Mid-Morning Look

Friday, October 18, 2024

Meet today, the same as yesterday? US equities are once again giving back overnight and pre-market gains. As with yesterday, the morning was shaping up as a good one, this time thanks to China stimulus expectations following weak economic data. And, as was the case yesterday, profit takers seemed happy to use the upside to take some early gains. After a fade and bounce, major indices help modest gains thanks for outperformance in Communications, Technology and Materials. Energy led the decliners on the drop in oil. Breadth held up early as small caps staying the green but trailed SPY and QQQ.

Oil futures open lower, headed for more than a 6% weekly drop (biggest weekly drop since Sept 2) on concerns about demand from China’s slowing economy and easing supply risk from the Middle East conflict. This week the International Energy Agency cut their forecasts for global oil demand in 2024 and 2025, while China’s Q3 economy grew at the slowest pace since early 2023. OPEC and IEA also cut their forecasts for global oil demand in 2024 and 2025.

• FXI +4% KWEB +5%; China stocks rally across the board after President Xi Jinping vowed to support the tech sector. A slew of Central Bank statements also boosted optimism. China’s Central Bank urged Swift adoption of policies to support capital markets. The Central Bank launched two schemes to initially pump as much as 800B yuan ($112B) into the stock market through newly created monetary policy tools, boosting investor sentiment.

• ISRG +8%; shares rose on last night’s double beat and raised forward guidance along with multiple upward price target changes this morning.

• NFLX +10%; added 5.1M subs in Q3 (vs. est. 4.6M and vs. 8.8M y/y) with rev up 21% YoY vs 22% in Q2; for Q4 mgmt expects sequentially higher net adds (prior/street 7M; 13M in Q423); mgmt now expects full year revenue to grow 15%

• AAPL +1%; Apple shares rose as high as +2% in pre-market trading after Bloomberg reported that iPhone 16 sales soared +20% in their China debut.

• DDOG +2%; UBS upgraded Datadog to Buy from Neutral & raised their price target to $150 from $125, stating that channel checks are revealing a possible 2H spending pop.

• HEPS +67%; KSPI announced a definitive agreement to acquire a 65.41% stake in Hepsiburada (HEPS), a leading Turkish e-commerce platform, for approximately $1.13B.

• DKNG +3%; Mizuho reiterated their Outperform rating & raised their price target to $62 from $54, adding the online sports betting site to its Top Picks List.

• ALV +6%; shares rallied despite an EPS miss with traders focusing on the company’s comment that they outgrew LVP on a global basis after meaningful outperformance in Europe and Asia in the face of a weak China market.

• PCT +10%; Cantor initiated coverage on PureCycle with an Overweight rating and $14 price target, stating that the company has differentiated technology and has a first-mover advantage.

• GOLD +2% NEM +1%; Gold stocks rallied as investors looked to the commodity as a hedge against the heightened geo-political turmoil engulfing the world.

• USM +9% TDS +16%; United States Cellular Corporation has entered into an agreement with Verizon Communications to sell a portion of the Company’s retained spectrum licenses for total consideration of $1.0B. Additionally, US Cellular has entered into agreements with two other mobile network operators for the sale of other selected spectrum licenses.

• AXP -4%; Q3 revs of $16.64B missed est. $16.67B (but up from $15.38B y/y) but said rev growth due to higher net interest income supported by growth in loan volumes, stable growth in card member spending and accelerated card fee revenue growth; boosted its EPS outlook for year to $13.75-$14.05 from prior $13.30-$13.80.
• CVS -8%; lowered Q3 EPS guidance for the fourth time this year to $1.05-$1.10 below consensus of $1.70 and named longtime executive David Joyner as new CEO, replacing Karen Lynch, who is stepping down. Current Chairman Roger Farah will become executive chair.
• WAL -7%; Q3 EPS of $1.80 missed consensus of $1.88 on better revs $823.1M; Q3 net interest margin 3.61% vs. 3.67% last year; Provision for credit losses totaled $33.6M for the third quarter 2024, compared to $37.1M; said expects NII decline in Q4.
• PG -1%; shares are lower following a Q1 core EPS $1.93 beat vs. est. $1.90 and a sales miss of $21.7B vs. est. $21.91B; on the conf. call PG’s CFO stated that the China market continues to be weak and North American organic sales grew at 4% in the Q1 compared to a +7% gain YoY.
• COHR -3%; B. Riley downgraded Coherent Corp to Neutral from Buy with an $86 PT citing the company’s +142% share appreciation YTD as the main reason.