Mid-Morning Look

Friday, August 09, 2024

U.S. stocks choppy on this final day of a volatile trading week, with all major averages on track for weekly declines, as investors await the next trend move. Lots of technical damage done this week for U.S. stocks following Monday’s sharp pullback on rising recession fears, with a couple of big bounces scattered in on Tuesday and Thursday, as the unwind of the carry trade looks to have slowed, calls for a 50-bps interest rate cut from the Fed has subsided, and economic data has been mixed the last few days. Earnings season is also coming to an end for the quarter, with 90% of the S&P 500 having reported and we head into the dog days of summer/back to school time. Yesterday, equities made a comeback from losses earlier in the week, with Technology leading the rebound, while tech is mixed early today. Healthcare, leading in the S&P behind another big jump in LLY after earnings while Industrials and Utilities fell the most. The yield on the benchmark 10-year bond recovered to 3.98% yesterday but down to 3.93% this morning. Crypto rallied, with Bitcoin rallying 12% back to its 50-/200-day MA resistance around $62,000 (back to $60K now) while Volatility (VIX) remains high despite its easing back from Monday’s extreme. All eyes on CPI/PPI inflation data next week.

• In Paper & Packaging: KRT downgraded to Hold from Buy at Truist after results as 2Q24 adj. EBITDA miss driven by sales, gross margins and operating expenses, and firm sees continued risk to expectations given macro demand pressures, continued product price declines, execution risk, freight rate volatility. SEE was downgraded to Hold from Buy at Jefferies and cut tgt to $35 from $47 saying the consumer weakening & secular headwinds in Protective gaining momentum, volume declines are accelerating & expected to decline again in 2025.
• In FinTech: SYF and BFH both upgraded to Buy from Neutral at Bank America and both assigned a $54 price target driven by improving credit and less late fee rule pressure saying analysis suggests the current credit cycle has peaked and losses will be lower prospectively. The delay in implementing the late fee also provides nice upside optionality. PYPL was upgraded to Outperform from Neutral at Daiwa and raised tgt to $72 from $68 saying some of the company’s initiatives are “quickly generating visible results,” such as improving profitability for Braintree.
• In Healthcare Services/Technology: DOCS shares jumped as raised its full-year forecast for both revenue and adjusted Ebitda as sees FY revs $514-523Mm vs est. $512.21Mm and adj EBITDA $248.5-257.5Mm vs est. $244.8Mm. NTRA said it now expects to rollout data from a study of its colorectal cancer test in Q1 2025 vs August this year, but noted Q2 revs $413M beat $343M est. and raised 2024 rev forecast to $1.49B-$1.52B from $1.42B-$1.45B. GDRX upgraded to Strong Buy at Raymond James while maintaining its $10 price target following an 18.6% selloff, an over-reaction in its view.

• AKAM +9%; was upgraded to Buy at Craig-Hallum after earnings results and guidance and on expected organic growth acceleration.
• AXL +8%; shares rose after Q2 EPS $0.19 topped consensus $0.11 (on better sales $1.63B) and boosted its FY adj Ebitda outlook to $705m-$755M from prior view $685M-$750M.
• DOCS +25%; shares jumped as raised its full-year forecast for both revenue and adjusted Ebitda as sees FY revs $514-523Mm vs est. $512.21Mm and adj EBITDA $248.5-257.5Mm vs est. $244.8Mm.
• EVH +28%; shares jumped on a better than feared print, with a $11M beat on 2Q revs and FY24 revs rose by $15M and announced rate increases from its payer partners to offset the elevated disease prevalence and acuity it has seen.
• EXPE +7%; reported better-than-feared results on both top- and bottom-line following cautious commentary from BKNG and ABNB as 3Q guidance came in a little lighter than anticipated, full-year GBV and revenue guidance was updated to now be at the low end of the previous range but said saw improving trends at Vrbo.
• IOVA +23%; forecast FY 2024 total product revenue between $160M-$165M topping ests of $150M while guiding overall Q3 revs above views and said had cash, cash equivalents, investments $449.6M above $346.30M end of December
• RNA +7%; after saying its RNA-based drug produced 25% of normal dystrophin in patients with Duchenne muscular dystrophy caused by a mutation in exon 44.
• SG +29%; shares jumped as raised ’24 revenue guidance to $670- 680MM (from $660-675MM) and comp store sales guidance to 5-7% (from 4-6%) largely reflect Q2 upside.
• TTD +8%; delivered a solid 3Q print (revs 1% better; EBITDA 7% ahead), and guidance stands out from peers.

• CPRI 4%; followed other luxury retailers lower with a big Q1 miss as sales declines steepened despite easier comparisons (sales -13% in Q125 vs -8% in Q424) and EPS were $0.04 vs consensus of $0.60.
• ELF -14%; forecast annual sales and profit below estimates and said it would raise product prices if Republican presidential candidate Donald Trump comes to power and hikes tariffs on imports from China.
• FIVN -25%; shares fell as reported solid Q2 results, delivering an $8M revenue beat (roughly in line with Q1) and announced the acquisition of Acqueon but lowered its full-year revenue growth guidance to 11.5% Y/Y (from 16% Y/Y previously), with the largest driver being a new bookings shortfall (fewer $1M+ ARR deals in Q2).
• PODD -8%; raised 2024 revenue forecast late driven by strong sales of its insulin delivery devices branded as Omnipod, but shares fell after saying it expects a “less steep ramp” of new customer to start in H2 2024, driven partly by the overall market reduction in competitive switching.
• PUBM -24%; reported Q2 results below expectations, driven by an auction structure change at a DSP partner (~2/3 of the shortfall) and weakness in a set of verticals including Tech, Autos, Travel, and Arts/Entertainment (~1/3 of shortfall); these issues drove the reduced guidance.