Mid-Morning Look

Monday, June 07, 2021

U.S. stock markets were generally quiet early, with no economic data or Fed speakers shaking up markets this morning as early trading remains focused on M&A news over the weekend (several deals announced) and volatility in the Reddit/Wall Street Bets “meme” stocks again grabbing the bulk of early volume. Prices pulled back in some of those names (AMC, KOSS, BBBY, EXPR) following headlines that the SEC is on the lookout for manipulation and other forms of misconduct and is monitoring ongoing volatility in certain stocks. Coming into today, financials, bank stocks trading at new highs, tech stocks just 2% from record highs, Energy remains top gaining sector year-to-date as oil prices have climbed. The Group of Seven (G7) advanced economies agreed on Saturday to back a minimum global corporate tax rate of at least 15%, squeezing more money out of multinational companies such as Amazon and Google which hit tech names early. Meanwhile this weekend, Treasury Secretary Janet Yellen said President Joe Biden shouldn’t be deterred from his spending plans even if they spur inflation and higher interest rates. U.S. stocks ended higher on Friday after a tepid U.S. monthly jobs report relieved investors concerned about the Federal Reserve scaling back its massive stimulus program sooner than expected. Some stock items to watch today include Apple (AAPL) kicking off its annual Worldwide Developer Conference at 1 p.m. ET., and as investors await the FDA decision on Biogen (BIIB) Alzheimer’s drug Aducanumab.

Sector Movers Today

·     Consumer Finance; COF downgraded to Neutral at Baird following significant outperformance of the stock (+68% YTD vs. S&P 500 +13% and +110% over the last year vs. S&P +32%) and a less than compelling valuation at ~1.85x TBV, ~17.7% cap/assets, and ~4.3x PPNR; Visa (V) upgraded to Overweight from Neutral at Piper and up tgt to $260 from $234 as expect Visa to benefit more from a vaccine-driven U.S. recovery than Mastercard. Visa generated 45% of its pre-pandemic revenue from the United States, compared to only 32% for Mastercard; MGI prospectus supplement is offering shares of common stock having aggregate offering price of $100 mln

·     Casinos, Gaming, Lodging & Leisure sector; RCL said six of its ships will begin sailing from U.S. cruise ports in Florida and Texas in July and August and CCL confirmed its plans to return to guest operations from port of Galveston on July 3 with Carnival Vista; in casinos, Las Vegas is making a comeback according to Barron’s saying bookings at casino resorts have gone up, but convention and expo business still faces uncertainty after the pandemic (positive on shares of VICI, MGP, MGM, CZR, BYD, RRR); VAC upgrade from Hold to Buy with $209 pt at Deutsche Bank based on an incrementally bullish outlook for big ticket spending from a historically robust consumer, combined with a favorable longer term outlook for leisure travel in a post-Covid world

·     Pharma movers; BLUE announces lifting of FDA clinical hold for sickle cell disease and β-thalassemia studies; NVS announced Phase 2 primary endpoint data showing investigational iptacopan – a first-in-class, oral, targeted factor B inhibitor – reduced protein in the urine; IOVA announced updated clinical data for lifileucel from Cohort 2 in the C-144-01 clinical study in patients with advanced melanoma; KZIA initiates Phase 2 study of Paxalisib in primary CNS lymphoma. Enrolls first patient; ALLK completes patient enrollment in phase 3 eosinophilic gastritis and/or eosinophilic duodenitis and phase 2/3 eosinophilic esophagitis clinical trials of lirentelimab (ak002); MRUS upgraded to Buy with $31 tgt at Citigroup based on the ASCO’21 dataset we now believe that Zeno has the type of efficacy and safety profile that can support multiple paths to registration including tumor-agnostic or tumor-specific strategies

·     Software movers; ALMFF rejected an unsolicited takeover proposal by ADSK as it significantly undervalued the company’s prospects. Autodesk had made an offer of 38.50 Australian dollars (US$29.81) a share for the ASX-listed company; LSPD said to acquire Ecwid, a U.S.-based global e-commerce platform for total estimated consideration of about $500M and to buy NuORDER, a digital platform connecting businesses and suppliers for about $425M https://bit.ly/3z8nUiM ; SNOW rises to highest levels since mid-March – ahead of virtual annual Snowflake Summit user event on June 8-10, and an inaugural Investor Day on June 10

Stock GAINERS

·     BIIB ; rises ahead of FDA decision on Alzheimer’s drug aducanumab as the FDA is set to decide on whether to approve company’s drug

·     BLUE +2%; rises after the U.S. FDA has lifted its clinical hold on early- to mid-stage and late-stage studies of its LentiGlobin therapy for sickle cell disease and also removes clinical hold on two studies of its beti-cel therapy for a type of blood disorder

·     EXFO +60%; announces going-private transaction by its Founder and Majority Shareholder, Germain Lamonde as holders to get $6 per share

·     FUBO +8%; said starting today, LG customers can enjoy more than 100 sports, news & entertainment channels from fuboTV

·     GIII +12%; tops estimates for Q1 net sales and guides FY22 net sales of about $2.57B and EPS between $2.60-$2.70 per share, both above estimates ($2.41 and $2.53B) as it benefits from a reopening of the economy

·     LMNL +35%; shares jumped after the U.S. FDA approved Ryplazim for the treatment of patients with plasminogen deficiency type 1 (hypoplasminogenia)

·     QTS +21%; after private equity giant Blackstone, through its infrastructure unit and non-traded REIT, agreed to buy QTS for $78 per share in a deal valued at ~$10 bln, including debt (a ~21% premium to Friday close for QTS) https://on.mktw.net/2T6nQiI

·     USCR +28%; as VMC agrees to acquire the company for $1.29B, paying $74 per share in cash, representing a premium of 29.5% to USCR’s Friday’s close (transaction has been unanimously approved by the boards of both companies) https://on.mktw.net/3ge0bVI

Stock LAGGARDS

·     HARP -5%; downgraded to Neutral at Wedbush after presented updated data for PSMA-targeted TriTAC HPN424 at ASCO, and provided a broad pipeline update in an investor event

·     MGI -7%; prospectus supplement is offering shares of common stock having aggregate offering price of $100 mln

·     MSTR -2%; said it expects to incur impairment loss of at least $284.5 million related to its Bitcoin for three months ending June 30, 2021

·     POSH ; announced its CFO stepped down

·     TAL -11%; weakness continues in China education sector after Credit Suisse latest to downgrade shares in space (EDU, TAL), while GOTU falls as well as concerns remain about stricter China regulations on the after school tutoring sector