Closing Recap

Wednesday, February 28, 2024

Index	Up/Down	%	Last
DJ Industrials	-23.12	0.06%	38,949
S&P 500	-8.42	0.17%	5,069
Nasdaq	-87.56	0.55%	15,947
Russell 2000	-15.73	0.77%	2,040

 

 

 

 

 

 

 

 

 

U.S. stocks chopped up/down for a third straight day, holding in a narrow trading range as markets await the latest outlook on inflation, with the January PCE and Core PCE data (the Fed’s preferred measure) tomorrow morning at 8:30 AM. Investors got a little taste of data earlier today as the Q4 GDP (2^nd estimate) showed slightly slower growth than expected and also slightly higher PCE inflation (not as updated as tomorrow’s Jan figures). Treasury yields slipped late day to lows while the dollar pared gains. Smallcaps take a breather, as the Russell 2000 snaps its 4-day win streak. REITs, Consumer Discretionary, and Financials were among the best performers while Healthcare, Technology, and Communications fell. There were several stock movers on a busy day of earnings as Q4 results wrap up, with a couple of big names tonight including software giant and Dow component Salesforce (CRM), but it’s all about PCE tomorrow!

 

Several Fed speakers weighed in today on rates/the economy ahead of tomorrow’s PCE data: 1) New York Fed President John Williams said Wednesday that “While we’ve seen great progress toward achieving our goals, the journey is not yet over, and I am very focused on making sure we complete this mission successfully.,” “We still have a ways to go on the journey to sustained 2% inflation,” he added. Williams said he expects U.S. GDP to slow to about 1.5% annual rate this year, down from a 2.5% rate in 2023. 2) Boston Fed President Susan Collins said she wanted to see continued declines in housing and non-shelter services inflation, two subcomponents that have been sticky. Still, Collins said she was a “realistic optimist” that the economy is on a path back to 2% inflation without damaging the labor market. 3) Fed’s Bostic repeated there is still work to do and will not declare victory on inflation yet, as has been his stance for some time. He is comfortable being patient on the policy approach. It is not going to be a fast march to 2% and he anticipates volatility.

• Bitcoin extends 2024 gains, topping $63K for the first time since November 2021, jumping more than 12% or over 75,000 today alone as momentum continues to carry it and stocks leveraged to Bitcoin (COIN, MARA, RIO, MSTR) higher. Bitcoin is also heading for its largest week-on-week gain in a year, up % since Feb. 21. Traders have poured into bitcoin by the support of consistent inflows into the new spot ETFs and outlook for April’s halving event and June’s Fed interest rate cuts. The three most popular, run by Grayscale (GBTC), Fidelity (FTBC) and BlackRock (IBIT) have seen trading volumes surge in recent weeks since the ETF approval this month. Of course, volatility comes along with Bitcoin as between 12:15 PM ET and 12:30 PM ET, Bitcoin fell from $64,000 to $59,000 before bouncing.

 

Macro	Up/Down	Last
WTI Crude	-0.33	78.54
Brent	0.03	83.68
Gold	-1.40	2,042.70
EUR/USD	-0.0012	1.0832
JPY/USD	0.19	150.69
10-Year Note	-0.033	4.282%

 

• In Auto Technology: LAZR reported Q4 FY23 revenue/non-GAAP EPS that missed estimates, as the company saw lower than anticipated sensor sales in adjacent markets and slower revenue recognition for a development contract.
• In Auto Suppliers: AXL was upgraded from Sell to Neutral at UBS saying their downgrade two things have changed: 1) Consensus 2024/25 adj. EBITDA forecasts are now a more reasonable ~3% above UBS and 2) at current levels and using UBS’s 4.3x 2025E EV/EBITDA multiple, it believes the mark.
• China EV stocks slipped early (LI, NIO, XPEV) after Senator Hawley noted this morning that President Biden should hike tariffs on Chinese EVs.

• In Footwear/Apparel Retail: URBN shares slump as Q4 adj EPS $0.69 missed the $0.74 consensus on in-line revs $1.49B citing softer traffic from unfavorable weather in January while elevated expenses hurt profit. SHOO shares slump after guiding 2024 EPS $2.55-$2.65 below est. $2.69 despite Q4 beat on EPS/revs.
• In Beverages: SAM shares slump on quarterly miss as reported softer volumes, margins, and EPS with margin headwinds into 2024; Q4 revs $393.7M vs. est. $413.8M; Q4 Depletions decreased 9%; shipments decreased 12.2%. COCO beats Q4 sales and profit expectations on higher pricing and strong demand for its products like Vita Coco coconut water (sales rose 15% to $106M topping est. $99.6M), but guidance for sales was below views.
• In Online, Specialty retail: CPNG reported a good quarter with strong top-line growth and EBITDA beat; for top line, the company grew 20% FXN, leveraging its competitive advantage in logistics to gain share while EBITDA came in above the Street by >10%. WRBY shares drop after surprise quarterly loss as gross margin keep falling.
• In Food: BYND shares jumped after mixed results/guidance as Q4 revs of $73.7M were 10.0% above consensus estimates but down -7.8% YoY, and guidance implies flat to negative sales growth and a mid-teens gross margin. BROS priced an 8M share secondary offering at $29.05 per share. BGS shares jumped after the earnings results.

• In Refiners/E&P: DVN reiterated its 2024 guidance from November and delivered solid operational results topping 4Q23 production volume guidance and Street estimates for FCF, capex for 1Q24 is slightly above expectations. PR delivered with a strong 4Q and ’24 guide that matches expectations and is likely conservative, said TD Cowen. VTNR shares tumbled after a Q4 net loss of (-$0.84) worse than the profit of $0.07 y/y.
• In Aerospace & Defense: BA shares led the Dow Jones Industrials after saying it had agreed to a U.S government demand to develop a comprehensive action plan to address "systemic quality-control issues" within 90 days after a mid-air emergency last month sparked renewed safety concerns. AXON shares surged over 14% midday in follow through strength after better earnings and guidance overnight.
• In Building Products: IBP downgraded to Neutral from Overweight at JP Morgan (though raise PT to $242 from $199) following Q4 earnings as it believes valuation fully reflects its outlook for a stable to constructive macro and housing backdrop this year, as well as the company’s recent solid execution.

• In Real Estate: In China, property developer Country Garden Holdings said on Wednesday it was facing a liquidation petition for not repaying a term loan facility worth HK$1.6 billion ($204.5 million). RDFN shares fell initially after Q4 results and guidance but rebounded off lows.
• In REITs: GNL reported 4Q23 AFFO of $0.31/share, which missed consensus by ~22% and provided FY24 AFFO guidance, which was 18% below consensus at the midpoint; GMRE FFO missed expectations by $0.03/share, or nearly 14%, which includes the unexpected impact from a $1.1M tenant reserve on a tenant in NJ; GLPI reported a $0.01/share 4Q23 AFFO beat vs. consensus, though management issued initial FY24 AFFO guidance that fell shy of consensus by $0.03/share at the midpoint; EXR reported a slight 4Q23 miss, with performance in the quarter mostly in line with expectations, but issued initial FY24 Core FFO guidance that was ~4% below consensus.
• In Business Services: FLYW Q4 results beat after a mixed Q3 with strong guidance lifting shares (NRR accelerated to 125% in FY24, from 124% in FY22 and 123% for the avg of FY19-FY22). PAYO shares sunk after guiding 2024 revs $875m-$885M below consensus $910M after Q4 revs topped consensus.
• In Payments/Services/Lending: a day after falling on better results/but lower guidance, TREE was upgraded from Market Perform to Outperform at KBW with $45 tgt cited in 2024 earnings recovery led by a rebound in insurance segment, where it thinks 2024 guidance could be conservative and increased conviction in ability to efficiently address its convert maturity in 1H24. FOUR shares jumped late day after Reuters reported FI and Amadeus IT Group competing to acquire the payments processor that has a market value of $6.5B. http://tinyurl.com/2fsavckh
• In Insurance: LMND shares tumble after Q4 revs $115.5M vs. est. $111.7M but guides Q1 revs below views and FY24 revenue $505M-$510M vs. est. $520.95M and adj EBITDA loss ($160M)-($155M).
• In FinTech: Stripe is allowing its employees to cash out more stock as the fintech giant continues to put off an initial public offering. Stripe and some of its investors agreed to buy over $1B of current and former Stripe employees’ shares, according to people familiar with the matter. The deal will value Stripe at $65B, the people said. That is up from its $50B valuation nearly a year ago – WSJ http://tinyurl.com/yzssa3dz

• APLT shares jumped after the company disclosed a $100 million private placement and said regulators have granted priority review for its lead drug candidate govorestat.
• EDIT shares jumped after narrower EPS loss and jump in revenues for Q4.
• NVAX posted a larger-than-expected Q4 loss (-$1.44 vs. est. -$0.45) and misses revenue estimates ($291M below ests $322M) and said expects 2024 sales to be flat or lower guiding $800M-$1B vs. est. $970M.
• PTN shares tumbled after a pivotal Phase 3 study evaluating the safety and efficacy of PL9643 missed its co-primary endpoint and a secondary endpoint related to clinical sign.
• SHC shares fell after saying last night that PE firms Warburg Pincus and GTCR, along with Co’s execs and a board member, file to sell 25M shares.
• VANI shares surge as announces positive NPM-115 preclinical weight loss data comparable to Ozempic/Wegovy and discloses NPM-139 as Semaglutide as strategy shifts to prioritize obesity portfolio.

• Healthcare Facilities: ACHC and UHS both reported good quarters, highlighted by strong same-store revenue trends. Both companies reported initial 2024 guidance in-line or modestly above expectations.
• In Medical Equipment: Agilent (A) beat expectations and positive themes were more stable end markets, sequentially improving China, and easier comparisons developing according to KeyBanc while negatives include the biopharma-driven oligo business is expected to be flat in FY24, total revs will have a MSD/HSD y/y decline in 2Q24.
• In Dental Supply Sector: PDCO reported F3Q results that were slightly below consensus on revenue and EPS, with weaker Dental Equipment and Animal Health topline and lighter operating margins weighing and lowered its FY24 guidance, expecting EPS of $2.30 to $2.35 vs. $2.35 to $2.45 prior.

• In Internet: EBAY delivered strong 4Q results, GMV beat expectations due to rebounding holiday demand and continued product improvements and issued encouraging 1Q/FY24 outlook; BIDU reported mostly in-line Q4 revs on better net income and said ERNIE AI services have already started to contribute to Baidu’s revenues.
• In Media/Advertising: DIS announced an agreement with India’s Reliance Industries Ltd., Viacom 18 Media Private Ltd. to form a joint venture that merges the companies’ digital streaming and TV assets in India. As part of the deal, in which the JV will be valued at about $8.5 billion, Reliance has agreed to invest $1.4 billion in the JV at closing. IAS shares tumbled after strong Q423 results and softer Q1/FY24 guide, driven by pricing concessions to several Measurement clients, which should pressure growth in 1H24 according to Truist.

• CRDO reported in-line JanQ/AprQ, with revenues up ~90% y/y marking Apr’23 the bottom as CRDO drives low power AEC/optical adoption.
• ENFN downgraded to Sell at Goldman Sachs as they expect that the sharp underperformance over the past 12 months relative to the NASDAQ we have seen to persist as revenue growth expectations are likely too optimistic and expect customer acquisition cost to remain elevated over the next 3 years.
• JAMF reported Q4 total ARR growth of 15% Y/Y, slightly above Street forecasts, while provided a disappointing 2024 revenue/ARR outlook that reflects only 10% Y/Y growth, albeit with significantly better margins.
• KVYO posted Q4 rev growth of 39% above Street at 35%, w/ op margin of 8% in-line as up-market momentum was a highlight w/ $50k+ net adds the highest on record according to TD Cowen.

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Market commentary provided by Hammerstone Markets, Inc, a firm separate from and not affiliated with Regal Securities. Regal Securities has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.