Mid-Morning Look

Monday, May 20, 2024

Another day another rally for U.S stock markets, adding to new record highs for the Dow, S&P, and Nasdaq Comp, boosted by shares of technology shares (XLK +1%, SOX +1.7%), while most other S&P sectors are trading modestly lower. The focus this week on a few key earnings results, mostly the poster child for “AI” in NVDA earnings mid-week on 5/22, with semis surging to kick off the week (led by MU after an analyst upgrade and equipment names LRCX, AMAT, KLAC). Minutes of the Fed’s latest monetary policy meeting is also scheduled later Wednesday, and investors will go through comments of Federal Open Market Committee members to determine the timing of the first interest rate cut since March 2020. Major averages coming into the week riding 4-week winning streaks, putting the brief pullback in April in the rear-view mirror as investors continue to buy on any pullback. Markets were helped by weaker-than-expected inflation numbers last week (CPI, PPI) underpinned the belief that the Fed will start easing this year. Treasury yields up slightly, while commodity prices gold, copper, oil, and others continue to rally. Quiet overall news day so far, with no economic data, but a few Fed speakers on the docket.

• Semiconductors: among leaders in mkt and tech, with SOX index rising 1.8% well back above 5,000 level (all-time high remains 5,217) on more AI optimism ahead of NVDA results this week. ARM mentioned positively in Barron’s saying the chip designer could get a big boost from the rise of AI-enabled smartphones, as could chipmaker QCOM. MU upgraded to Equal Weight from Underweight at Morgan Stanley and raise tgt to $130 from $98 saying they overestimated how much significant 2023 losses would weigh on the stock’s valuation and underestimated both the economic and narrative elements of artificial intelligence memory. NVDA shares approaching back near all-time highs ahead of earnings this week (5/22), with many Wall Street analysts staying positive ahead of numbers.
• Healthcare Services: GMED upgraded from Neutral to Overweight at Piper and raised tgt to $80 from $60 saying 15 months ago the merger between NUVA and GMED was met with a lot of investor trepidation. While still early, Piper believes GMED’s management team has successfully navigated a lot of the pitfalls seen in other spine deals. HIMS shares jumped after the telehealth company said to offer compounded GLP-1 weight loss injections, in addition to weight management oral medication kits. Pricing starts at $79 per month for oral medication kits and at $199 per month for compounded GLP-1 injections, which includes unlimited medical consultations with a licensed provider. UHS upgraded to a Buy and raise PT to $226 at UBS in hospitals saying they believe UHS’ acute and behavioral segments are both well positioned to deliver favorable growth.

• GLBE +6%; shares jumped on results after better Q1 results and raises FY24 revenue view to $733M-$773M from $731M-$771M (vs. consensus $749.71M).
• HIMS +32%; to offer compounded GLP-1 weight loss injections, in addition to weight management oral medication kits. Pricing starts at $79 per month for oral medication kits and at $199 per month for compounded GLP-1 injections, which includes unlimited medical consultations with a licensed provider.
• IBTX +6%; said SSB will acquire the lender in an all-stock deal worth about $2 bln as Independent Bank shareholders will receive 0.60 shares of SouthState common stock in a deal valued at $48.51 per share.
• JCI +4%; shares rise premarket after Bloomberg reported Activist investor Elliott Investment Management has built a position worth over $1 billion in Johnson Controls International Plc. https://tinyurl.com/4sfr3ucv  
• MU +4%; upgraded to Equal Weight from Underweight at Morgan Stanley and raise tgt to $130 from $98 saying they overestimated how much significant 2023 losses would weigh on the stock’s valuation and underestimated both the economic and narrative elements of artificial intelligence memory.
• NCLH +6%; raised FY adj EPS to about $1.42, up from prior view about $1.32 (est. $1.31) citing strong demand and bookings; said sees adj. EPS of about $2.45, representing a 2-year CAGR from 2024 to 2026 of over 30% and expects adj. operational EBITDA Margin of approximately 39% by 2026 (guidance boost RCL, CCL as well).
• NEXT +14%; said that ADNOC has acquired a 11.7% stake in Phase 1 of the company’s Rio Grande LNG export project in Texas, which is expected to produce less carbon-intensive LNG.
• OSG +23%; to be acquired by privately held Saltchuk Resources for $950M, as Saltchuk will acquire all outstanding shares of OSG it does not already own for $8.50 per share in cash, a 23.9% premium to OSG stock’s last close.
• PTCT +22%; announces European Commission has decided not to adopt the CHMP’s negative opinion on the annual renewal of the conditional marketing authorization of Translarna and has returned the opinion to the CHMP for re-evaluation; paused its 2024 revenue guidance after the EC decided against adopting a committee’s negative opinion.
• WIX +20%; after raises FY24 revs to $1.74B-$1.76B from $1.73B-$1.76B (est. $1.75B); now expect non-GAAP operating expenses to be 50-51% of revenue for the full year, down slightly from our previous expectation of 51-52% of revenue.

• LI -2%; reported weaker-than-expected Q1 EPS and guided low on the current quarter, as the China electric vehicle maker struggles with increased competition.
• ROKU -3%; dropping back below its 50dam resistance, underperforms in media.
• ULTA -1%; Piper lowers price tgt saying they remain cautious on ULTA’s near term results given intensified competitive pressures and broader category normalization (but still views as attractive Buy).