Mid-Morning Look

Thursday, April 13, 2023

U.S. stocks moving straight up to start the day after another monthly inflation report eased fears, boosting hopes the Fed will have one more rate hike in May before future rat cuts. The US dollar tumbles alongside a decline in Treasury yields after March PPI inflation hits 2.7%, below expectations of 3.0%, though core PPI inflation came in at 3.4%, in-line with expectations of 3.4%. PPI inflation fell from 4.9% to 2.7%, or 220 basis points, in one month (largest monthly drop since inflation peaked in 2022). Euro extends gains vs. the dollar to its highest since April 2022. Gold extending gains, +1.7% to $2,059 an ounce and silver also higher as the dollar falls further following the “tamer” PPI readings. Technology among early leaders (AAPL, AMZN, META, TSLA, GOOGL, MSFT) while Industrials slip, along with defensive sectors Staples, REITs, and Utilities. Transports slip after mixed DAL results as missed quarter but issues upbeat guidance. Bank earnings in focus next with JPM, WFC, Citi, PNC tomorrow.

Economic Data

·     The Producer Price Index (PPI) for March reported at down (-0.5%) vs. est. unchanged (prior -0.1%) and headline Producer Price Index (PPI) Y/Y rose +2.7% vs. est. +3.0% (prior +4.6%). On a core basis, for ex: Food & Energy, PPI M/M fell (-0.1%) vs. est. +0.3% (prior 0%) and on a Y/Y basis rose 3.4%, in-line with expectations (prior +4.4%).

·     Weekly Jobless claims rose to 239K from 22K prior week (above est. 232K); the 4-week moving average rose to 240,000 from 237,750 prior week (previous 237,750); continued claims fell to 1.810M from 1.823M prior and insured unemployment rate fell to 1.2% from 1.3% prior.

Sector Movers Today

·     In gene editing space: CRSP initiated coverage at Cantor with overweight saying it “stands out to us as an interesting gene editing play for 2023.” NTLA was initiated with Buy and $66 tgt at Canaccord as continues to invest in its CRISPR-Cas9 capabilities, which they think will help the company maintain an edge in the increasingly competitive CRISPR-Cas space. Independent drug pricing review group ICER said in a draft report on Wednesday that CRSP and BLUE’s one-time gene editing therapy for sickle-cell disease would be cost effective if priced at up to $1.9 million.

·     In gaming: DKNG upgraded to Neutral from Underperform at Exane BNP Paribas with $17 tgt; PLTK was downgraded to Underperform at Bank America saying renewed buyout speculation drove the stock runup while says current FCF yield unlikely to appeal to investors. Structural challenges persist; investors are unlikely to underwrite return to 10%+ LT industry growth model. WYNN named top pick in casinos at Wells Fargo citing a clear path to upward estimate revisions and notes Macau’s recovering.

·     In solar: FSLR downgraded from Buy to Hold but raise tgt to $230 from $190 as believe that this is an opportune moment for investors to look for better risk/reward elsewhere, after FSLR’s stock rally of 45% since early November (says remain positive on the company). ENPH named catalyst call Buy at Deutsche Bank noting shares has been a material underperformer YTD, while names SPWR a catalyst call Sell idea by the firm. Separately, SPWR was upgraded to Neutral at Bofa based on improved visibility into 2023 profitability.

·     In chemicals: SHW added as a Catalyst Call Buy at Deutsche Bank saying shares have been in the proverbial penalty box since its Q4 release on January 26 when its shares fell 9% following ’23 EPS guidance that was 18% below consensus. IFF also named as Catalyst Call Buy at DBAB. Jefferies downgraded LXU to hold from buy and its tgt halved anticipating challenges facing the chemicals firm will continue for several quarters and cut LYB to Hold citing rising risks over US demand for the chemicals company amid growing pressure on consumers.

Stock GAINERS

·     COIN +3%; as crypto assets continue to rise with Bitcoin holding above $30K and Ethereum moving above $2,000, lifting the group higher.

·     MRK +1%; upgraded to Buy at Citigroup driven by materially revised forecasts for MRK’s novel ADC for cancer MK-2870/SKB-264 (TROP2), and cardiology agents sotatercept and MK-0616.

·     NVO +1%; after announcing expected sales growth of 24%-30% (vs. 13%-19% prior) and Operating Profit Growth of 28% to 34% (vs. 13%-19% prior) primarily reflecting Wegovy prescription trends.

·     SHOO +2%; upgraded to Buy from Neutral at Citigroup with higher tgt of $42 and opening a positive catalyst watch ahead of 1Q23 results as anticipate a modest 1Q beat.

·     SSYS +2%; after its Board rejected NNDM revised unsolicited proposal of $20.05/share.

·     WYNN +3%; strength in casinos, gaming, and leisure activities among top movers.

Stock LAGGARDS

·     BBAI -8%; after the software company filed a shelf registration statement for the resale of up to about 113.3m shares of common stock.

·     DAL -1%; reiterates 2023 outlook for significant EPS growth to $5 to $6 and free cash flow of more than $2 billion and higher Q2 outlook for PS and revs after Q1 results missed.

·     HOG -3%; after announced the departure of CFO Gina Goetter at the end of April.

·     INFY 7%; reported lower 4Q Revs of 374B rupees vs. est. 388B rupees & lower net income of 61B rupees vs. est. 66B rupees, driven by lower financial services & communications revs. Operating margin came in 70bps light at 21% vs. est. 21.7%.

·     PGR -5%; reports Q1 results as net premiums earned $13.53B vs. est. $13.58B and net premiums written $16.11B vs. est. $15.95B as per Bloomberg.

·     SPWH -23%; after mixed Q4 results and lower guidance as guides 1Q net sales $265-270Mm vs est. $316.7Mm, comps -19%-17%, EPS ($0.40) to ($0.35) vs est. $0.03.

·     SRPT -5%; after an earlier report from STAT News noting that the FDA staff leaned toward rejecting Sarepta gene therapy before top official intervened; shares contract manufacturer CTLT with which Sarepta (SRPT) has partnered for SRP-9001, fell in reaction.

·     VRAY -33%; shares slide after reported Q1 preliminary revs of $23M, up from $19M a year ago but below ests of $24.7M on a wider loss; lowers year rev growth to 0% to 15%, from 25% to 40%.