Mid-Morning Look

Friday, April 23, 2021

U.S. stocks with a straight shot higher off the open, erasing much of yesterday’s late afternoon decline, which followed reports that the White House plans to double the capital gains tax. Market resiliency has been remarkable, shaking off all negative headlines for months, with stocks marching higher again to end the week. The Dow Jones Industrial average underperforms broader markets after shares of Intel and Amex decline following earnings results. Economic data strong again in manufacturing and home sales, while the 10-year Treasury yield rises slightly to highs above 1.57%. Bitcoin headed for its worst week in more than a year as a proposed capital-gains tax increase for wealthy Americans intensified volatility (Bitcoin dropped below $50,000 from $65K record highs over a week ago).

Economic Data

·     Markit Manufacturing PMI 60.6, vs. expected 61.0, highest in series history going back to May 2007, vs final March 59.1; Markit Services PMI 63.1 vs. expected 61.5 and last 60.4; Markit U.S. manufacturing flash input prices index for April at highest since July 2008, 78.0 vs final March 74.8; flash composite PMI for April at 62.2, highest in series history going back to October 2009

·     New Home Sales showed March single-family home sales 1.021M unit annual rate vs. est. 886K and Feb 846K unit rate; March single-family home sales +20.7% vs. Feb -16.2%; new home supply 3.6 months’ worth at current pace vs. Feb 4.4 months; median sale price $330,800, +0.8%

Sector Movers Today

·     Retailers; MAT easily topped Q1 estimates as sales in the North America segment rose 67% during Q4, driven by growth in driven by growth in several segments; SWIM 20M share IPO priced at $19.00; SKX rises to over 5-year highs after Q1 revenue and profit topped analysts’ estimates amid a 20.2% jump in international business sales, while also guided 2021 sales above estimates (guides FY sales $5.8-5.9B vs. est. $5.6B); Cowen raises tgt on YETI to $91 and DKS to $93 saying incoming data suggest consensus expectations are conservative beyond 1Q and says clear winners from Feb-April checks: DKS, UAA, YETI, COLM, RL, PUMA, DECK, LULU, FL; NKE in focus as Simone Biles is leaving the co for her own performance line at GPS’s Athleta, which is a partnership she says more closely reflects her values; SWIM 20M share IPO priced at $19.00

·     Energy research; MRO upgraded to Outperform with $15 pt at Wolfe Research on the back of its FCF strength, 2022 FCF/EV Yield at 14% that ranks amongst the top of the oil-focused peers and reduced concerns over the balance sheet and inventory duration; Raymond James downgraded RRC, SWN saying they have meaningfully outperformed their gassy peers while upgraded a few names they like into the quarter that they believe have more room to run (CLR, XEC); in pipelines, ENLC upgraded to Buy at UBS as see the co sporting modest EBITDA growth in ’22 post bottoming out in ’21 in contrast to broad investor expectation of a flat to down trajectory.

·     Biotech movers; INO plunges after saying the U.S. government had stopped funding for a late-stage study testing its COVID-19 vaccine candidate, due to the increasing availability of authorized shots in the country – U.S. will continue to fund the completion of the ongoing mid-stage study; CHRS announces toripalimab achieved primary endpoints of progression free survival and overall survival in interim analysis of phase 3 clinical trial in first-line esophageal squamous cell carcinoma; ANAB rises as the FDA approves the co’s partner GSK marketing application for drug, Jemperli, to treat endometrial cancer as they will receive $20 mln milestone payment upon FDA approval and 8%-25% royalty on global net sales

·     Internet; SNAP Q1 revs grew 66% to $770M, above the $743M estimate and beats views for user growth while the improved Android version of its popular messaging app Snapchat attracted more users – said daily active users (DAUs) rose 22% YoY to 280M vs. est. 275.3M; Jidu Auto, an electric-vehicle venture between BIDU and Chinese automaker Geely, aims to plough 50 bln yuan ($7.7 bln) into producing smart cars over the next five years its CEO told Reuters; SPOT is reportedly planning to introduce a competing paid podcast subscription service to AAPL, the WSJ reported – Spotify’s offering will reportedly differ from Apple’s by not charging a fee, nor taking a revenue cut

Stock GAINERS

·     FCX +4%; rebound in material stocks, also reiterated top pick and $55 tgt at Jefferies after solid 1Q results and continues to meet its production targets and as commodity prices strengthened

·     IMAX +3%; was upgraded to Outperform at Wedbush and raising price target to $26 calling it a COVID recovery story

·     MAT +9%; easily topped Q1 estimates as sales in the North America segment rose 67% during Q4, driven by growth in driven by growth in several segments

·     SAM +2%; Q1 numbers crush as EPS of $5.26 doubled estimates; raised year to $22-26 from $20-$24, FY depletion and shipment growth now +40-50% from +35-45% (good), and price increases raised to 1-3% from 1-2%. Truly punch launch in 2Q21 and Truly tea growing dd%

·     SIVB +7%; Q1 earnings beat ($10.03 vs. est. $6.78) and said due to strong earnings growth and an improving economic outlook, increased its growth expectations for 2021

·     SKX +14%; rises to over 5-year highs after Q1 revenue and profit topped analysts’ estimates amid a 20.2% jump in international business sales, while also guided 2021 sales above estimates (guides FY sales $5.8-5.9B vs. est. $5.6B)

·     SLAB +10%; rises after SWKS agreed to buy its infrastructure and automotive business in deal valued at $2.75B in cash

·     SNAP +5%; Q1 revs grew 66% to $770M, above the $743M estimate and beats views for user growth while the improved Android version of its popular messaging app Snapchat attracted more users – said daily active users (DAUs) rose 22% YoY to 280M vs. est. 275.3M

Stock LAGGARDS

·     AXP -2%; reports lower Q1 revenue, falling 12% to $9.06B, below the $9.17B estimate as spending and loan volumes declined, while also noted a forex adj 50% slump in travel and entertainment-related spending (EPS did beat for the quarter)

·     INO -26%; after saying the U.S. government had stopped funding for a late-stage study testing its COVID-19 vaccine candidate, due to the increasing availability of authorized shots in the country

·     INTC -6%; Q1 results came in above views, but shares dipped as forecasts Q2 profit below estimates after lower-than-expected Q1 data center chip sales (sees Q2 EPS of $1.05 vs. estimates of $1.09) – strong 1Q as PCs shine, but DC competition hurts guide

·     KMB -5%; Q1 EPS $1.80 misses the $1.93 est. on softer revs of $4.7B vs. rest. $4.97B and cut FY21 adjusted EPS view to $7.30-$7.55 from $7.75-$8.00 (est. $7.75) and lowers FY21 organic sales growth view to 0%-1% from 1%-2% – reflects significantly higher input cost inflation and lower sales volumes, partially offset by higher net selling prices and additional cost savings

·     QDEL -7%; guides Q1 revenue $374M-$376M below the consensus $465.7M saying the quarter was marked by the lack of a respiratory season, notes influenza revenues for Q1 are expected to be $5 million, compared with $79.6 million YoY

Syndicate:

·     Agiliti (AGTI) 26.316M share IPO priced at $14.00

·     Latham Group (SWIM) 20M share IPO priced at $19.00

·     Impel NeuroPharma (IMPL) 5.33M share IPO priced at $15.00

·     Rain Therapeutics (RAIN) 7.353M share IPO priced at $17.00

·     Treace Medical (TMCI) 11.25M share IPO priced at $17.00