Mid-Morning Look

Thursday, May 23, 2024

U.S. stocks are mixed early, as the tech heavy Nasdaq and S&P 500 outperform as tech giant NVDA reported results that came in above lofty expectations overnight, pushing shares to record highs above $1,000 per share for the first time and boosting the “AI” tech complex across the board. Small caps underperform along with the Dow, as the Nasdaq rises just shy of 17,000 level (high was 16,996.39) before fading from the open. The Philly semiconductor index (SOX) traded new all-time highs behind the spike in NVDA, etc. rising to 5,255.63 (taking out prior 5,217.83 high in early March) but has since pulled back below that prior level. Treasury yields spike after S&P PMI data showed strength, as 10-yr hits more than 1-week high above 4.49% from 4.43% prior to data. The CBOE Volatility Index (VIX) rolled more than -6% to $11.53 earlier, lowest since 2020 (Covid times) but has pared losses. Bitcoin prices roll along with pullback in stocks, -2% below $68K and weighing on crypto names (COIN, MSTR, MARA, CLSK, HUT). Gold prices declined to a one-week low, extending their fall for a third consecutive session on profit-taking after minutes from the U.S. Federal Reserve’s latest meeting indicated that interest rates would stay higher for longer. This morning’s S&P Global PMI data showed strength in the economy, adding to concerns. Little profit taking early after new record highs for the S&P and Nasdaq, while Dow and Russell 2000 underperform.

• Weekly Jobless Claims fell to 215,000 from 223,000 last week and below consensus 220,000; the 4-week moving average climbed to 219,750 from 218,000 prior week; continued claims climbed to 1.794M from 1.786M prior week (prev 1.794M) and the U.S. insured unemployment Rate unchanged at 1.2%.
• S&P Global May flash composite PMI at 54.4 (vs 51.3 in April) and S&P Global May flash services PMI at 54.8 (vs 51.3 in April); S&P Global May flash manufacturing PMI at 50.9 (vs 50.0 in April).

• In Industrial/Machinery: ENS beat F4Q24 top/bottom line consensus and guided FY25 revenue/EPS 4%/5% above the street at the midpoint; TITN shares fall as Q1 revenue of $628.7M missed the $671.7M consensus along with earnings miss of $0.41 vs. est. $0.64 and lowered FY25 EPS to $2.25-$2.75 from prior $3.00-$3.50 and below consensus $3.18; GNRC was downgraded to Neutral at JP Morgan on valuation, while continues to believe that the co is well positioned to benefit from increased grid outage activity given an aging US infrastructure and increasing mix of intermittent renewables, and believe major power outages present upside to estimates. GE tgt was raised to $201 from $191 at UBS as sees both earnings and valuation upside, driven by GE’s 100% EBIT exposure to recurring aerospace aftermarket and dominant narrowbody engine position.
• In Apparel Retail: VFC shares tumbled Q4 revenue fell to $2.37B y/y missing the $2.41B estimate and posted an unexpected Q4 EPS loss of (-$0.32) vs. expected $0.01 profit; said sales of VFC’s major brands Vans down -26%, The North Face slip -5%, Timberland drop -14% and Dickies falls -15% y/y; RL Q4 revs $1.57B compared to est. $1.56B while forecast annual revenue growth below market expectations to about 2%-3% vs. est. 4% and named Justin Picicci as its chief financial officer succeeding Jane Nielsen; raises quarterly dividend by 10%. UAA was downgraded to Perform at Oppenheimer and remove prior tgt (of $15) saying while stills look optimistically towards longer-term potential for Under Amour it recognizes that positive change at the company will require time.
• In Chemicals: DD announced plans to break apart into three publicly traded companies, joining a list of industrial conglomerates seeking to boost returns by splitting into smaller, more focused businesses; seeking to spin out electronics and water businesses (Jefferies said estimates New DuPont is worth $41/share, Electronics is worth $48/share and Water at $12/share). EMN was upgraded to Buy at UBS and raised tgt to $128 from $106 as believes Q1 earnings provided evidence that EMN’s 2024 expectations are conservative, see higher growth into 2025 w/ upside risk on restocking, and see adv. plastics recycling investments additive to earnings/ growth.

• ELF +16%; reported 4Q adj. EPS and net sales that topped consensus estimates (Q4 adjusted EBITDA of $40.9M easily topping a Street figure of $34.7M and sales increased ~71% ahead of a Street expectation of ~56%), while the company’s annual projections for sales and profit failed to meet expectations.
• ENS +10%; beat 4Q top/bottom line consensus and guided FY25 revenue/EPS 4%/5% above the street at the midpoint.
• NWSA +2%; after signing a content deal with artificial-intelligence leader OpenAI which allows the ChatGPT provider to have access to current and archived properties including the Wall Street Journal, the New York Post and The Times.
• NVDA +8%; delivered record Q1 revenue of $26 billion, up 260% y/y, record Q1 EPS of $6.12, up 560% y/y, record $14.8 billion in net income, up 600% y/y, and record data center revenue of $19.4B, up 430% y/y and vs $3.8B two years ago; also announced a 10-1 stock split and boosted its dividend.
• RAMP +12%; posted a strong beat and raise lifting shares as mgmt noted sees numerous tailwinds for the business—like the Habu acquisition and PAIR partnership that could drive growth over the near- and longer-term, as per Susquehanna.
• ZUO +6%; as earnings and guidance come in above consensus.

• BABA -2%; after Bloomberg reported yesterday the company is considering raising about $5B via convertible bonds; also, broad weakness in China overnight.
• CYTK -19%; expanded a strategic funding collaboration with RPRX for up to $575MM in additional funding (incl. $250MM upon closing) in return for increased royalties on aficamten and other assets. CYTK also announced an equity offering of $500MM; new funds are earmarked for aficamten’s commercial launch.
• GFS -8%; after announced pricing of $950M secondary offering of ordinary shares at a price to public of $50.75 per share; a unit of Abu Dhabi’s sovereign wealth fund Mubadala Investment Company PJSC, which is the largest shareholder, is looking to sell $950M worth of shares in the company.
• LYV -4%; shares dropped after Bloomberg reported the DoJ and a group of states will sue the company for antitrust violations related to Ticketmaster’s unrivaled control of concert ticket sales, according to people familiar with the case. US Justice Department to Seek Breakup of Live Nation-Ticketmaster https://tinyurl.com/5au9kcjs
• TITN -12%; shares fall as Q1 revenue of $628.7M missed the $671.7M consensus along with earnings miss of $0.41 vs. est. $0.64 and lowered FY25 EPS to $2.25-$2.75 from prior $3.00-$3.50 and below consensus $3.18.
• VFC -8%; shares tumbled Q4 revenue fell to $2.37B y/y missing the $2.41B estimate and posted an unexpected Q4 EPS loss of (-$0.32) vs. expected $0.01 profit; said sales of VFC’s major brands Vans down -26%, The North Face slip -5%, Timberland drop -14% and Dickies falls -15% y/y.