Mid-Morning Look

Friday, November 13, 2020

U.S. stocks are seeing a solid rebound after weakness on Thursday, as the reopen related trades (travel, leisure, restaurants, REITs, energy) are back on the rise heading into the weekend in what has been a volatile week of trading for the sectors given positive Covid vaccine news on Monday from Pfizer. Economic data was mixed with PPI data mixed (headline inflation above views, but core prices came in slightly above estimates), while confidence figures weak as the University of Michigan confidence well below consensus expectations. Technology space getting a boost from strong earnings results/guidance out of Dow components DIS and CSCO and semiconductors with solid results from AMAT. Oil prices pulling back after gains this week as coronavirus cases surge, while gold prices edge higher. The rising Covid cases remain a concern for markets as more than a dozen U.S. states reported a doubling of new COVID-19 cases in the last two weeks, with Chicago’s mayor issuing a month-long stay-at-home advisory on Thursday and hospitalizations are rising.

Economic Data

·     Producer Price Index (PPI) for October rose 0.3% vs. est. 0.2% and core prices MoM (ex food and energy) rose 0.1% missing the 0.2% estimate; on a YoY basis, headline PPI rose 0.5% vs. est. 0.4% and core prices YoY rose 1.1% missing the 1.2% estimate

·     The University of Michigan surveys of consumers sentiment prelim Nov 77.0 (consensus 82.0) vs final oct 81.8; the current conditions index prelim Nov 85.8 (consensus 87.5) vs final oct 85.9 and the expectations index prelim Nov 71.3 (consensus 78.6) vs final oct 79.2

Sector Movers Today

·     Oil Refiners; group outperformed early (HFC, PSX, MPC) – Piper said despite near-term headwinds through 1H21 on a potential COVID-driven pullback in demand, improved visibility on the recovery in the form of 1) vaccine readiness, and 2) refinery closures makes us cautiously optimistic on the outlook for refiners in 2H21/2022

·     Auto sector; electric vehicle sector strong again as Chinese EV maker LI rises as Q3 revs $379.8M top the $290.17M est. as vehicle deliveries rose 31% from previous quarter to 8,660 vehicles in Q3 and guides Q4 revenue $457.8M-$499.4M vs. est. $342.38M on better deliveries (follows strong results from XPEV the day earlier in China EV space); BLNK falls as Q3 results missed top and bottom-line estimates with a $900K (+18% Y/Y) and a $0.12 loss respectively; Ford (F) said is considering doing own battery cell production; NIO short call mention at Citron – reverses from long call made two-years ago it noted

·     Consumer Staples; UTZ was upgraded to overweight at Piper as believes the co has an attractive portfolio as it is focused in salty snacks, a category that has had 4%-5% average growth over past three years (follows purchase yesterday of Truco Enterprises for $480M); DoorDash files for IPO, to list on NYSE under ticker DASH; SPB better-than-expected Q4 EPS and revenue, helped by a quick rebound in demand for its garden and home improvement products as well as pet supplies, as shares trade to 52-week highs

·     REITs; EXR was upgraded at KeyBanc to Overweight with a $124 pt from Sector Weight as work- and learn-from-home as boosted demand for self-storage; NSA will pay a dividend of 35c/share in Q4, up from 34c in Q3; EQR was downgraded to Hold from Buy at Argus on concerns that its big-city portfolio (NYC, LA, San Francisco make up 55% of rev) may face softer demand as surging cases may push more people to the suburbs; WELL was downgraded to In-Line from OP at Evercore/ISI, though its pt was raised to $64 from $60; Citi upgraded DLR to Buy from Hold after its -11% pullback over the past month, saying the stock trades in-line or at a discount to peers and offers a favorable combination of growth and yield

Stock GAINERS

·     AMAT +5%; delivered Q4 revenue/EPS above the midpoint of guidance and consensus on better than expected semiconductor and services sales while Q1 revenue/EPS guidance was also above expectations on continued strong semiconductor equipment demand

·     CSCO +6%; quarterly results exceeded the reduced guidance (1Q21 revenue/EPS of $11.9B/76c beat Street’s est. of $11.85B/71c), while expects Q2 revenue to be between flat and a 2% fall better than the 3% estimate decline

·     DIS +2%; Q4 results exceeded consensus expectations driven by outperformance at Media Networks, Parks, and Direct-to-Consumer segments while the co highlighted strong growth across its DTC portfolio with Disney+ reaching 73.7mm paid subscribers in its first year and over 120mm combined paid subs including ESPN+ and Hulu

·     DKNG +7%; unique players rose 64% Y/Y in Q3 and average revenue per monthly unique user was 34% higher while raises FY20 revenue guidance to a range of $540M to $560M (+25% to +30% Y/Y) from $500M to $540M prior view

·     FSLY +2%; U.S. Commerce Department said on Thursday Chinese-owned TikTok video-sharing app can continue to operate in the U.S./TikTok-owner ByteDance is FSLY’s biggest customer and accounts for 11% of its YTD revenue

·     FTCH +11%; as topped consensus estimates on all key metrics as Digital Platform GMV rose 60% vs. guidance of 40-45% and the Street’s 42% while BTIG noted Digital Platform Services revenue of $263MM on $674MM in Digital Platform GMV beat est. of $222MM of revs $596MM of GMV

·     HFC +5%; as oil refiners outperform on the day (PSX, MPC)

·     LI +27%; Q3 revs $379.8M top the $290.17M est. as vehicle deliveries rose 31% from previous quarter to 8,660 vehicles in Q3 and guides Q4 revenue $457.8M-$499.4M vs. est. $342.38M on better deliveries

·     PLTR +5%; beat market expectations in its first quarter as a public company and raised its 2020 revenue forecast as it shored up large government and aerospace contracts – though net loss widened

·     SPB +4%; better-than-expected Q4 EPS and revenue, helped by a quick rebound in demand for its garden and home improvement products as well as pet supplies, as shares trade to 52-week highs

·     UROV +92%; Sumitovant Biopharma to acquire the balance 28% shares in Urovant Sciences (UROV) for $16.25 per share, or ~$584M, in an all-cash merger https://bit.ly/3f6ysW5

Stock LAGGARDS

·     AMWL -5%; posted a bigger-than-expected Q3 loss of (92c) vs. est. loss (28c) as total costs, operating expenses more than doubled while guides year revs $235M-$239M as the midpoint of which is slightly higher than analysts’ estimates

·     LYB -1%; DOW and LYB both downgraded to Market-Perform at Bernstein given that our COVID recovery thesis now has largely played out

·     NFLX -0.5%; as DIS said its Disney+ streaming service subscribers jumped – raising competition fears for the likes of NFLX

·     PECK -7%; SUNW shares rise after terminating the merger agreement w/PECK as the agreement inked on August 10 was cancelled due to Sunworks’ inability to obtain stockholder approval

Syndicate:

·     Five Prime (FPRX) 7.2M share Secondary priced at $21.00

·     Keros Therapeutics (KROS) 2.6M share Secondary priced at $50.00

·     Organogenesis (ORGO) 17.5M share Secondary priced at $3.25

·     Oric Pharmaceuticals (ORIC) 5.4M share Secondary priced at $23.00

·     Bentley Systems (BSY) 10M share Secondary priced at $32.00

·     BigCommerce (BIGC) 5M share Secondary priced at $68.00

·     Vertiv Holdings (VRT) 18M share Block Trade priced at $17.00