Mid-Morning Look

Monday, February 24, 2025

U.S. stock futures looked strong overnight, but markets quickly turned lower on the open, with the Nasdaq falling as much as 1% and the S&P 500 (SPX) dropping below 6,000 before slightly paring losses as investors open the week cautious following last week’s pullback. The CBOE Volatility (VIX) spiked to highs above 20 this morning on the pullback but quickly reversed lower as stocks rebounded. Among the biggest decliners in the S&P 500 this morning was in tech/AI data center names (SMCI, VST, GEV, DLR, CEG among others) after recent commentary that MSFT has begun canceling leases for a substantial amount of datacenter capacity in the US (as per TD Cowen). Markets also focused on one more busy week of earnings coming up, as well as key economic data points (GDP/PCE) later this week. More haven asset buying as Treasury prices rise further (yields fall) and gold stays elevated above $2,050 an ounce. Macro news over the weekend focused on German elections, where the center-right bloc took the most votes, led by Friedrich Merz (mostly as expected, but now have to form a coalition). Semiconductors a focus this week as well with NVDA earnings midweek. Hong Kong and Chinese stocks surrender early gains to swing to losses as Asian equities slide, following declines in US indices on Friday (US listed Chinese stocks fall sharply today on profit taking).

• In the Defense sector: PLTR extended its recent pullback on DOGE budget concerns and after CEO adopted new share sale plan; in research, RTX was upgraded to Buy from Neutral at UBS as believes RTX is well positioned at the intersection of strength in commercial OE and aftermarket, Defense has international growth drivers, and it sees a number of company specific drivers. UBS also upgraded TDG to buy from Neutral as it expects aftermarket growth to stabilize and accelerate from FQ1, with above-consensus margin expansion and the potential for a step-up in capital deployment. The group saw a little bounce after recent selloff in names on DOGE budget cut fears.
• In Restaurants: DPZ shares slipped after results as Q4 EPS $4.89 vs. est. $4.90; Q4 revs $1.44B vs. est. $1.47B; Q4 comp store sales up 0.4% vs. est. 1.63% and Q4 international comp sales up 2.7%; raises quarterly dividend 15% to $1.74 per share; WING was upgraded to Buy from Neutral at Guggenheim and reinstitutes a $280 tgt saying appreciation for both the competitive strengths of the business and the sustainability of strong unit growth gives them the confidence to underwrite a healthy multiple for shares despite soft same store sales trends to start 2025. SBUX to lay off more than 1,000 workers worldwide.

• BMY +3%; after winning FDA priority review for its application seeking approval of the combination of its Opdivo and Yervoy cancer drugs for the early treatment of certain patients with colorectal cancer.
• BRDG +34%; as alternative asset manager APO said it will buy the company for about $1.5 billion in an all-stock deal as deal is expected to close in Q3 of 2025
• BRKA +3%; Q4 operating earnings surged 71% to a record $14.5B on strength in insurance operations and higher investment income. Insurance underwriting jumped 302% from a year earlier to $3.41B. Meanwhile, Berkshire Hathaway’s total amount of cash and equivalents rose to a record $334B at the end 2024.
• NKE +5%; upgraded to Buy from Hold at Jefferies and raised tgt to $115 from $75 noting the company’s new CEO is tackling product and distribution issues head-on, positioning the brand to again outgrow the market and take back lost share and said survey work shows that Nike’s brand remains very strong.
• ODFL +2%; In the LTL Sector, Stifel upgraded shares of ODFL, SAIA and XPO to Buy from Hold after last week’s sharp selloff. Stifel said with the group de-rating on discussion of AMZN disruption and from fallout from dismal earnings, Stifel sees an opportunity for investors to get involved in LTL again.

• DPZ -4%; after results as Q4 EPS $4.89 vs. est. $4.90; Q4 revs $1.44B vs. est. $1.47B; Q4 comp store sales up 0.4% vs. est. 1.63% and Q4 international comp sales up 2.7%.
• IVVD -30%; after saying the FDA has declined to expand the emergency use authorization of its COVID-19 prevention drug; expansion was to include those whose immunity is impaired by certain conditions such as cancer and organ transplant, and for whom alternative options are not accessible or appropriate.
• PLTR -9%; extending recent pullback on DOGE budget concerns and after CEO adopted new share sale plan.
• RIVN -7%; downgraded to Underperform at Bank America saying the 2025 outlook was softer than the firm had expected, and the VW partnership is complicating earnings forecasts for at least the next four years
• TH -51%; shares sunk after the US government said it is ending its services agreement with the co’s nonprofit partner running the Pecos Children’s Center, an emergency intake site for unaccompanied migrant children.
• U -4%; as announced proposed private offering of $500.0M offering of convertible senior notes due 2030.
• VRT -5%; along with weakness in other AI data center related names/nuclear stocks with OKLO, DELL, ETN, SMCI, SMR, TLN, GEV, VST all getting hit hard/extending recent pullbacks. Group hurt after TD Cowen noted MSFT has begun canceling leases for a substantial amount of datacenter capacity in the US.