Mid-Morning Look

Monday, June 14, 2021

U.S. stocks are trading cautiously ahead of a big macro week highlighted by the June Federal Reserve policy meeting with results on Wednesday, followed by a press conference from Fed Chairman Jerome Powell, with all eyes on inflation and potential asset tapering comments. The Nasdaq Composite comes into the week with 4-week winning streak, at the highest levels since end of April as Treasury yields remain depressed (10-yr inches higher today but still below 1.5%), while S&P opens near new record highs. Hedge-funder Paul Tudor Jones, appearing on CNBC this morning as the FOMC gets set to meet this week said, “this is the most important Fed meeting we’ve had in 5 years.” Jones said will be watching carefully, and if Fed boss Jay Powell “shrugs off ” the perky inflation numbers, that would be a “green light” for heavy bets on every inflation trade. There were no economic data comments this morning or earnings results to mover stocks. Bitcoin spikes to highs this morning, topping the $40K level for first time in 2 1/2 weeks, leading the crypto space while Ethereum above $2,500 in broad bounce in crypto assets following positive comments by Elon Musk and hedge fund manager Paul Tudor Jones.

Sector Movers Today

·     Auto sector; TSLA CEO Elon Musk said this weekend his electric-vehicle company would resume transactions with Bitcoin when mining is done with more “clean energy usage.” “When there’s confirmation of reasonable (~50%) clean energy usage by miners with positive future trend, Tesla will resume allowing Bitcoin transactions,” Musk said in a tweet; RIDE falls after saying CEO Steve Burns and CFO Julio Rodriguez have resigned – move follows comments last week by the company that there was “substantial doubt” about its ability to continue as a going concern in the next year; NKLA announced a purchase agreement with Tumim Stone Cap committing to buy up to $300M in NKLA shares; RACE downgraded to Sell at Goldman Sachs following the announcement of a BEV by 2025 and appointment of the new CEO with a tech background, as expect Ferrari to accelerate its transition to technologies of the future

·     Restaurants; CMG was upgraded from Outperform to Strong Buy with $1,800 tgt at Raymond James as believe recently announced menu price increases create 1) significant upside to 2H consensus comp expectations and increased confidence in their above-Street ’22 EPS estimates; CAKE was added to the Wedbush Best Ideas list after recent sell-off as expect post-COVID market share opportunities to result in higher growth vs. pre-COVID growth rates; WEN was upgraded from Neutral to Buy with $30 tgt at Northcoast; Cowen positive on shares of JACK saying foresee opportunities for JACK to exceed consensus 2024E EBITDA, as well as undergo multiple expansion from continued top-line execution as new management revamps marketing, menu innovation, and operations

·     MLPs & Pipelines: Goldman increased their coverage baseline multiple to reflect an improving fundamental backdrop that is driven mostly by high continued oil prices as they remain constructive on midstream stocks even after their material YTD outperformance, and downgraded KMI to Sell and upgraded CQP to Buy; Raymond James downgraded DCP to Outperform from Strong Buy, though they continue to see the stock as one of the more mis-priced names due to broader under-appreciation of its integrated assets and operating leverage within its G&P and L&S segments, and it has the most NGL price sensitivity in their coverage universe and they are increasingly optimistic around higher U.S. NGL prices later this year and into 2022, and they also upgraded ENLC to OP from MP as they see more room to run even after the stock moved higher following its upward revision to 2021 EBITDA guidance run due to the combination of upstream activity improvements in 2021 and ENLC’s NGL price exposure via Midland basin POP G&P contracts; Goldman started HESM with a buy rating and $30 target

Stock GAINERS

·     ASND +3%; said the FDA has extended their its PDUFA data for TransCon GH by three months

·     CMG +2%; upgraded from Outperform to Strong Buy with $1,800 tgt at Raymond James citing recently announced menu price increases

·     CRSR +11%; Reuters noted it was the top-trending ticker on Stock Twits in terms of message volume this morning

·     ITOS +32%; as GSK agreed to pay up to $2 billion to the co to develop and sell a potential cancer treatment together/ITOS will receive a $625 million upfront payment and is eligible to get up to $1.45 billion more if the program meets certain milestones

·     MARA +14%; along with gains in GBTC, COIN, MSTR, RIOT as Bitcoin leveraged plays rebound along with broader crypto assets on Musk and Tudor Jones comments

·     NOVN +30%; adds to last Friday’s 62% advance following positive topline efficacy and safety results for the phase 3 clinical study of SB206

·     NVAX +3%; after reporting late-stage trial data showing its COVID-19 vaccine candidate is more than 90% effective against a variety of variants of the virus as the study puts NVAX on track for filing for U.S. emergency authorization

·     OXY 3%; as the oil complex outperforms early with energy prices edging higher

·     RAPT +100%; rises after positive topline results from phase 1b trial of rpt193 monotherapy in atopic dermatitis

Stock LAGGARDS

·     HEXO -9%; Q3 revenue fell short of estimates due to a decline in adult-use non-beverage sales and co said it had no international medical cannabis sales due to revised prerequisite testing and an additional certification by the Israeli government

·     PHG -4%; announced a voluntary recall in its Sleep & Respiratory division relating to certain CPAP, BiPAP, and mechanical ventilator machines

·     RIDE -19%; after saying CEO Steve Burns and CFO Julio Rodriguez have resigned – move follows comments last week by the company that there was “substantial doubt” about its ability to continue as a going concern in the next year

·     SKLZ -7%; slides ahead of lock-up expiry tomorrow

·     WPG -39%; announced that it and certain of its subsidiaries have filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code

·     WYNN -1%; early weakness in gaming (PENN) and some reopen names (restaurants, cruise)