Mid-Morning Look

Monday, May 24, 2021

Stocks on a straight move higher to start the trading week, with the Nasdaq up over 1.4%, the S&P 500 rising around 1% along with smaller gains for the large cap Dow and Smallcap Russell as investors look to riskier assets after defensive REITs, healthcare and utilities led last week’s gains. Top gainers in markets early are large cap tech (Internet and semiconductors specifically), along with casinos/gaming (MGM, PENN, CZR), leisure (cruise lines) and travel (airlines) in a strong start to the week. The Nasdaq Comp snapped its 4-week losing streak last Friday and is kicking things off this week with big gains in semiconductors (up over 2% for the index). Airlines and travel names get a boost after big travel weekend vs 2019, best TSA checkpoint compares of the year so far with Saturday -27% and Sunday -10%; 7-day avg improved to -31% (BKNG, TRIP, AAL, UAL, JBLU). No major economic data today for major averages and quiet on earnings front, as oil prices surge, and Treasury yields remain steady (1.61% for 10-yr). Bitcoin (and other crypto assets) regained some ground after touching multi-month lows Sunday and traded up around $38,000, well off Sunday lows below $32,000 as volatility persists. One M&A deal in the energy space as COG and XEC in $17B tie-up.

Sector Movers Today

·     Auto sector; Wedbush said electric vehicle bellwethers will continue to face heavy selling pressure due to chip shortages, increasing competition and lofty valuations – sees the deep sell-off in the sector as a short-term pullback in a bullish multi-year upward rally; NIO renews manufacturing agreements with Jianghuai Automobile Group Co (JAC) and Jianglai Advanced Manufacturing Technology (Jianglai) for May 2021; KNDI unveils K32 premium fully enclosed electric 4WD utility terrain vehicles in Hainan Factory; LAZR rises early after an Inside EVs report late last week suggested that TSLA is testing the company’s lidar on vehicles (original story was reported on 5/20); SFT shares slide after offering privately $75M in 5-year convertible notes

·     Consumer Staples & Restaurants; BYND upgraded to Outperform from Underperform at Bernstein saying 2022 sales ests have come down by 35% from pre-pandemic levels but says this is not a broken growth story; CPB downgraded to Hold from Buy at Jefferies saying risk/reward more balanced with elevated at-home HH penetration sustainability a risk, and away-from-home exposure lower vs. peers; OLLI upgrade from Underweight to Equal-weight at Morgan Stanley on balanced R/R with stock trading below the co tgt; Piper said they believe the beauty backdrop should benefit ELF into their Q4 print and see results topping estimates; WTRH announced today a new partnership with PBPB

·     Casinos, Gaming, Lodging & Leisure sector; cruise lines active (RCL, CCL) after NCLH announces return to cruising in the United States, with Alaska cruises sailing from Seattle beginning Aug. 7; GAN announces addition of Soaring Eagle Casino & Resort as its fourth client in the state of Michigan; Bank America noted airline card spend, domestic flight searches and TSA check-ins all recorded new COVID-era highs at -24%, -22% and -33%, respectively – said Las Vegas Strip credit card spend declined -2% vs. 2019 (+1% LW); in movie theater, IMAX tgt raised to 425 at Benchmark as firm raises global box office projections based on reported results, movie-goer momentum, and a compelling film slate while Cineworld said on Monday its UK reopening weekend had topped expectations

·     Software movers; PLTR it will support the United States Space Force and United States Air Force by providing its software to the critical missions of the Department of the Air Force in award totaled above $32M; several analysts with previews ahead of busy week of software earnings (CRM, DOMO, PLAN, WDAY, VEEV); Cowen said they have bullish previews for DOMO , solid checks into the print for SNOW; neutral update for WDAY and mixed on SPLK this qtr; Needham said they are most positive in PLAN and WDAY into earnings, and remain cautious on CRM, while for VEEV they believe continued healthy trends in both the commercial and vault segments will drive upside to heightened billings expectations and for YEXT, recent conversations with management and customer checks indicate continued strength in Answers adoption

Stock GAINERS

·     BYND +7%; upgraded to Outperform from Underperform at Bernstein saying 2022 sales ests have come down by 35% from pre-pandemic levels but says this is not a broken growth story

·     HPQ +2%; Citigroup upgraded to Buy given their view of more resilient PC demand, as well as comments on underlying print demand improvements

·     MU +3%; rises along with rip in rest of semis after Digitimes reported that DRAM and NAND flash memory contract prices are set to register double-digit increases in the third quarter of 2021, according to industry sources

·     MRNA +2%; after saying it reached an agreement with Samsung Biologics to produce Moderna’s Covid-19 vaccine

·     NVDA +3%; extends Friday gains after 4 for 1 stock split and ahead of earnings with semiconductors the top gainers in tech/S&P early

·     SPCE +12%; after the space-travel company said it completed the first human space flight from New Mexico on Saturday

Stock LAGGARDS

·     AEL -2%; on May 21, 2021, after the market closed, AEL announced its CEO, Anant Bhalla, will be taking on additional responsibilities as interim CFO with longtime CFO, Ted Johnson, expected to no longer serve as CFO effective today

·     DG -2%; downgrade from Neutral to Underperform at Bank America with $190 tgt saying higher gas prices and convenience store traffic recovery could pressure stock, return of grocery store promos pressures 2021 comps

·     NGM -47%; after the company reported that its 24-week Phase 2b ALPINE 2/3 study of Adlafermin in NASH did not meet primary endpoint of fibrosis improvement by ≥1 stage with no worsening of NASH versus placebo – said it is ending development of Adlafermin for certain patients with nonalcoholic steatohepatitis

·     SFT -11%; shares slide after offering privately $75M in 5-year convertible notes

·     XEC -7%; merger deal announced this morning as COG and XEC agree to merge to create a company with an enterprise value of about $17B where XEC shareholders will receive 4.0146 shares of COG’s common stock for each Cimarex share owned – deal expected to close in Q4, and implies an offer value of $71.50 per share https://on.mktw.net/2QNYwgQ