Mid-Morning Look

Friday, November 05, 2021

Another record run for U.S. stocks, extending all-time highs for major averages amid multiple positive catalysts today, benefitting from 1) a significantly strong October jobs report (payrolls rose +531K vs. est. +450K), 2) another string of strong earnings results in the tech space (FTNT, EXPE, DDOG, BIGC, BILL, NET, SYNA), 3) and a resurgence of shares in the “reopen” space after PFE said its COVID-19 pill ritonavir cut the risk of hospitalization or death by 89% compared to placebo in a Phase 2/3 trial involving non-hospitalized at-risk adults with COVID-19 (compared to MRK’s trial results last month of its COVID pill which reduced the risk of hospitalization or death by about 50%). The news has shares of airlines (AAL, UAL), casinos (WYNN, MGM), theme parks (SEAS, SIX), cruise ships (CCL, RCL) hotels (MAR, H) and lodging, restaurants (EAT, TXRH), and retailers firmly higher – while other vaccine makers crushed early – MRNA, BNTX, NVAX, MRK). The move in stocks early again to the upside as the Nasdaq Comp looks to make it a 10^th straight day of gains while the S&P 500 index adding to its record highs, up a 7^th straight day. A remarkable start to the new month with the S&P up 2.3% this week, the Nasdaq 3.5% (with the SOX +9% on week), the Dow +1.6% and the Russell 2000 +6% as Smallcaps rose the early part of the week – all despite the Fed starting its asset tapering this week, and no spending bill announced on week. More than 440 S&P companies have now reported this quarter, with the bulk better but guidance a little uncertain given rising cost, supply issues, and labor shortages into the holiday season. Treasury yields ending the week near lows while oil prices rebound, but on track for a lower week.

Economic Data

·     Strong jobs data across the board: U.S. October nonfarm payrolls +531,000 topping ests +450,000) while prior month upwardly revised to +312,000 from +194,000 and Aug to +483,000 from +366,000); Private sector jobs +604,000 tops est. +400,000), on better revisions and manufacturing at 60K vs. est. 33K; unemployment rate slips to 4.6% from 4.8% and average hourly earnings in-line at +0.4%

Sector Movers Today

·     Vaccine movers; PFE’s oral antiviral candidate Paxlovid cut Covid-19 hospitalizations or death by 89% in trial, company says in statement and they plan to submit data to FDA for emergency use authorization as soon as possible; shares of MRNA, NVAX, BNTX, MRK and other vaccine names slide after PFE’s mental antiviral pill reduced the risk of death and hospitalization by 89% with those with COVID; NRXP shares tumble as the FDA has declined to grant Emergency Use Authorization for NRx Pharmaceuticals’ therapy, Zyesami® (aviptadil), in the treatment of critical COVID-19 patients; PBYI shares tank after its 3Q earnings missed estimates; OCGN rises after submits EUA to FDA for COVID-19 vaccine COVAXIN for ages 2-18 years

·     Auto sector; AXL Q3 adj EPS 15c vs est. 1c on revs $1.21B vs est. $1.18B, said semi shortage negatively impacted sales by ~$245M, is targeting annual sales $5.15-5.25B vs est. $5.14B; GT Q3 adj EPS 72c vs est. 25c on revs $4.93B vs est. $4.77B, revenue per tire +10%, tire unit volumes +32% YoY; CVNA Q3 EPS loss (38c) was wider than est. (28c) on revs $3.48B vs est. $3.27B, retail units sold +74% YoY; HMC Q2 EPS 85c beat estimates, cut its FY22 net profit forecast vs its August guidance by over 17%, revenue by over 5%, and car sales target to 4.2M vs 4.85M; MGA Q3 adj EPS 56c missed est. 60c on revs $7.9B vs est. $7.9B as vehicle production was significantly lower than expected due to the ongoing semi shortage, lowered full-year sales view to $35.4-36.4B from $38-39.5B; BTIG downgraded NKLA to Neutral after the stock rose over 21% yesterday and about 50% over the past month, pushing it close to their prior $16 target

·     Lodging & Leisure sector among top gaining sectors; PTON shares tumble as FY22 rev guide was lowered given N-T demand issues (as economies re-open) and mix shift to lower price bike while EBITDA losses are expected to be worse given lower rev and product gross margins coupled with higher supply chain costs; ABNB jumps as Q3 revenue and EBITDA came in 9% and 33% above consensus, respectively, as Airbnb continues to take share of the lodging market; EXPE getting a double boost, lifted on better Q3 EPS/revs ($2.26 vs est. $1.65 on revs $2.96B vs est. $2.24B), driven by superior performance from Vrbo and domestic travel, while online travel industry in general gets an early boost on positive PFE COVID pill news as BKNG, TRIP rise along with strength in casino stocks WYNN, LVS, MGM.

·     Semiconductors; SWKS reported slight upside to the Sep-21Q. Dec-21Q guidance was largely in line, as the Mobile segment fared better, driven by iPhone 13 builds and (~5-10%) content gains (better than the QRVO report the day prior); SYNA spikes as reported SepQ rev/EPS of $373M/$2.68 and guided to a strong DecQ up 6% above consensus and GM to 59% (cons. 56.7%) on IoT strength; OLED reported Sep Q sales largely in line but EPS was below consensus expectations primarily due to lower materials GM; MCHP posted a slight beat but a material guidance raise its latest record quarter of revenue and profitability

Stock GAINERS

·     BILL +11%; reported a high-quality organic revenue beat (11% above Street or 10%) and guided to mid-50s organic growth (up from mid 40s prior)

·     BIGC +22%; surges as Enterprise ARR grew over 50% organically for the fourth consecutive qtr and Subscription revenue was well ahead of expectations

·     EXPE +14%; getting a double boost, lifted on better Q3 EPS/revs ($2.26 vs est. $1.65 on revs $2.96B vs est. $2.24B), driven by superior performance from Vrbo and domestic travel, while online travel industry in general gets an early boost on positive PFE COVID pill news

·     GPRO +11%; as Q3 adj EPS $0.34 vs est. $0.20 on revenue $316.7M vs est. $292.2M, adj EBITDA $60.4M vs est. $39.8M; subscriber count 1.34M, +168% YoY; avg selling price $381, +25% YoY

·     NET +4%; posts better Q3 revs of $172.3M vs. est. $165.7M and EPS beat, while guides full-year loss per share of (5c-6c), smaller than the expected loss of (11c-12c)

·     PFE +7%; its experimental antiviral pill reduced the risk of death and hospitalization by 89% in patients with newly diagnosed Covid-19, a large new study shows

·     SYNA +15%; spikes as reported SepQ rev/EPS of $373M/$2.68 and guided to a strong DecQ up 6% above consensus and GM to 59% (cons. 56.7%) on IoT strength

·     UBER +6%; Q3 revenue topped expectations, while UBER achieved EBITDA profitability for the first time; gross bookings of $23.1B were in-line with the guidance range (of $22.8B-$23.2B)

Stock LAGGARDS

·     DCPH -71%; after the company said that a cancer drug (Qinlock) missed the primary endpoint in a Phase III study

·     DKNG ; posted a quarterly loss of $1.35 a share on revs $135M, missing the consensus views for a loss of (98cc) and $236.9M as Q3 marketing spend was up 49% to $304M (up $100M) – stock fell as much as -10% pre-open but rallied back

·     EBS -30%; after the U.S. government terminates contract with EBS for manufacturing COVID-19 vaccines, as the contract manufacturer will forego about $180 million due to contract termination

·     MRNA -19%; along with losses in other vaccine makers NVAX, BNTX, MRK after PFE’s mental antiviral pill reduced the risk of death and hospitalization by 89% with those with COVID

·     NKTR -23%, PBYI -26%; s Smallcap bio names fall on disappointing results

·     NRXP -24%; as the FDA has declined to grant Emergency Use Authorization for NRx Pharmaceuticals’ therapy, Zyesami® (aviptadil), in the treatment of critical COVID-19 patients

·     PTON -32%; as FY22 rev guide was lowered given N-T demand issues (as economies re-open) and mix shift to lower price bike while EBITDA losses are expected to be worse given lower rev and product gross margins coupled with higher supply chain costs

·     SQ ; after reported Q3 rev of $3.84B, missing estimates of $4.54B saying bitcoin revenue was lower than in Q2, as relative stability in the cryptocurrency’s price weighed on trading activity

·     WKHS -12%; after Dow Jones reported the electric-van maker workhorse is being investigated by the justice department, documents show