Mid-Morning Look

Thursday, November 19, 2020

Stocks open mixed after yesterday’s late day sell-off following mixed economic data (weaker jobs data, better housing) and as investors continue to cope with surging coronavirus cases in the U.S. and Europe, which has been offset by positive vaccine news this week. The Labor Department said initial claims for state unemployment benefits totaled a seasonally adjusted 742,000 for the week ended Nov. 14, compared to 711,000 in the prior week and economist forecasts for 707,000 as new business closures to control the spiraling COVID-19 infections unleashed a fresh wave of layoffs. The U.S. death toll from COVID-19 surpassed a grim new milestone of 250,000 on Wednesday as New York City’s schools called a halt to in-classroom instruction, in the latest restrictions aimed at curbing the virus spread. Gold slipped as much as 1% as the dollar firmed and progress in COVID-19 vaccine development boosted hopes of a faster economic rebound and tempered bets for an immediate U.S. coronavirus relief package. COVID threats are definitely settling back in to investor sentiment as headlines like those that hit yesterday afternoon regarding the temporary closures of NYC schools created a bit of a forced exit in equities (but not seeing mass follow through weakness to start this morning). Seeing small rotation out of the economically sensitive (reopen) names early after a strong week of gains as new restrictions imposed to curb rising coronavirus infection levels weighed on the economic outlook.

Economic Data

·     Initial Jobless Claims rose to 742K vs. 710K consensus, while prior week edged up to 711K from 709K; continuing jobless claims of 6.372M is down from 6.801M prior and below the 6.470M consensus; the 4-week moving average fell to 742K from 755,750 prior week; US insured unemployment rate fell to 4.3% from 4.6% prior week

·     Philadelphia Fed business conditions index for November at +26.3 (above consensus 22.0) vs 32.3 in October as new orders index 37.9 in November down from 42.6 in October, prices paid index 38.9 in November vs 28.5 MoM, employment index 27.2 in November vs 12.7 in October; the 6-month business conditions index 44.3 in November vs 62.7 in October

·     Existing Home Sales for October +4.3% to 6.85M topping the 6.47M consensus (and revised higher to 6.57M from 6.54M pervious month); U.S. oct inventory of homes for sale 1.42 mln units, 2.5 months’ worth and the Oct national median home price for existing homes $313,000, +15.5%

Sector Movers Today

·     Retailers; LB trades to more than 2-year highs as handily beats Q3 sales and profit estimates, helped by record sales growth at Bath & Body Works, higher demand for Victoria’s Secret lingerie (first time VS posted consecutive positive quarterly comps in 4 years), and gross margins 870bps expansion; Macy’s (M) reported 3Q adj EPS ($0.19) vs. est. ($0.79) on sales $3.99B vs. est. $3.86B, comps -21% on owned basis, -20.2% owned & licensed, digital sales +27%; BJ 3Q adj EPS $0.92 vs. est. $0.64 on net sales $3.65B vs. est. $3.68B, comp club sales ex gas +18.5% vs est. +16.7%, digitally-enabled sales +200%; PLCE Q3 EPS $1.44 on revs $425.6M, both surpassing estimates (26c, $388M); CATO posted Q3 EPS (15c) on revs $150.8M; SCVL reported Q3 EPS $1.03, topping est. $0.70, on revs $274.6M, just shy of est. $275.58M, an comp sales +0.9% and digital sales up over 150% YoY; COTY was upgraded to Buy with a $10 target from $4.50 at Citi who sees more room for the stock to run despite doubling off its 2020 lows

·     Exchanges; NDAQ buys Verafin for $2.75B to bolster financial crime-fighting tech, to add its anti-money laundering and fraud platform to Nasdaq’s established regulatory technology business (says Verafin’s cloud products deliver ~30% compound annual recurring revenue growth within a $13B addressable market) https://on.mktw.net/2KnHDpH ; ICE upgraded to Strong Buy with a price target of $125 at Raymond James as expects the recently completed Ellie Mae acquisition to sustainably boost its organic revenue growth profile, and feels that an upcoming segment realignment will better highlight the value of its mortgage franchise as well as its FI business

·     Internet; SHOP upgraded to buy from hold at Jefferies with $1,250 tgt saying it see its future prospects being as bright as ever; YELP tgt raised to $34 from $29 at RBC Capital as came away with greater appreciation for Yelp’s product improvements, sales efficiency driving margin expansion, and the overall return of ad budgets under a vaccine world; PINS tgt raised to $80 from $44 at Loop as believes that the break-out monetization momentum, along with continued strength in the company’s user growth, will sustain a high multiple for the stock; BILI posted a beat and raise quarter

·     Metals & Materials; OSB to be acquired by West Fraser Timber Co. Ltd. for about 4 billion Canadian dollars (US$3.1 billion), in an all-stock deal combining the wood-products companies as the transaction values Norbord at C$49.35 a share https://on.mktw.net/3fcqieL (watch other timber names LPX, BCC, WY, UFPI); BERY reports Q4 adj EPS of $1.59 above est. $1.22 and net sales of $3 bln, with 4% organic volume growth

Stock GAINERS

·     APVO +30%; as investment fund Tang Capital Partners LP submitted a bid letter to APVO’s board, offering to acquire co’s remaining stock it doesn’t own for $50 per share in $240M deal https://bit.ly/3lGNowp

·     AZN +1%; University of Oxford, which is working in collaboration with AZN, was shown to have generated a healthy immune response in adults in their 60s and 70s

·     CORT +21%; after U.S. Patent and Trademark Office issued a decision upholding the validity of Corcept’s claims for its approved drug for Cushing’s syndrome, Korlym (challenger TEVA)

·     COTY +18%; was upgraded to Buy with a $10 target from $4.50 at Citi who sees more room for the stock to run despite doubling off its 2020 lows

·     LB +14%; trades to more than 2-year highs as handily beats Q3 sales and profit estimates, helped by record sales growth at Bath & Body Works, higher demand for Victoria’s Secret lingerie

·     NUAN +14%; rises as Q3 total revenue of $352.9M beat the Street’s $345.9M estimate driven by Healthcare strength on better margins and guidance

·     OSB +13%; to be acquired by West Fraser Timber Co. Ltd. for about 4 billion Canadian dollars (US$3.1 billion), in an all-stock deal combining the wood-products companies as the transaction values Norbord at C$49.35 a share https://on.mktw.net/3fcqieL

·     SBGI +16%; after partnered with sports betting company and casino operator BALY and was rebranding its 21 Fox regional sports networks under the Bally name.

·     SONO +29%; after Q4 EPS 33c on revs $339.8M topped the consensus for 0c and $298.8M on better revs as sees FY21 revs $1.44B-$1.5B vs. est. $1.38B and announces $50 million stock repurchase program

Stock LAGGARDS

·     GPRO -10%; announces $100M convertible senior notes offering

·     NVDA -1%; posts both Q3 rev and profit above analysts’ est., driven by strength in gaming business, where revenue jumped 37% to $2.27 bln from a year earlier and sees Q4 rev of $4.80 bln, plus or minus 2%, while analysts expect $4.42 bln but did warn it sees a decline in data center chip sales in Q4

·     RHI -5% as Credit Suisse downgraded to underperform as sees limited near-term catalysts to rerate shares further with initial claims having declined significantly

·     TTCF -5%; shares fall after Kerrisdale Corp names as a short report

·     ZTO -9%; reported 3Q results as revenue beat consensus slightly by 6.3% but posted lower profit

Syndicate:

·     Berkeley Lights (BLI) 3M share Secondary priced at $86.00

·     BeyondSpring (BYSI) 7.5M share Secondary priced at $10.00

·     Camtek (CAMT) 3.5M share Secondary priced at $17.00

·     Jamf Holding (JAMF) 11M share Secondary priced at $32.00

·     MeiraGTx (MGTX) 5M share Spot Secondary priced at $12.85

·     Neogames (NGMS) 4.81M share IPO price $17.00

·     Olema Pharmaceuticals (OLMA) 11M share IPO priced at $19.00

·     Ormat Technologies (ORA) 4.15M share Secondary priced at $74.00

·     Playa Hotels & Resorts (PLYA) 13.6M share Secondary priced at $4.10

·     Simon Property (SPG) 19.25M share Spot Secondary priced at $72.50

·     SmileDirectClub (SDC) 5M share Block Trade priced at $10.70

·     Yatsen (YSG) 58.75M share IPO priced at $10.50