Mid-Morning Look

Tuesday, May 14, 2024

U.S. stocks are pushing higher, led by a bounce in Smallcap stocks (Russell up over 1%), as the S&P holds recent gains and remain not far from all-time highs as the first of two key inflation reports was digested by investors. Several high short interest stocks are also seeing renewed interest for a second straight day with big moves in several names (on no specific news). First, the April producer price index (PPI) came in hotter than expected on both the headline and core (ex-food & energy) readings M/m (see below), an unwelcome sight for Wall Street which was hoping for tamer prices on hopes it could boost chances for the Fed to cut interest rates this year. However, while the first move pre-mkt was a drop in stock prices and a spike in Treasury yields, the opposite has since occurred with yields at lows (10-yr 4.45% after popping to 4.53%) and stocks rising. The reason, the Y/Y readings for core and headline PPI were in-line with estimates as markets took note the M/M comps were revised lower, giving markets hope into tomorrow’s more important consumer price index (CPI) report and retail sales. The other big story, for a second day, is a short interest (SI) “squeeze” led by 2021 “meme” trade names AMC and GME, along with a bevy of other SI stock movers (on no news) for names like SPWR, BB, NVAX, SPCE, CHPT, KOSS among many others. "Roaring Kitty", the social media persona of Keith Gill, credited with setting off the so-called Reddit rally in January 2021 with his bullish calls on GameStop, posted on social media platform X, formerly Twitter, several times yesterday after nearly three years and that has sparked market interest (even though the posts have said absolutely nothing, other than a few movie clips that are again meant to be very cryptic). In macro news, President Joe Biden is increasing tariffs on $18B in Chinese imports across a handful of sectors deemed strategic to national security. The increases will apply to imported steel and aluminum, legacy semiconductors, electric vehicles, battery components, critical minerals, solar cells, cranes, and medical products. The new tariff rates – which range from 100% on electric vehicles, to 50% for solar components, to 25% for all other sectors – will be implemented over the next two years.

• U.S. Small-Business Optimism Increases for First Time This Year – NFIB sentiment index climbed 1.2 points to 89.7 in April (vs. est. 88.2) – share planning to raise prices declined to a one-year low.

• AMC +72%; as the surge in short interest/meme related names spiking for a 2^nd day, with likes of GME, SPWR, BB, among others seeing renewed interest and “squeezing” higher.
• IGT +6%; shares advanced after Q1 EPS/revs topped consensus on higher Ebitda $443M vs. est. $412M, while forecasts FY operating margin 21% to 24%, above prior view 20% to 21%.
• ONON +16%; after the footwear maker posted a beat-and-raise quarter for sales on strong demand for its running shoes.
• PLUG +42%; said it receives a conditional commitment for an up to $1.66 billion loan guarantee from the U.S. Department of Energy to build six green hydrogen production facilities.
• PSFE +21%; shares jumped after the payment’s platform swung to a profit year-over-year in Q1 and revenue beat estimates ($0.57/$417.7M vs. est. $0.55/$408.2M) and reaffirmed its guidance for the year for revenue.
• SAM +4%; upgraded to Buy from Hold at Jefferies and raise tgt to $360 from $335, following the firm’s bi-annual distributor survey which they said shows Hard Teas are dominating.
• SONY +6%; announced stock buyback, announces 5-for-1 stock split and 4Q results better as net profit Y189.00B topped est. Y149.71B thanks to stronger earnings from its game and movie businesses.
• UEC +3%; along with UUUU, CCJ in uranium after President Joe Biden signs into law a ban on Russian-enriched uranium. The ban on imports of fuel for nuclear power plants begins in about 90 days but will allow the Department of Energy to issue waivers in case of supply concerns.

• AUGX -55%; shares tumbled after cutting FY24 guidance from $60M-62M to $52M-55M, +23% Y/Y at midpoint, because of existing clients switching to lower-cost services and prospective customers evaluating many AI offerings before purchase commitment (prompting at least two analyst downgrades).
• BABA -7%; shares give up some of its recent rally as Q1 profit sinks despite a rise in sales saying the bottom line was hurt by a net loss in investments during the quarter due to mark-to-market changes; adjusted EPS $1.40 vs. est. $1.41; Q4 revenue $30.73B vs. est. $30.39B; board approves $4 billion dividend for FY24; approves two-part dividend.
• JAMF -9%; after 8.96M share Spot Secondary is priced at $18.25.
• LUNR -3%; shares slide as guides FY revenue in the range of $200M-$240M below consensus estimates of $267.9M even after posting record high revenue of $73.1M in Q1 topping the $55.9M estimate.
• NOTV –47%; was downgraded at Jefferies to hold after results and highlighted $32M lower FQ2 RMS sales (driven by) and lower NHP sales (volume and price) and destocking; co said expects to raise going concern.
• STNE -9%; slipped after the Brazilian payments company’s revenue missed expectations rising 13.8% as adj net profit of 450.4M reais misses the 462M est. and issued unchanged guidance was also seen as a disappointment.