Mid-Morning Look: August 05, 2022

Mid-Morning Look

Friday, August 05, 2022






DJ Industrials




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Russell 2000






Stock markets slip, but resiliency remains impressive, bouncing sharply off lows after a strong jobs report raised expectations the Fed will need to continue to act aggressively on rate hikes. So good news is bad news? The July jobs market data was astoundingly positive, with results coming in more than double the estimates of economists (+528K jobs vs. est. +250k), as the unemployment rate dropped, and wages grew more than expected (+0.5% vs. +0.3% est.). That data helps the argument of those who believe the U.S. economy is not in a recession. That was the good news. The bad news, the strong data also raises the prospects of the Fed needing to get more aggressive on rate hikes, with futures now looking to a 75-bps hike in the September meeting, as they need to deal with rising inflation concerns, which is the stock market concern. Following the data, the 2s-10s Treasury yield curve inverted by over 40bps (3.205% for 2yr vs 2.79%), the dollar spiked, and precious metals slumped. Tons of movers on earnings and guidance overnight/this morning (top names below).


Economic Data

·     Nonfarm payrolls for July a much stronger than expected +528K, more than doubling the economist estimate of +250K and prior month revised up to +398K from +372K; private sector jobs +471K vs. est. +230K and prior revised to +404K from +381K and manufacturing jobs +30K vs. est. +17K; the average hourly earnings all private workers +0.5% vs. est. +0.3% and y/y earnings +5.2%; the unemployment rate falls to 3.5%, labor participation rate down to 62.1% from 62.2%.







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10-Year Note





Sector Movers Today

·     Software movers: HUBS delivered ~39% cc billings growth nicely above Street at ~34%. 3Q cc rev growth guide of 33% was slightly below; TEAM named a new CFO, reported a Q4 rev beat as subscription revenue of $597M was up 55% y/y and guides Q1 revs $795M-$810M vs. est. $770M; TWLO reported mixed 2Q results, with a continued deceleration, DBNE softness, and weak gross margins as shares slide; JAMF strong quarter with +40% ARR growth and record net-new ARR vs +42% last quarter and a consecutive quarter of accelerating SaaS revenue growth; in video game names (ATVI, EA, TTWO, UBSFY, NTDOY) active as consumer spending on video game hardware, content and accessories stood at $4.3 bln in June, a 11% fall from a year ago, according to research firm NPD – video game hardware dollar sales for June declined 8% y/y

·     Utilities & Solar; solar and alternative energy stocks (BLDP, FSLR, SPWR, RUN, ENPH, CLNE) and electric vehicle names rallied early after Democrats agreed on a revised version of their tax and climate bill, dropping a provision that would have narrowed a tax break for carried interest, altering a 15% minimum tax on corporations, and adding a new 1% excise tax on stock buybacks. Senator Kyrsten Sinema, a pivotal Democratic vote in the 50-50 Senate, said Thursday night she’ll back the revised bill; DUK downgraded to Neutral from Outperform at Credit Suisse following 2Q earnings where we now see increased risk of a re-base to the 5-7% LT EPS CAGR

·     MedTech Equipment; CDNA slides after Q2 top and bottom results missed estimates and the company lowered its FY22 revenue outlook to $325M-$335M vs. est. $337.9M; ATEC delivered Q2 organic revenue growth of 30% despite a challenging macro backdrop and raised 2022 guidance, calling for revenues of $325M (+34% Y/Y, +31% organic) vs. $316M previously; IRTC raised the low end of its FY22 revenue guidance to $415-420M from $410-420M to reflect the strong quarter results but did signal that Q3 would be below consensus expectations; XRAY said it plans to restate Q1 results due to an ongoing internal probe into its accounting practices that was announced in May; PODD 2Q revenue of $299.4M (+14% reported, +18% constant currency) that came in $8M above Street estimates driven by U.S. Omnipod

·     Media movers: IHRT Q2 results mixed as op income $83M topped $28M y/y but revs of $954M missed ests with slightly lower Q3 rev growth guidance; FUBO said it expects to have 1.475M-1.515M subscribers worldwide in Q3, up from the 1.294M subscribers in Q2 with upbeat Q3 rev guidance; AMCX posts Q2 profit and revenue that missed expectations, while streaming subscriber growth beat and the full-year outlook was affirmed; WBD tumbles after results and cut its FY23 EBITDA guidance from $14B to $12B+ (analysts cautious post results)



·     C +2%; rally in financials (JPM, WFC, FITB, PNC) following the jump in yields on better jobs data

·     CVNA +38%; shares rebound despite a wider Q2 EPS loss (-$2.35) vs. est. loss (-$1.79) and revs $3.88B missing the est. $3.98B, while gross profit per unit (GPU) fell $1,752 from the prior year quarter to $3,368

·     DKNG +10%; posts Q2 revenue of $466M, compared to estimates of $436.2M and raises midpoint of its FY22 revenue outlook range by $15M as was driven by 68% rise in sales in co’s B2C segment

·     IRBT +19%; to be acquired by AMZN for $61 per share in an all-cash transaction valued at approximately $1.7 billion, including iRobot’s net debt

·     NET +20%; after raising its 2022 revenue guidance ($968-972Mm vs est. $958.4Mm) as it added a record number of large customers in Q2

·     TEAM +10%; topping the high end of the revenue guide by 5% and delivering a $0.03 beat on EPS, Strong cloud revenue growth (+55% y/y, vs. prior 3 qtrs. of 53%, 58%, 60%) and cloud migration activity helped drive the outperformance

·     TRIP +7%; and EXPE rise in online travel post earnings after mixed week – ABNB and BKNG shares dropped earlier this week post results



·     BGS -12%; 2Q results fell below internal expectations for EBITDA and EPS and management lowered guidance again for the year

·     DOCS -9%; after cutting FY rev guidance to $424M-$432M, well below consensus estimate of $455.92M and prior view of $454M-$458M on lower Ebitda guidance

·     FNKO -15%; Q2 adj EPS $0.26 vs. est. $0.23; Q2 revs +33.7% y/y to $315.7M vs. est. $292.6M; guides year EPS $1.88-$1.99 vs. est. $1.90 and sales $1.3B-$1.35B vs. est. $1.31B

·     MNST -5%; Q2 sales grew 15% organically, well ahead of April sales +8%, but EPS of $0.51 missed the $0.70 estimate on weaker gross margins

·     SPCE -12%; as filed a prospectus for offering of up to $300 mln of common stock, released Q2 results, and again delayed its commercial flight to Q2 2023 from Q1 2023

·     TWLO -14%; reported mixed 2Q results, with a continued deceleration, DBNE softness, and weak gross margins as shares slide

·     WBD -13%; tumbles after results and cut its FY23 EBITDA guidance from $14B to $12B+ (analysts cautious post results)

·     WDC -6%; issued Q1 sales and adjusted earnings guidance below analyst expectations as sees revs $3.6B-$3.8B vs. est. $4.75B


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.