Mid-Morning Look

Friday, September 06, 2024

U.S. stock futures were sharply lower overnight, recovered on the open following a weaker-than-expected August nonfarm payroll report (with weaker revisions to June and July), but have since slumped to lows (taking out overnight low) as investors still unsure as to the aggressiveness of interest rate cuts in the Fed in September and remainder of 2024. The tech heavy Nasdaq underperforms, down over -1.35% back below 17,000 following weakness in semiconductors after Broadcom (AVGO) shares tumble 9% on results/guidance that disappoint investors (SOX index -3.4% below 4,600 falling below its 200dma support). All eleven S&P sectors are in the red, falling since the open as the S&P is on track for its 4^th straight decline (would be longest such streak in a month). The U.S. dollar index (DXY) reversed from the 8:30 spike lower, and Treasury yields/markets moving around like they are “meme” stocks (after a quick spike higher (to 3.77%) and then lower (to 3.67%), the 10-yr yield is back to the highs around 3.76% as Wall Street digests the jobs data and meaning for future interest rate cuts by the Fed. Recession fears remain given the weaker jobs outlook (ADP/nonfarm this week both soft) and ISM manufacturing showed softness two straight months.

• CARR +2%; upgraded to Peer Perform from Underperform at Wolfe Research as now sees a more favorable bear/bull range of $60-97, with base case upside of 11%.
• GWRE +13%; advanced on earnings as Q4 results showed ARR 1% above, subscription and support revenue 2% above, and FCF 37% above consensus; in-line FY25E ARR guidance.
• IOT +15%; reported Q2 rev growth of 37% (no Q/Q deceleration) above Street at 32%, w/ upside coming in stronger than 1Q as large customer activity & multi-product adoption drove out-performance.
• SMAR +7%; guided FY adj. EPS $1.36-$1.39; above ests. of $1.33 following Q2 EPS and revs beat, which followed a prior day report by Reuters saying that Private equity consortium including Vista Equity Partners and Blackstone are in talks to acquire company.
• SRCL +4%; in the waste sector, SRCL and WM merger clears HSR following pull and refile. The merger has also received antitrust clearance from Portugal & confirmation from UK CMA that it has no further questions.
• TVTX +15%; as received full U.S. FDA approval for Filspari, which slows kidney function decline in adults with primary IgA Nephropathy and at risk of disease progression.
• ZUMZ +15%; reported Q2 N.A. sales/comps up 10.4%/5.9%, while Q2 sales/adj. EBITDA/adj. EPS above consensus, exceeding guidance as QTD sales as of 9/2 up 6.8%; Q3 sales/EPS guide above/below consensus.

• BE -9%; downgraded from Buy to Hold at Jefferies given uncertainty on backlog, expiration of ITC, in its current form, in ’24, and minimal transparency around SK.
• KBR -4%; was downgraded from Buy to Hold at TD Cowen with an unchanged price target, given a less-rich catalyst roadmap and emerging risks limit upside to Street estimates.
• MBLY -7%; on reports INTC is said to explore the sale of part of its stake in Mobileye, noting the chipmaker could offload some of its 88% holding in Mobileye on the public market or via a sale to a third party https://tinyurl.com/5fcd45sp
• PL -19%; after earnings; Q2 revs rose 14% y/y to $61.1M vs. est. $61.8M; sees Q3 revs $61M-$64M, vs. est. $64.2M.
• SMCI -5%; downgraded to Neutral from Overweight and tgt to $500 from $950 at JP Morgan (marks third Wall Street fir to downgrade in last 2-week; Bofa and Barclays the other two).
• SWBI -10%; reported Q1 results that showed they saw softer than anticipated demand for firearms