Mid-Morning Look

Thursday, November 04, 2021

Another rip-roaring session for U.S. stocks, just continuing to surge higher day after day as the S&P 500 making a new record high for the 5^th consecutive day (up 6-straight days overall) and the Nasdaq enjoying its 6th straight new intraday high (up a 9^th straight day overall), along with record highs for the Smallcap Russell 2000 Index. No market concern following the Fed’s well-telegraphed asset tapering news yesterday (will reduce its purchase of Treasury securities by $10B per month and MBS by $5B per month from its current monthly rate of at least $80B for Treasuries and $40B for MBS), or fear that the spending bill out of Washington has not moved forward, as traders/investors continue to pile into stocks amid FOMO – or “fear of missing out”. Economic data today was mixed with improved jobless claims data, but labor costs soar, and productivity fell sharply from the prior quarter. Rising inflation fears, supply concerns heading into the holiday quarter also not a concern currently for markets. Stronger than expected quarterly earnings this quarter (very good) have overshadowed cautious commentary from many companies about rising costs and labor shortages. Fear index (VIX) falls to July lows, while oil prices rebound, the dollar is mixed, and treasury yields still no upward movement. Another incredibly busy night of earnings coming up, one of the bigger volume days of releases as we hit the tail end of earnings season.

Economic Data

·     Weekly jobless claims fell to 269K in latest week, below the 275K estimate while the prior week was revised to 283K from 281K; the 4-week moving average fell to 284,750 from 299,750 prior week; continued claims fell to 2.105M from 2.239M prior week; the U.S. insured unemployment rate fell to 1.6% from 1.7%

·     U.S. Q3 non-farm productivity fell -5.0%, missing the -3.0% consensus and sharply lower from the Q2 rise of +2.4%; U.S. Q3 non-farm unit labor costs surge +8.3% from +1.1% in Q2 and came in above consensus of +7.0%

·     The U.S. trade deficit widened in September to a record (-$80.9 billion), driven by climbing demand for capital goods like computers and electric equipment and industrial supplies that have been soaring in cost as global supply chains remain snarled. The deficit in trade of goods and services widened 11.2% in September. Imports rose by 0.6% to $288.5 billion, while exports fell by 3% to $207.6 billion.

Sector Movers Today

·     Video gamers; EA and TTWO each boosted their 2021 adj sales forecasts – TTWO raised its annual adjusted sales outlook to between $3.3 billion and $3.4 billion, citing strong demand for its key franchises “Grand Theft Auto V”, “NBA2K” and “Red Dead Redemption 2.” EA F2Q22 EPS of $1.58 beat consensus of $1.17, Net bookings of $1.85 bn beat consensus of $1.73/$1.76 bn

·     Media & Telecom movers; ROKU guided Q4 total revs $893M, well below estimates of $944.4M and expects product development and new hires to increase operating expenses on a sequential basis/says it expects global supply chain disruptions to likely continue into 2022; MTCH reported revenue in-line and EBITDA 3% above consensus but lowered 4Q implied revenue guidance by ~$25mn, of which $20mn is attributed to continued weakness from Hyperconnect; VIAC posted a Q3 rev beat on in-line EPS amid strength in its streaming and TV entertainment businesses as it added 4.3M global streaming subs to about 47M; MGNI reported adjusted Q3 revenue that lagged behind the average analyst estimate; LBRDK Q3 EPS misses by $0.56, beats on revenue; FOXA posted strong 1Q-FY22 results with better-than-expected advertising revenue, margin upside, and momentum with its streaming/digital assets

·     Consumer Staples; ELF Q2 adj EPS 48c vs est. 13c on sales $91.9M vs est. $83.7M and raised FY22 sales outlook to $364M-$370M from $357M-$364M (est. $366.7M), but Piper downgraded shares to Neutral despite the solid quarter as they do not see adequate flow through in EBITDA margin to support an OW rating; Kellogg (K) reported Q3 adj EPS $1.09 above est. $0.93 on revs $3.62B vs est. $3.54B, reaffirmed full-year guide for EPS while raising sales growth forecast to +2-3% from +0-1%; COST Oct. 2021 total company comparable sales up 17.5% vs. est. 12.4%; Oct. U.S. comp sales ex-gas, FX +11.7% vs. est. +7.50%; HBI Q3 adj EPS 53c vs est. 47c on revs $1.79B slightly below est. $1.8B, sees Q4 adj EPS 40-45c on sales $1.71-1.78B whose midpoints are in-line with consensus estimates; GIL Q3 adj EPS 80c and sales $801.6M crushed estimates; REYN reported Q3 adj EPS 33c vs est. 32c on revs $905M vs est. $879.9M, guided Q4 adj EPS 44-51c vs est. 50c and adj EBITDA $170-190M vs est. $177.35M, lowered FY adj EPS range to $1.53-1.60 from $1.54-1.64 as they increased estimated cost pressures to $450M from $400M

·     Casinos, Gaming, Lodging & Leisure sector; MGM reported better-than-expected third-quarter results and said it planned to sell the Mirage operations in Las Vegas; HST reported 3Q adjusted EBITDA of $177mn vs est. $134mn, as beat was broad based with higher revenues across segments (rooms, F&B and other) and ongoing stronger cost control; PENN reported Q3 EBITDA $480mm vs est. $537mm, Q3 EPS 52c vs est. 71c on in line revs noting while July was a record month, the second half of August and September was impacted by Hurricanes and Delta; PLNT rises, after missing the last 6 quarters in a row, they finally beat a good quarter and raised FY EPS to $0.75-$0.80 vs prior $0.65-$0.70 on sales of $575M (mid) vs prior $535M.

Stock GAINERS

·     ALB +4%; lifts its FY outlook for EPS to $3.85-$4.15 from a previous view of $3.60-$4.00, above $3.61 analyst consensus estimate, and adjusted EBITDA to $830M-$860M from $775M-$815M previously after topping Q4 estimates (lifts shares of LAC, LTHM)

·     APA +6%; after earnings and upgraded to Buy at Truist as anticipate near-term upside potential

·     BKNG +4%; as bookings, revenue, and EBITDA came in 5%, 9%, and 15% ahead of consensus, respectively, as travel demand improved in 3Q with momentum continuing into October

·     CME +2%; record highs as signs 10-yr partnership with Google Cloud to transform global derivatives markets through cloud adoption

·     ETSY +13%; Q3 GMS growth of 18% accelerated from 13% in Q2, along with EPS/sales beat

·     MRK +2%; Britain’s medicines regulator authorizes oral COVID-19 antiviral pill developed by MRK and partner Ridgeback Biotherapeutics, the first country to clear therapy

·     NPTN +34%; to be acquired by LITE for $16 per share or about $918M in cash, a 39% premium to Wednesday close (optical names LASR, AAOI active In sympathy)

·     NVDA +5%; new record highs, price target is raised to $320 from $245 at Wells Fargo, as metaverse represents a sizable opportunity for the chipmaker

·     PLNT +12%; after missing the last 6 quarters in a row, they finally beat a good quarter and raised FY EPS to $0.75-$0.80 vs prior $0.65-$0.70 on sales of $575M (mid) vs prior $535M.

·     QCOM +12%; tops expectations for Q4 revenue and profit and forecast Q1 profit and revenue to beat estimates on strong demand for chips used in phones, cars, and internet-connected devices

·     SAVA +40%; surges after saying said it has been informed by the Journal of Neuroscience that there is no evidence of data manipulation in an article it published in July 2012 describing a new approach to treating Alzheimer’s disease1

Stock LAGGARDS

·     ELF -8%; Q2 adj EPS 48c vs est. 13c on sales $91.9M vs est. $83.7M and raised FY22 sales outlook to $364M-$370M from $357M-$364M (est. $366.7M), but Piper downgraded shares to Neutral despite the solid quarter

·     MRNA -16%; after 3Q miss EPS $7.70 vs est. $9.05 on revs $5.0B vs est. $6.2B and weaker guidance as sees year revs $15B-$18B vs. est. $19.87B

·     PENN -9%; reported Q3 EBITDA $480mm vs est. $537mm, Q3 EPS 52c vs est. 71c on in line revs noting while July was a record month, the second half of August and September was impacted by Hurricanes and Delta

·     QRVO -12%; delivered strong quarterly results for the September quarter but provided December quarter guidance that was below consensus expectations, primarily driven by challenges related to ongoing supply constraints

·     ROKU -4%; guided Q4 total revs $893M, well below estimates of $944.4M and expects product development and new hires to increase operating expenses on a sequential basis

·     SPWR -8%; swung to a quarterly loss and sales were slightly under expectations ($323.6M vs. est. $333M) and said sees full-year revenue and adj EBITDA below prior guidance

·     UPLD -24%; delivered top-line revenue growth of 3% (vs. Street at 5%) in 3Q coming in at the lower end of guidance as miss was driven by a deceleration in volume-based messaging activity

·     W -5%; after guiding revenue down 10%, 4Q EBITDA margins 350bps below consensus and said it could take a few quarters for e-commerce growth to return

Syndicate:

·     ANI Pharmaceuticals (ANIP) 1.5M share Secondary priced at $50.00

·     Arhaus (ARHS) 12.9M share IPO priced at $13.00

·     MDxHealth (MDXH) 3.75M share IPO priced at $12.00

·     NerdWallet (NRDS) 7.25M share IPO priced at $18.00

·     STAG Industrial (STAG) 8M share Secondary priced at $42.50