It was a crazy session for markets... one could say historic. The S&P, Nasdaq, and Dow all closed in the green, reversing heavy losses in a volatile session. There was no new news or catalyst for the bounce, just extremely oversold conditions and some ready to jump into the rough waters. Asia markets closed lower overnight while Europe stocks are in the green as I write this. U.S. futures are back in sell mode with the S&P set to open down nearly 2% as I write this, the Dollar is up, while Oil, Gold, and Yields are all lower.
Here is what UPB is reading this morning: Tuesday Morning Reads
And my rant from yesterday if you missed it: JB Morning Rant – January 24th, 2022
It was a crazy session yesterday, bringing back memories of Aug 2015, the flash crash of 2010, or some of the days in 2008/2009 that saw some crazy intra-day reversals. Price discovery at its finest... You could have went into the day holding puts, only to see them get destroyed. You could have added calls on the bounce, and will likely see those destroyed this morning with the gap lower. Certainly not an easy environment to traverse. I spoke about it on my rant yesterday... think some of these 3x bear ETFs maybe a way to hedge for the next few weeks as this volatility continues and as indexes near bear market territory - the Nasdaq came within a hair of it yesterday. Tickers like FAZ, SRS, TZA, LABD, and DRV are ones I am watching to potentially add a few spec calls. On the flip side, adding these will allow me to try and nibble calls on days like yesterday for the bounces.
Back in 2008/2009 SKF, FAZ, and SRS went parabolic. SKF was $20 and ran over $300 in a short period of time. These 3x ETFS are not a great investment, as they erode overt ime, but offer nice protection if the market continues to fall.
GME is another name I will be watching in the coming days. Just like the shorts got trapped on the way up, over-leveraged longs may get trapped on the way down as well. Think if GME starts tumbling will be a sign of margin calls coming... though I am hoping that will not be the case and it holds up:
IBM reported some decent earnings after the close but is not trading up too much in the pre-market as it missed some analyst expectations and likely not the numbers some were looking for to point to the long-awaited turnaround. Likely will take off the watchlist for now and revisit for next earnings:
In typical market fashion, ZBRA sold off yesterday, testing $463 before bouncing - the session after my $480 puts would have expired. PANW, NOW, and ZBRA are names I may look to nibble again on some spec puts if the market can't muster a bounce today.
APPS, KRNT, SPOT, and TWLO saw some nice reversals. If today is day #2 of reversals, will be looking at those names for some calls.
Not going to sit here and put my bear suit on just yet. The market came down and tested July 2021 levels before bouncing. We would need to get to $367s or so on the SPY just to test last year lows. We have the Fed tomorrow, could go a long way in supporting at least a short term bottom before we start talking about a bear market:
Here are the analyst changes of note for today:
| Kohl's board may consider sale best option, says Morgan Stanley | |
| Following reports indicating that Starboard-backed Acacia Research (ACTG) and Sycamore Partners put in offers to acquire Kohl's (KSS) for about $9.4B-$9.6B, and the company having issued an official press release to confirm its board has received offers and is reviewing the details, Morgan Stanley analyst Kimberly Greenberger argued that the board may consider a sale its best option given unsuccessful plans to reignite sales, a declining EPS path and the ongoing investor calls for strategic action. The $64-$65 per share acquisition bids reported, if confirmed, would be only $3-$4 below her bull case and "could offer a compelling starting point for a sale process," said Greenberger, who has an Underweight rating and $50 price target on Kohl's shares | |
| Goosehead Insurance price target lowered to $150 from $175 at RBC Capital | |
| RBC Capital analyst Mark Dwelle lowered the firm's price target on Goosehead Insurance to $150 from $175 but keeps an Outperform rating on the shares. The analyst cites the company's Q4 pre-announcement that was a bit below prior estimates, though he continues to see a long runway for its growth and views the recent drawdown in shares as overdone. Goosehead is continuing to expand its footprint and market share, with policy in force and premium growth metrics set to continue to grow by about 40%, Dwelle tells investors in a research note | |
| Evercore sticking with In Line rating on IBM after 'impressive' December quarter | |
| Evercore ISI analyst Amit Daryanani said IBM reported "impressive" December quarter revenue and EPS that beat Street consensus, highlighted by about 5% growth in constant currency ex-Kyndryl (KD) partner revenue that was spread across both consulting and software. Overall, he thinks IBM is starting to see benefits as their investments in software and consulting translate to the top line and while he thinks the March quarter could see tempered profitability, IBM "should see healthy improvement for the remainder of the year," Daryanani tells investors. The tailwinds from digital transformation and hybrid infrastructure are "clear," but investors will look to see if IBM can convert these tailwinds into sustained profitability, said Daryanani, who is sticking with an In Line rating and $140 price target on the stock
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| Electronic Arts price target lowered to $172 from $182 at MKM Partners | |
| MKM Partners analyst Eric Handler lowered the firm's price target on Electronic Arts (EA) to $172 from $182 but keeps a Buy rating on the shares. With a strong balance sheet and "significant scale", EA should remain a leading consolidator, but following Microsoft's (MSFT) proposed acquisition of Activision (ATVI) and the potential domino effect for an industry that is seeing platform and genre expansion, EA could find itself a takeout candidate, the analyst tells investors in a research note. Handler adds that he remains "comfortable" with the expected 6% revenue growth forecast for Electronic Arts in FY23 thanks to the continued success of FIFA and Apex Legends along with a full year's contribution from Golf Clash | |
| McDonald's price target raised to $293 from $268 at Baird | |
| Baird analyst David Tarantino raised the firm's price target on McDonald's to $293 from $268 and keeps an Outperform rating on the shares. The analyst sees potential for Q4-21 results to be largely satisfactory, although he acknowledges that any commentary on early-2022 performance could be mixed amid omicron-related disruptions in certain markets. He believes the shares can yield a good risk-adjusted total return over the next 12+ months | |
| IBM sales growth not bringing improved profits, says MoffettNathanson | |
| MoffettNathanson analyst Lisa Ellis reiterates a Sell rating on IBM with a $115 price target following the company's Q4 results. The company's constant currency revenue growth jumped to 5.1% when excluding the benefit from Kyndryl transfers, Ellis tells investors in a research note. IBM's sales are benefiting from "two significant tailwinds:" the spin-out of Kyndryl and a very strong enterprise IT demand environment, says the analyst. However, Ellis says IBM's strong revenue growth improvement is not yet translating to improved profits and free cash flow. She expects IBM to remain a "chronic underperformer" in 2022 with weakening fee cash flow and does not see the ITO spin-off as a significant positive catalyst | |
And here is what I am watching today: MSFT, FAZ, SRS, TZA, LABD, DRV, ZBRA, PANW, NOW, TWLO, SPOT, APPS, and KRNT.
Let's have a great day!
-JB