Mid-Morning Look

Thursday, September 12, 2024

U.S. stocks holding strong following yesterday’s amazing rebound, as this morning’s producer price index (PPI) and European Central Bank policy meeting results offered few surprises. The Philly semi-index (SOX) underperforms early, -0.8% to 4,870 led behind weakness in MU which is down over 6% on a few cautious analyst comments (see below), while the broader SOX surged 4.9% yesterday, rising a 3rd straight day. As expected, the European Central Bank (ECB) lowered interest rates by 25-bps, its second cut in three months, widening a policy gap with the Federal Reserve, which is expected to start cutting rates next week. The ECB cuts the deposit rate to 3.50% from 3.75%, the deposit rate expected at 3.50% and cuts the refi rate to 3.65% from 4.25%. The ECB also cuts growth forecasts for every year through 2026. Just like last months stock market action, September saw weakness the first few days of the month…but also like last month, major averages have recovered quickly and bounced the following week after. Smallcap Russell 2000 and the Dow underperform the S&P and Nasdaq. Treasury yields inch back to yesterday highs at 3.685%, Bitcoin up over 1% topping $58,000 and gold prices back near record highs up over 1%.

• Weekly Jobless Claims climbed to 230,000 from 228,000 prior week (in-line w consensus); the 4-week moving average climbed to 230,750 from 230,250 the prior week; continued claims climbed to 1.850M from 1.845M prior week (in-line w consensus) and the US insured unemployment rate unchanged at 1.2%.

• Transports: in Airlines: ALK boosted Q3 adj EPS to $2.15-$2.25 from prior view $1.40-$1.60 because of the improved revenue and fuel cost outlook and said sees Q3 fuel costs per gallon $2.60-$2.70 from prior $2.85-$2.95; DAL said full year 2024 earnings per share is expected to be at or above the mid-point of guidance of $6 to $7. In Trucking: TD Cowen said that TL carriers are seeing signs of a peak season, better gains on sales and lower fuel prices which May lead to an upside in Q3 for TL stocks (KNX, SNDR, and WERN) if trends continue. LTL carriers continue to price rationally despite more anecdotes of deteriorating industrial demand.

• LOVE +16%; Q2 revenue of $156.6M topped estimates of $155.1M and guided FY25 revenue between $700M-$735M above average estimates of $722M, lifting shares.
• MPW +7%; announced that it had reached a global settlement agreement with a) Steward Health Care System – a key tenant that went bankrupt, b) its secured lenders and c) the unsecured creditors committee (UCC).
• NTGR +30%; after raised Q3 revenue view to $170M-$180M from $160M-$175M saying guidance reflects the above-referenced litigation settlement, as well as the earlier than anticipated launch of its next generation 5G mobile hotspot in the third quarter which was previously expected to occur in the fourth quarter of 2024.
• RLMD +19%; shares rose after Mizuho noted form 4s were filed with the SEC disclosing insider share purchases from C-Suite management (CEO and CFO) and two board members (Chairman and a director).
• ROKU +4%; was upgraded to Outperform at Wolfe Research with $93 tgt and lift estimates above consensus saying amidst industry & Roku-specific fears about CTV ad sales, leadership’s rising focus on monetization supports acceleration and should bury the profitability debate.
• SIG +17%; reported better Q2 results as sales fell -7.6% y/y to $1.49B just missing the $1.50B estimate but EPS of $1.25 topped the $1.14 estimate, while same-store sales fell (-3.4%) to beat expectations of a (-4.1%) decline. For the quarter to date, the company said same-store sales have turned positive.
• SMMT +19%; after announced that the company accepted offers from multiple leading biotech institutional and individual investors to purchase an aggregate of approximately 10.35M shares of the company’s common stock at $22.70 per share, the closing price on Wednesday.

• CURV -22%; shares declined after priced an 8M share stock offering at $4.00.
• DOW -2%; provides update on Q3 guidance as expects Q3 revenue of $10.6B, down from prior forecast of about $11.1B saying the lowered outlook is due to a significant unplanned event that occurred in late July at ethylene cracker in Texas and higher input costs and margin compression in Europe.
• FULC -65%; after saying its experimental oral drug, losmapimod, to treat a genetic muscle disorder failed to meet the main goal in a late-stage study; the company adds it will suspend future losmapimod development.
• IPG -2%; was downgraded to Sell from Neutral at UBS and cut tgt to $29 from $34 saying they think consensus has not fully factored in the impact of account losses such as the recent Amazon media loss.
• MRNA -17%; after saying they aim to reduce its R&D budget by about 20% over the next three years, cutting to $3.6B-$3.8B in 2027 from $4.8B in 2024; MRNA said it is discontinuing five programs in its pipeline and slowing some late-stage studies of treatments for latent and rare diseases to achieve the cost savings; and now expects sales between $2.5B-$3.5B next year, below analysts’ forecast of $3.74B.
• MU -4%; Exane BNP Paribas double downgraded to Underperform from Outperform and slashed tgt to $67 from $140 saying Micron will underperform its artificial intelligence peers through 2025 as high bandwidth memory capacity oversupply leads to a faster than expected market correction of conventional DRAM selling prices.
• OXM -4%; shares declined after reported Q2 adj EPS of $2.77 missing the $3.00 consensus on revs $305M missing the Street est. $438.18M and cut its fiscal-year for revs to $1.51B-$1.54B, down from prior guidance of $1.59B-$1.63B.
• VNOM -3%; sold 10M shares, up from 8.5M shares, at $42.50, 5.8% discount to last sale saying will use expected net proceeds of ~$413.7M to fund pending acquisition of mineral and royalty-interest owning subsidiaries of Tumbleweed Royalty IV, LLC.