feb 1.37 months.

Sector Movers Today

·     Software movers: SNOW upgraded to Buy from Hold at Stifel with $185 tgt as commentary from MSFT as well as other 3rd party consumption models (DDOG, FROG, CFLT) lead them to believe the optimization headwinds the group has felt over the last 9 months are stabilizing; BL upgraded to Neutral on valuation at Citigroup after reported 1Q23 results with a $1M rev beat vs. in-line revs for the past 2 quarters yet a $0.18 EPS beat; DBX was upgraded from Sell to Neutral at Goldman Sachs and upped tgt to $25 from $22 following Q1 results that beat across all metrics (with revenue coming in 2% higher than consensus, ARPU beating by 1%, operating margin by 5% and EPS by 15%). WKME was downgraded to MP from OP at BMO Capital and tgt trimmed to $11 from $13 as have growing concerns about WalkMe growth over the next few years.

·     In retail: ENR Q2 $0.64 v $0.51est. and revs $684M as affirms FY23 $3.00-3.30 v $3.11e, adj EBITDA $585-615M, Organic Rev “to increase low single digits.” FRPT rises on Q1 sales beat, reaffirms FY sales outlook. PTON upgraded from Underperform to Market Perform at BMO Capital saying they still fear TAM will prove materially lower than management expectations and see risks, but also see green shoots as risk/reward has shifted, even skewed upward.

Stock GAINERS

·     ANIP +15%; raises company net revenue guidance to $385 million to $410 million from $360 million to $385 million; adjusted non-GAAP ebitda guidance.

·     AXSM +6%; reported a smaller-than-expected Q1 EPS loss on much better revs $$94.6M vs. est. $26M, which included its first full qtr launch of depression drug Auvelity.

·     BNTX +5%; after co confirms FY vaccine revenue outlook, announces portfolio expansion plans.

·     IMRN +65%; as announces FDA removed clinical hold on new Campylobacter ETEC Therapeutic Paves way for clinical trial initiation.

·     PACW +36%; extended Friday gains after it slashed its quarterly dividend to $0.01 and said business remains “sound.”

·     SIX +14%; Q1 EPS loss (-$0.84) vs. est. loss (-$0.85); Q1 revs grew 3% to $142.2M, above consensus $132.56M; Attendance declined 5% to 1.6 million in Q1, while total guest spending per guest increased 7.2% to $80.88, as admissions spending per guest rose 10.5%.

·     SNOW +3%; upgraded to Buy from Hold at Stifel with $185 tgt as commentary from MSFT as well as other 3rd party consumption models (DDOG, FROG, CFLT) lead them to believe the optimization headwinds the group has felt over the last 9 months are stabilizing.

·     SPB +8%; after the DOJ said late Friday that it has settled its antitrust challenge to the Swedish lock maker Assa Abloy’s planned acquisition putting the $4.3 billion deal on track for completion.

·     ZS +19%; as reported stronger-than-expected Q3 results and boosted its revenue, as sees 3Q rev’s view $415M-$419M vs prior guidance $396M-$398M.

Stock LAGGARDS

·     COIN -2%; Bitcoin prices fell over -5% to below $28,000 after Cryptocurrency exchange Binance halted bitcoin withdrawals for several hours on Monday.

·     CTLT -24%; after delays Q3 results & conference call; said expects to significantly reduce both its FY23 net revenue and Adjusted EBITDA guidance by more than $400M each.

·     DISH -3%; slips on miss as Q1 EPS $0.35 vs. est. $0.36; Q1 revs $3.96B vs. est. $4.06B; said Q1 net Pay-TV subs decreased approximately 552,000 and retail wireless net subscribers decreased by approximately 81,000 in Q1.

·     LL -17%; Q1 adjusted EPS loss (-$0.31) vs. est. loss (-$0.15) and vs. $0.13 y/y while Q1 revenue $240.7M miss $258.4M est.; said Q1 comps declined -15% vs consensus -8%.

·     SWAV -5%; amid speculation BSX talks have broken down https://bit.ly/3BaZMxT

·     TRUP -11%; downgraded to Neutral at Bank America after share decline Friday post earnings results; firm notes shares had already discounted a lot of headwinds, but still downgraded.

·     TSN -12%; Q1 adj EPS $0.82 vs. est. $0.79; Q1 revs $13.13B vs. est. $13.60B; guides FY CAPEX to $2.3B down from about $2.5B and lowers FY sales $53B-$54B from $55B-$57B (est. at $55.04B).

·     TUP -19%; said it had engaged investment bank Moelis & Co LLC to explore strategic alternatives, adding that it expects a “material decline” in revenues for the first quarter ended April 1.