Closing Recap

Wednesday, August 09, 2023

Index	Up/Down	%	Last
DJ Industrials	-190.54	0.54%	35,123
S&P 500	-31.54	0.70%	4,467
Nasdaq	-162.31	1.17%	13,722
Russell 2000	-16.89	0.87%	1,930

 

 

 

 

 

 

 

 

 

U.S. stocks slumped ahead of key inflation data tomorrow morning, with the S&P 500 falling for the 6^th time in the last 7-trading days while Treasury yields held steady above 4%. Energy was the top S&P sector mover, up over 1% as WTI crude hits its highest levels in 9-months, while defensive sectors such as Utilities, Consumer Staples, and REITs round out the top advancers while tech was a drag. Large cap tech has seen a recent downturn since AAPL earnings last week, carrying over to some software stocks after disappointing earnings/guidance results (DDOG, AYX, FTNT) and in semis as NVDA breaks its 5-day moving average today as semis finish lower. Both Treasury and Currency markets were relatively quiet all afternoon awaiting tomorrow Consumer Price Index (CPI) July data at 8:30 AM ET with ests as follows: The Consumer Price Index (CPI) M/M headline for July is est. to rise +0.2% (prior 0.2%) and on a Y/Y basis est. to rise +3.3% (would be above prior month +3.0%). On a core basis, or Ex: Food & Energy M/M for July est. +0.2% (prior 0.2%) and on a Y/Y basis est. to rise +4.8% (prior 4.8%). In overnight inflation data, China’s consumer and producer prices fell together for the first time since 2020, as the consumer price index registered its first decline in more than two years, falling -0.3% in July from a year earlier, and producer prices fell for a 10th consecutive month, contracting -4.4%. It was a quiet afternoon overall, as stocks sunk in the final minutes of the trading day.

 

Commodities

·     Oil prices hit 9-month highs despite mixed data as WTI crude rose $1.48 or 1.78% to settle at $84.40 per barrel. Crude stockpiles rose more than expected last week as domestic crude production soared to a three-year high, (rose 5.9M barrels vs. est. 1.3M barrel build). Oil stored at Cushing, Okla., the delivery point for U.S. stocks, rose by 159K barrels. U.S. crude-oil production catapulted 400,000 barrels a day higher from the previous week to 12.6 million barrels a day, according to the EIA (largest weekly gain in 2-years). Gasoline stockpiles slid by 2.7M barrels and Distillate stocks, which are mostly diesel fuel, fell by -1.7M barrels. Gold prices slide -$9.30 or 0.47% to settle at $1,950.60 an ounce, closing at its lowest levels in over 4-weeks ahead of the CPI data tomorrow.

 

Currencies & Treasuries

·     Treasury yields and the US dollar were steady most of the day, awaiting the July Consumer Price Index (CPI) tomorrow morning. The US Treasury sold $38B in 10-year notes at a yield of 3.999% vs. 3.998% when issued prior (6^th straight tailing 10-yr), with the bid-to-cover (demand) at 2.56, as primary dealers take 9.5% of U.S. 10-year notes sale, direct 18.3% and indirect 72.2%.

 

 

Macro	Up/Down	Last
WTI Crude	1.48	84.40
Brent	1.38	87.55
Gold	-9.30	1,950.60
EUR/USD	0.0025	1.0979
JPY/USD	0.36	143.73
10-Year Note	-0.004	4.02%

 

 

Sector News Breakdown

Consumer

Autos:

·     In Electric vehicles: RIVN raised its full-year production forecast to 52K vehicles from 50K, reported better-than-expected Q2 results and ended Q2 with $10.2 bln in cash, cash equivalents and short-term investments.

·     In EV Charging: BLNK shares jumped as Q2 revs rose 186% y/y to $32.84M vs. est. $23.76M; raises FY23 revenue to $110M-$120M, consensus $103.16M and targets adjusted EBITDA break even run rate by December 2024 and margins improved to 37% in Q2 compared to 17% y/y.

·     In used cars: CVNA said it sees Q3 Ebitda of more than $75M, whereas it was previously calling for “positive” performance (ests. $46M) and now models adjusted total gross profit per unit (GPU) upwards of $5,500, while it previously told investors to expect more than $5,000.

 

Consumer Staples & Restaurants:

·     In Beverages: CELH shares jump on Q2 top/bottom-line beat and says its drinks were available in more stores, and sold more drinks per location, on average; said its market share doubled in Q2 to 8.6%, making it the 3rd most popular energy drink in the US.

·     In Restaurants: BROS shares rose after swinging to a Q2 profit and named a former SBUX executive as its next CEO (offset weaker sales for Q2); WEN reports Q2 total revenue of $561.6M vs. est. $567M as EPS just beat and said operated restaurant margin grew 200 bps as customers spent higher per check. JACK Q3 adj EPS and sales topped consensus while comp sales rose 7.9%. but shares fell (also announced new CFO); SHAK downgraded from Buy to Neutral at Northcoast.

·     In Beauty: TD Cowen said into earnings they are more constructive on ULTA and remain more cautious on EL in the near-term saying beauty trends in the US continue to show strength and we think ULTA could post better than expected comps sales.

·     In Retail: REAL Top line was slightly below, and adj. EBITDA was better than expected; TGT is adding SBUX drinks and food to curbside pickup at stores across the country. TDUP posted slight revenue and adj. EBITDA beats against a difficult macro backdrop, with top-line acceleration expected in 2H.

 

Leisure, Gaming & Lodging:

·     In casinos & gaming: PENN shares rally after the company announced a 10-year partnership with Disney’s (DIS) ESPN and said it was divesting from Barstool Sports, selling 100% of its stake back to Barstool founder Dave Portnoy. Penn has agreed to pay ESPN $1.5B in cash over 10 years and grant ESPN $500M of warrants to purchase ~31.8M shares of Penn. The app will be promoted across ESPN platforms (shares of DKNG came under pressure following the news).

·     In ride hailing: LYFT beat & raised Q3 but decided to get in front of a Q4 margin guide down, due once again to rising insurance costs; reported its slowest revenue growth since the pandemic; Q2 EPS loss (-$0.30) vs. est. loss (-$0.01); Q2 revs $1.02B, in-line with consensus; said lower pricing helped spur an 8.2% jump in the number of active riders.

 

Energy

·     Natural gas prices rose +6.6% at $2.959/MMBtu, the highest closing price since March 3 helped by a sharp rally higher in European gas markets.

·     In E&P and Equipment Sector: EQNR upgraded to Outperform at RBC Capital with $390 tgt noting the shares have underperformed peers YTD as European gas prices have moved from unusually high levels in 2022 back to the long-term trend. VTS downgraded at Northland after delivered a Q2 miss. BOOM rises reported 2Q23 adjusted EPS of $0.72 above consensus of $0.41 on higher revs while gross margin came in at 32.8% vs 31.4% in 2Q22.

·     In Utilities: WES downgraded from Overweight to Neutral at JP Morgan after reported 2Q23 adj EBITDA of $488mm, below the $500Mm est. on higher opex and says Delaware growth appears lighter than expected. VST reported Q2 results and guided FY adj. EBITDA to range of $3.60B-$4.00B, raising the lower end from prior $3.40B-$4.00B. XYL shares slumped after short seller Spruce Point Capital issued a strong sell recommendation.

·     In Solar: ARRY delivered an impressive Q2 beat — beating >10% on revenue, posting 29.5% GMs vs. 20.8% consensus, and ~2x Adj. EBITDA vs. consensus and raised year EPS and Ebitda views; CSIQ said it received an order for 7 gigawatts of solar modules from EDF Renewables North America; says modules to be produced at its new factory in Mesquite, Texas

 

Financials

Bitcoin, FinTech, Payments:

·     UPST stumbles as Q2 revs fell -40% y/y to $135.8M vs. est. $135.9M; said lending partners originated 109,447 loans, totaling $1.2 billion across platform, down 64% y/y; sees Q3 loss (-$28.2M) and revs about $140M.

·     MQ shares jump as Q2 revenues grew 24%, 5% above ests but below the 1% in prior qtrs. and adj gross profit rose 8% vs. guidance of LSD growth, but the renewal of the Cash App contract with SQ helped shares outperform. Mizuho said that MQ’s renewal of its contract with SQ could add 3% to Cash App’s GP growth in 2024.

·     FLT reported Q2 results with revenues slightly above the Street, by $3M, and adj. EPS $0.02 above the Street, while the midpoint of FY23 revenue guidance was increased by $8M to $3.848B and adj. EPS by $0.07 to $17.22.

·     In Business Services: ZIP downgraded from Outperform to In Line at Evercore/ISI in the wake of In-Line & lower Q2 EPS results saying fundamentals are weaker than Evercore had anticipated, and trends are continuing to deteriorate faster than it had expected.

 

Healthcare

Biotech & Pharma:

·     DBTX to be acquired by REGN for $4 per share, in a deal valued at about $109M, strengthening its gene therapy and hearing loss programs.

·     EBS announced that it will cut 400 jobs and eliminate the role of chief operating officer as part of a shift away from its contract manufacturing services business; also cut its 2023 revenue and margin forecasts, citing weakness in its contract research business; gross margin to grow 36%-39% vs its earlier outlook of 39%-42% growth.

·     MRTX shares rise after announcing compelling initial clinical data for MRTX1719 in MTAP-deleted cancers demonstrating favorable safety profile and early signs of strong clinical activity. Guggenheim raised price tgt on IDYA to $42 and TNGX to $16 (from $12) following external validation & positive read through after the MRTX data.

 

Healthcare Services & MedTech movers:

·     DOCS reported a top-and bottom-line beat with margins that came in above consensus (18% above) driven by better G&A and R&D but did issue F2Q guidance that came in significantly lower than consensus on both revenue (~10% below consensus) and profits (15% below).

·     HCAT reported a solid beat, with revenues topping consensus by ~1% and adjusted EBITDA coming in ~40% higher than expectations.

·     LH entered accelerated share repurchase deals to repurchase about $1 billion of co’s common stock as part of co’s repurchase program.

·     OSCR rises as Q2 revs $1.522B vs est. $1.44B; said expect to be towards the low-end of our MLR guidance and high-end of our full year Adjusted EBITDA guidance.

 

Industrials & Materials

Transports

·     In Transports: UP said it is exploring potential strategic business partnerships and has been provided with a short-term capital infusion from DAL; also said it entered a nonbinding letter of intent with Airshare to acquire Wheels Up’s non-core aircraft management business.

·     In Industrials: GTES 15m share secondary offering prices at $11.75 per share as BX to sell shares taking the private equity stake from ~50% to ~44%.

·     In Aerospace & Defense: AXON raised its FY23 revenue outlook to a range of $1.51B-$1.53B from prior $1.44B-$1.46B (est. $1.5B) after Q2 results easily topped consensus; BAH reaffirms FY adj EBITDA forecast in slides; ASLE reported 2Q adjusted EBITDA of ($0.5M) vs. Stifel expectation of $6.2M as no aircraft sales were made during the quarter on the back of weaker conditions in the cargo market.

 

Technology

Semi’s Internet, Media & Telecom

·     In Semis: Sector tumbled as much as 1.5% late morning, now a more than 250-point pullback from recent 3,875 high at the end of July, as NVDA falls around 6%, losing steam (shares dropped below 50-day MA $429 this morning). SMCI shares tumble as posted Q4 earnings and revenue that topped estimates but its 2024 outlook disappointed, coming in at $10B for revs, only slightly above the $9.88B est.

·     In Telecom, VZ said starting with September bills, customers on Mix and Match plans will pay $3 more for single lines and $5 extra for multiple lines.

·     In Internet networks: AKAM delivered a solid beat-and-raise as revenue slightly beat consensus driven by Security upside and reacceleration, while Delivery was light.

·     In online Services: DUOL reported Q2 results that beat expectations and raised its full-year forecast, sending shares higher.

 

Hardware & Software movers:

·     In software video games: RBLX falls as missed Q2 bookings estimates amid waning demand for its online games and intensifying competition hurt growth as Q2 adj. EBITDA $37.9M misses $48.5M estimate and reported Q2 net bookings $780.7M vs. est. $784.9M. TTWO with mixed results.

·     In the 3D sector: DDD and SSYS both decline post earnings; DDD with Q2 miss and lower revs while cut FY23 revenue view to $525M-$545M from $545M-$575M while SSYS reports top and bottom line beat and backs year outlook.

·     In AI space: SOUN posted a solid 2Q, with 42% revenue growth, a 50% improvement in EBITDA, and 20% backlog growth. The current portfolio of restaurant customers could generate $10 million in ARR when fully deployed.

·     In Security: RPD reported an EPS & revs beat, forward guidance raises and announced plans to lay off 18% of its workforce, affecting more than 400 global employees.

·     In Cloud/SaaS: TOST raises annual revenue outlook to $3.81B-$3.87B from $3.71B-$3.80B (est. $3.78B) after Q2 revs grew 45% y/y to $978M, topping analysts est. of $941.98M.

·     In Application software: TWLO reported 2Q results that were largely above expectations, highlighted by $120m non-GAAP operating profit (12% margin) and raised 2023 non-GAAP operating profit guidance to a range of $350-400m, above the prior range of $250-350m.