Mid-Morning Look

Tuesday, February 27, 2024

Index	Up/Down	%	Last
DJ Industrials	-113.99	0.29%	38,957
S&P 500	2.06	0.04%	5,071
Nasdaq	34.19	0.22%	16,012
Russell 2000	18.22	0.90%	2,047

 

 

U.S. stocks remain choppy for a second straight day, rebounding after closing near the lows Monday on modest weakness, with investors not making any big bets ahead of the Fed’s preferred inflation reading, the core PCE reading on Thursday. The data could push stocks to new record highs or lead to some profit taking if a sharply “hot” reading is the result. Stocks dipped 2 weeks ago after the January CPI and PPI results showed higher-than-expected readings, so Thursday’s PCE will be a good gauge as to the direction of interest rates in the near term. Market expectations have now erased calls for a rate cut at the March meeting and lower odds of a may cut, though the Fed has said they still expected 75-bps of cuts this year (vs. the mkt futures calling for at least -125 bps cuts). Before the PCE data, we see Q4 GDP on Wednesday morning, with a few inflation readings in the mix as well. Data today was plentiful with weaker Durable Goods Orders, strong Housing prices, weaker Consumer Confidence, and slightly better manufacturing data. Biotech stocks rise to best level since January 2022 (XBI above $100), boosted by better weigh loss data the last 2-days (VKTX today, Zeal yesterday). Crypto remains strong to kick off the year with Bitcoin hitting $57K and boosting crypto related stocks (COIN, MSTR). Smallcaps jump a second day (IWM) after falling last week and underperforms for year vs. large cap.

• Home prices in the 20 biggest U.S. metros rose for the 11th month in a row and hit a record high amid a persistent shortage of resale homes for sale. The S&P CoreLogic Case-Shiller 20-city house price index rose 0.2% in December compared to the previous month.  Home prices in the 20 major U.S. metro markets were up 6.1% in the last 12 months ending in December.
• February Consumer Confidence index 106.7 below consensus 115.0 while January revised to 110.9 (previous 114.8).
• Richmond Fed factory index -5 vs. est. -9; services revenues index -16 in Feb vs +4 in January; shipments index -15 in Feb vs -15 in January.

 

 

Macro	Up/Down	Last
WTI Crude	0.58	78.16
Brent	0.49	83.03
Gold	5.10	2,044.00
EUR/USD	-0.0009	1.0839
JPY/USD	-0.24	150.34
10-Year Note	-0.01	4.289%

 

• In Shipping: Jefferies upgraded SB to Buy, while downgraded CPLP to Hold & FLNG to Underperform in industry call as they highlight the supply/demand impact across the shipping segments because of the Red Sea diversions, raise forecasts for dry bulk as spot rates continue to surprise to the upside, and highlight free cash flow as a key valuation approach across all companies. The highest free cash flow yields remain in tankers, followed by containership owners, LPG, and dry bulk.
• In Lending: TREE posts Q4 adj EPS $0.28 well above consensus of $0.04 while noted the company exited businesses that no longer fit with its strategy, reduced complexity as well as headcount; guidance was weaker as sees Q1 revs $158M-$168M (est. $165.2M) and year revs $650M-$690M vs. est. $715.6M; AAN reported a drop in Q4 sales, with lower average ticket sizes causing sales to fall as loss widened to (-$0.41) from (-$0.19) y/y and below ests for loss (-$0.03); guided FY24 revs $2.06B-$2.16B vs. est. $2.2B and EPS loss (-$0.10 to profit $0.25) vs. est. $1.09.
• In Telco/Media: ROKU was downgraded from Equal Weight to Underweight at Wells Fargo and cut tgt to $51 saying WMT is ~1/3rd of ROKU’s Device sales/net adds, but the retailer is set to acquire VZIO for its SmartCast O/S and believes it will likely pressure net adds by 2025-26, and WMT likely moving its on CTV from the ROKU O/S to SmartCast. Towers slipped for a second day after earnings/guidance from AMT/SBAC.
• In Auto Retailers: AZO reported better-than-expected Q2 profit (EPS $28.89 vs. est. $26.28), helped by a DIY trend among customers wanting to keep their older cars while revs rose 4.6% to $3.86B topping the $3.84B estimate; shares of AAP, ORLY, GPC, and others bounced in reaction initially.

 

• COIN +5%; along with gains in crypto miners MARA, RIOT and HUT and crypto investors such as MSTR after Bitcoin (+35% YTD) and Ethereum (+42% YTD), with strong upward moment as Bitcoin tops $57K.
• HIMS +30%; shares jumped after Q4 beat and upward guidance for Q1/year; Q4 EPS $0.01 vs. est. loss (-$0.02); Q4 revs $246.6M vs. est. $245.82; sees Q1 revenue $267M-$272M, vs. est. $251.26M and Q1 adjusted EBITDA $22M-$27M; sees FY24 revenue $1.17B-$1.2B vs. est. $1.1B.
• JANX +162%; after reported updated interim data for its PSMA-CD3 targeted TRACTr JANX007 and EGFR-CD3 targeted TRACTr JANX008 programs; JANX007 reduced PSA levels in majority of 23 dosed patients, with deeper reductions observed at higher doses.
• NCLH +11%; forecast Q1 profit of $0.12 EPS vs. ests loss (-$0.20) on higher ticket prices and steady demand in the U.S. for cruises to the Caribbean and Europe after reported Q4 revs rose to $1.99B from $1.52B y/y and slightly above ests $1.97B (shares of CCL, RCL moved in reaction).
• PUBM +26%; after reported strong 4Q23 results, with revenue and EBITDA coming in 8% and 15% ahead of consensus, driven by strong demand for display and omnichannel vide; 2024 rev guidance for at least 10% Y/Y growth (12% Y/Y ex-Yahoo) is ~3% ahead of consensus at the low end.
• TMDX +12%; after Q4 results beat with EPS $0.12 above est. loss (-$0.03) on revs $81.2Mm topping est. $68.51Mm and guides FY revs $360-370Mm vs. est. $330.23Mm.
• VKTX +68%; shares surged after announced positive results from a Phase 2 trial of its weight-loss drug VK2735, as the trial met all primary and secondary endpoints, showing statistically significant reductions in body weight at all doses compared to placebo.
• ZM +3%; delivered Q4 operating margin above consensus expectations, post a better-than-expected F4Q (2% top-line beat, FYE Jan.) driven by Enterprise, which saw uptick in $100K customers in F4Q (79 net adds +34% q/q) announced a $1.5B share buyback, while FY25 revenue guidance was below consensus.

 

• ATSG -3%; reported a Q4 miss with another negative margin quarter and 2024 EBITDA guidance came in weak, with management guiding to $506M relative to consensus of $592M and 2024 EPS guidance was for $0.55 to $0.80, down from the consensus of $1.58.
• CARG -6%; Q4 results beat both top- and bottom-line estimates, but shares fell as Q1 guidance was softer than expected, with CARG’s Digital Wholesale business set to take several quarters before returning to profitable growth (revenue was guided in the range of $201M-$221M, below consensus of $239M).
• IRBT -13%; shares fell on a larger than expected Q4 loss and guided FY24 adjusted EPS loss (-$3.73-$3.30), wider than analysts’ estimates of (-$2.49) and sees H1 rev to drop in high-teens to low-20s pct range y/y and sees only mid-single-digit pct improvement y/y in H2.
• LUNR -14%; said communications with spacecraft Odysseus to end on Tuesday morning, cutting short mission to 5 days from expectations of 7 to 10 days. The decline follows Monday -34% drop after saying its craft tipped over on landing, limiting communications and recharging of batteries via solar power.
• U -4%; after disappointing guidance and the company unveiled more details about its turnaround plan; guided Q1 revs $415M-$420M below ests $534M and Ebitda guidance of $45M-$50M below consensus forecast of $112M.
• WDAY -2%; reported better FQ4 results, albeit a smaller than typical beat (subscription revenue and backlog beats were lower than prior quarters) and provided softer FQ1 cRPO growth guidance of 17.5-18.5%.

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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.