Mid-Morning Look

Tuesday, December 10, 2024

U.S. stocks are down one day, bounce the next, as the underlying bid to stocks into year end continues. Major averages continue to hold around record highs, as the Mag 7 tech stocks keep a floor under the broader market, with big gains today in GOOGL, TSLA, NVDA, META, helping the Nasdaq briefly hit intraday record highs (topping yesterday’s high of 19,872.79). While the S&P 500 and Nasdaq are higher early, nine of the eleven S&P sectors are down on negative breadth showing that a few heavily weighted stocks are supporting markets. Materials (XLB -1.3%, down for the 7th straight day and 9 of last 10, falling below its 200dma support of $91.60) along with REITs and Utilities the biggest drags. Communications (XLC +1.7%) and Consumer Discretionary (XLY +0.7%) are the only sectors in positive territory. Shares of software companies pressured after ORCL, MDB results/commentary weigh on shares and semis lagging. Lots of noise in markets today with investors awaiting tomorrow’s consumer price index (CPI) inflation data. No Fed speakers into next week FOMC policy meeting and today’s lone piece of economic data showed U.S. Q3 non-farm productivity unrevised at +2.2% (vs. consensus +2.2%) while U.S. Q3 non-farm unit labor costs revised to +0.8% (consensus +1.5%), vs. prior +1.9%. Treasury yields are flattish, the dollar higher but no impact on gold which is surging a second day; Bitcoin at $98K. A very narrow range so far for S&P futures overnight (15 points as the waiting game continues).

• In Transports: AAL was upgraded to Outperform from Market-Perform at Bernstein citing the positive industry backdrop update paired with the announcement of an exclusive Co-branded credit card deal that’s set to generate sizable cash flow in the coming years. ALK raised Q4 guidance to $0.40-$0.50 from $0.20-$0.40) and said its board approved a stock buyback program of up to $1 billion. UPS was upgraded to Outperform at BMO Capital but lowered its tgt to $150 from $155 saying while the firm continues to have concerns regarding the trajectory of UPS’s Domestic operating margins over the medium-to-long-term, it believes that a combination of cyclical tailwinds; moderating unit cost inflationary pressures, and low valuation render n-t risk/reward favorable.
• In Internet: EBAY was downgraded to Underperform from Hold at Jefferies and PT cut to $52 from $60 noting advertising growth has slowed from 23%/18% in Q423/Q124 to just 4%/7% in Q224/Q324, eliminating a key source of margin and reinvestment capabilities and noted China growth is beginning to moderate from ~17% in 1H24 to ~10% in Q324. PINS was downgraded to Neutral from OW and cut tgt to $36 from $41 saying for ’24, ~20% rev growth seems unlikely given the Q4 15-17% guide and Q125 will likely see growth in the low double-digit range.

• BA +3%; said it has restarted production of its best-selling 737 MAX jet last week, about a month after a seven-week strike, Reuters reported on Monday, citing sources.
• CRDF +51%; after announces positive initial data from its mid-stage trial testing its experimental cancer drug, onvansertib, in combination with standard-of-care treatment in patients with a type of colorectal cancer.
• GOOGL +5%; after quantum computing headlines out yesterday and the use of its new Willow quantum chip.
• OLLI +14%; as Q3 profit and sales topped consensus and Q3 margin rises 100 bps to 41.4% while said still comparable sales fall wider-than-expected at 0.5% in Q3; trimmed its annual sales forecast.
• QURE +90%; after the company reached an agreement with the FDA on key elements of an accelerated approval pathway for AMT-130 in Huntington’s Disease.
• UNFI +28%; reported better-than-expected profits and net sales for Q1 and boosted its annual net sales forecast and raised the low-end of its year adjusted EPS and adjusted Ebitda forecast ranges.
• VMEO +11%; upgraded to Overweight at Piper noting mgmt has spent the last two years resetting the cost structure while the Enterprise business has flourished and now at $100MM+ annual run rate; raise tgt to $10.

• DBI -14%; shares tumbled after Q3 EPS and sales missed consensus and cut FY profit view to $0.10-$0.30 (from $0.50-$0.60) and sales forecast (to be down in low single-digit percentage vs prior forecast of flat to low single digits) citing unseasonably warm weather and consumers putting off discretionary purchases
• HQY -5%; reported Q3 results that came in above consensus on several key financial and operational metrics while guided next year revs $1.28B-$1.3B vs. est. $1.32B.
• MDB -10%; reversed overnight gains; Q3 beat/guidance raise, driven by solid upside on Atlas and more meaningful upside on EA (Q3 revenue beat by 33M vs ~$12M the prior two quarters) and OM was >700bps better while Q4 revenue guided above by $11M and FY25 EBIT margins raised nearly 250 bps. Shares reversed as mgmt explained upfront revenue from multiyear deals drove ~half of Q3 upside; CFO, COO also depart.
• ORCL -6%; reported FQ2 results, with slight misses on revenue and EPS due to FX headwinds (flat vs a 1% tailwind expected), and RPO growth decelerated (49% y/y vs 52% in F1Q)
• PL -10%; reported FQ325 results in-line with guidance on the topline but well ahead of profitability expectations, but shares slipped as while exceeded consensus expectations across most guided metrics in F3Q25, revenues of $61.3M came in just shy of consensus expectations for $63.2M, due to a delayed renewal.
• VOYA -6%; said due to further deterioration in stop-loss claims through November, now expects a 2024 policy year loss ratio of 90-105% vs. 86% previously, a 10-20% decline in 2025 stop-loss premiums, and meaningful 2025 loss ratio improvement.