Mid-Morning Look

Thursday, May 09, 2024

U.S. stock markets choppy for a third day, likely will remain so until next week’s producer prices (PPI) and consumer prices (CPI) inflation data on 5/14, and 5/15 respectively as investors look to the next major market moving catalyst with big earnings behind us (only a few key retailers and tech names left with nearly 450 of the S&P 500 index names having reported). U.S. stock indexes were muted as a slate of downbeat earnings offset the impact of data that showed U.S. weekly jobless claims rose more than expected, indicating softening labor market conditions. S&P futures (Spuz) trade as high as 5,221, taking out overnight highs and yesterday high of 5,218 in process; weekly high stands at 5,226.75 on 5/7 (SPX cash high just shy of 5,200 level).  Treasury yields little changed on the day after edging higher Wednesday on tepid 10-yr note auction (Treasury will sell $25 billion in 30-year bonds on Thursday, the final sale of $125 billion in coupon-bearing supply this week). Money market traders are pricing in U.S. rate cuts worth 47 bps by the end of 2024, according to latest rate probabilities app, up from 44bps before the latest jobless claims data as per Reuters. As widely expected, the Bank of England left the policy rate unchanged at 5.25% on Thursday. However, the surprise stemmed from the 7-2 vote split – versus 8-1 expected – whereby another member voted for a rate cut. Gold prices rise on data/dollar move. Recap of some of the biggest overnight/morning earnings/guidance movers provided below. Dow Jones on track for 7^th straight day of gains.

• In Solar: RUN reported a mixed bag 1Q results and tweaked the guidance to the downside across several items, but indicated positive sales trends, which it expects to translate into higher installations in 2H; SEDG shares slide early after reported 1Q revenue results in line with its guidance, with disappointing gross margin numbers, and issued a 2Q forecast below expectations ($250M-$280M, vs. consensus $305.99M) and said gross margin from the solar segment was negative -3.5%.
• In Media: WBD reported Q1 revs $9.96B below ests. $10.27B and Q1 total subscribers 99.60M compared to est. 98.87M; FOXA was upgraded from Neutral to Buy at Bank America and raise tgt to $40 saying FY24 was set to be a challenging year given the extremely difficult comparisons to FY23, but is now well-positioned to accelerate earnings in FY25; LYV upgraded from Neutral to Buy w/ $115 PT at Redburn saying a Department of Justice (DOJ) investigation continues to linger, but argues that break-up concerns are overblown, creating an attractive entry point for those willing to take a calculated risk. TKO reported better-than-expected Q1 results and raised its full-year guidance as an upside was seen from UFC and WWE.

• APP +16%; after 48% y/y rise in revs to $1.06B above $974M estimate and guided Q2 revs $1.06B-$1.08B vs. est. $1.01B.
• BLBD +28%; handily beat consensus estimates, raised full year guidance, and increased their long term adj EBITDA margin guidance, benefiting from a cyclical recovery in school bus purchases.
• CAKE +11%; reported Q1 results above consensus, upgraded at Raymond James saying results reflected encouraging comp resilience and strong relative outperformance in a softening industry backdrop.
• EQIX +13%; rises after Q1 total revenue grew 6.4%, below expectations, but FX was a $14M headwind relative to guidance; adjusted EBITDA grew 5.1%, despite a FX headwind relative to guidance, and was 170 bps above consensus. AFFO grew 3.1% to $8.86, 320 bps above consensus; announced of completion of its independent investigation.
• HOOD +2%; reported Q1 results nicely ahead, with ~13% revenue upside driven by transaction revenue as net interest revenue was more in line. Adj. EBITDA upside materialized; transaction revenue was led higher by crypto trading (above our Street-high estimate) and to a lesser extent options and equities trading.
• HUBS ; reported Q1 above consensus (revs $617.4M vs. $597M), but consistent with broader commentary within software, but saw incremental macro headwinds emerge in Q1; guided FY adj EPS $7.30-$7.38 vs est. $7.26 and Bloomberg reported GOOGL is progressing in talks to Buy HubSpot, https://tinyurl.com/3mdumzfp
• NTR +4%; Q1 EPS $0.46 topped the $0.39 estimate saying sales volumes for crop nutrients, NTR’s biggest segment, at 1.46M tonnes in North America, up 22.5% from a year ago (better results than comps CF, MOS last week); gold miners get a boost behind rebound in prices on economic data.
• WRBY +17%; shares jump as posted smaller Q1 loss on revs $200M tops $196M estimate and raises annual net revenue forecast to $753M-$761M above prior view $748M-$758M.
• YETI +9%; Q1 adj EPS/sales beat ($0.34/$341.4M vs. $0.25/$333.3M) highlighted by double-digit growth across both wholesale and direct-to-consumer channels and guided FY EPS $2.49-$2.62 vs. est. $2.49.

• ARM -4%; shares disappoint as posts better Q4 adj EPS $0.36 vs. est. $0.30; Q4 revs rose 47% y/y to $928M vs. est. $876.4M, but guides FY25 revs $3.8B-$4.1B as mid-point below estimates. $4.01B.
• BYND -14%; after reported wider-than-expected Q1 loss, drop in revenue, and Q1 volumes dip 16.1% as U.S. food service segment saw 16.2% drop in revenue.
• CDLX -41%; strong Q1 with positive EBITDA and strong user engagement as redemptions grew by 20% y/y, but shares fall as guides Q2 revs $73-81Mm vs est. $81.39Mm and adj EBITDA ($3.0Mm) – $1.0Mm vs est. $2.486Mm.
• CTMX -46%; after saying therapy CX-904 shows partial response in 2 of 6 patients with a type of pancreatic cancer in an early-stage study; study had 35 patients with advanced metastatic solid tumor types of different types of cancer.
• DUOL -17%; reported Q1 EPS/revs above consensus and guides FY revenue $726.5M-$735.5M, from $717.5M-$729.5M, but shares fell as DAU growth decelerated below 60%, but still posted a robust 54.7% Y/Y growth.
• EHAB -14%; after results and said after a prolonged strategic review/sale process, EHAB’s board has decided to keep the company public. Reuters reported Hedge fund AREX Capital Management is seeking seven board seats at Enhabit, arguing that new directors are needed to help reverse poor financial performance.
• EPAM -23%; as Q1 results beat, but forecasts Q2 adj. EPS $2.21-$2.29, below consensus ests of $2.44 and guided Q2 revs $1.14B-$1.15B vs. expectations of $1.17B and lower FY guidance saying they believe challenging demand environment unlikely to improve this year as much as expected.
• EXAS -7%; reported Q1 results that were ahead of consensus, though the results reflect only 6% y/y top-line growth and provided Q2 revenue guidance that was a touch lower than Street estimates and reaffirmed its 2024 guidance.
• FWRD -21%; shares tumble on results, posting a wider Q1 loss of (-$0.64) vs. est. (-$0.11) as adj. income from operations $12.5M vs. est. $31.9M and revs were $541.8M, below consensus $591.4M noting operating expenses rose 61% y/y to $607.5M and said continues to face weak freight demand, excess carrier capacity.
• NSC -2%; as shareholders voted down an attempt by an activist investment firm to remove the company’s chief executive and take control of its board.
• RAPT -31%; shares tumbled after saying it has decided to close and unblind both its phase 2b clinical trial of Zelnecirnon in atopic dermatitis and its phase 2a trial of Zelnecirnon in asthma.
• RBLX -22%; shares tumbled after results, and guided Q2 bookings $870M-$900M, below consensus est. $902.5M, with in-line Q1 daily active users 77.7M.