Futures looking to start this holiday shortened trading week deep in the red with S&P futures pointing to a 1.4% lower open. Asia stocks closed mixed overnight while Europe indexes are under pressure with the DAX off over 1.3% as I write this. The Dollar is higher while Yields, Oil, and Gold are all lower.
And this is what UPB is reading this morning: Tuesday Morning Reads
Futures opened lower Sunday night, rallied back into the green Monday night, then tumbled Tuesday morning as the Tech sector sell-off looked to resume last weeks carnage. Is this the start of a major correction or just a short-term pullback? For now this looks like profit taking in a sector that has been on fire since March... and as the sell-off depend last week, the rest of the market started getting pulled down with it. That $239 area on the SPY looks like strong support, would like to see a close above that spot. Last week reminded me a bit of the Q4 of 2018, where we had a major pull into Christmas Eve. Not saying this is going to be dejavu, but would be concerned of more selling if markets cannot find their footing this week:
and 2018:
Still plenty of companies yet to report their earnings, here are some of the implied moves:
Some implied moves for #earnings next week:$COUP 14.4%$LULU 10.8%$WORK 17.1%$ZS 17.9%$RH 14.7%$CHWY 16.7%$PTON 20.5%$ORCL 7.1%$PLAY 18.6%$AVAV 11.6%⁰$GME 25.5%$LAKE 20.1%$FCEL 25%$KR 6.6%$HQY 11.7%$CASY 7%$LOVE 23.4%⁰$AEO 13.6%⁰$HDS 7.9%⁰$NAV 11.5%
— Option Millionaires (@OMillionaires) September 5, 2020
PTON is the one I am most interested this week. They report earnings after the close Thursday. The company just announced a less expensive Tread and a new Bike. The next progression here is a rower option. Either way, the company is past 1 million subscribers at $39.99 per month and that number will keep heading higher. Here is their update:
They will need a monster beat and raise for the stock to soar over $100. May look for a few speculative calls to play into the report and look to trade post report as well:
The weakness in tech saw many names fall over 5% Thursday and Friday. If this continues one could say this is a resetting of multiples in the space and some cloud names can drop another 20-30%. Do not be surprised if you see me add some speculative OTM puts on names like OKTA, SPLK, AYX, and MDB.
NKLA reported a strategic partnership with GM this morning, where they will give them a $2 billion equity stake in exchange for in-kind contributions to include Badger production and Fuel Cell tech. Pretty surprising deal though GM and F are desperate to remain relevant in a market that continues to drift away from them. I have posted quite a bit about NKLA and their founder and this only solidifies my opinion how he is a snake-oil salesman. When NKLA fails he will be able to blame everyone else. Not trading this one and will continue to stay away.
If markets find footing this morning, I will be looking at calls on ABMD, ALGN, ISRG, SHW, SAM, DXCM, and TNDM.
Here are the analyst changes of note for today:
| Novavax selloff brings 'compelling' buying opportunity, says B. Riley FBR | |
| The 50% selloff in Novavax (NVAX) shares off the August 5 52-week high provides a "compelling additional buying opportunity" into Novavax, B. Riley FBR analyst Mayank Mamtani tells investors in a research note. The "three-fold differentiation" of NVX-CoV2373's clinical profile, as elucidated in recent a September 2 New England Journal of Medicine publication, particularly as it relates to advanced mRNA-based approaches of Moderna (MRNA) and Pfizer (PFE)/BioNTech (BNTX), are reactogenicity, immunogenicity and storage and distribution infrastructure requirements, Mamtani tells investors in a research note. The analyst sees the "differentiated" clinical profile translating into favorable contractual terms for Novavax "from the many supply agreements" that the company is in the process of formalizing with several nations globally | |
| Zscaler price target raised to $141 from $130 at RBC Capital | |
| RBC Capital analyst Matthew Hedberg raised the firm's price target on Zscaler to $141 from $130 and keeps an Outperform rating on the shares. The company should deliver "strong" Q4 results when it reports tomorrow while the earnings commentary should focus on its "tailwinds" from COVID-19, along with its ZIA run-rate, ZPA attach, and the balance of its growth relative to leverage, the analyst tells investors in a research note. Hedberg adds that Zscaler is "well positioned to disrupt" the Zero Trust security market, where he sees mega-trends "accelerate by five years post-COVID. | |
| Netflix price target raised to $560 from $530 at Truist | |
| Truist analyst Matthew Thornton raised the firm's price target on Netflix to $560 from $530 and keeps a Buy rating on the shares. The analyst says that based on his app download, search interest, and data science team models, Q3 paid member adds are tracking at over 5.6M through August vs. guidance of 2.5M and consensus of 2.9M. Thornton adds that FX rates have been favorable to Netflix, which should support its average-revenue-per-user metric. The analyst further notes that the recent market pullback makes valuation on the stock more tenable | |
| General Dynamics initiated with an Underweight at Morgan Stanley | |
| Morgan Stanley analyst Kristine Liwag initiated coverage of General Dynamics with an Underweight rating and $163 price target, calling the stock a "value trap." While Gulfstream offers a premium product and is "the most profitable aircraft company in the world," she does not expect General Dynamics shares to get a premium now as the portfolio transitions and Gulfstream earnings are below peak if the stock did not get a premium when the G650 "dominated the industry," Liwag tells investors | |
| Yum! Brands price target raised to $105 from $95 at Stifel | |
| Stifel analyst Chris O'Cull raised the firm's price target on Yum! Brands to $105 from $95 and keeps a Buy rating on the shares after he raised his EPS estimates for 2020 and 2021 as a result of increasing his same restaurant sales projections for its KFC and Pizza Hut brands. His revised expectation for Pizza Hut comes from the belief that the pizza category is sustaining its relative outperformance and Pizza Hut's relevance is improving from pre-COVID, the analyst noted | |
| Illumina Hold rating maintained despite COVID-19 opportunity, says Canaccord | |
| Canaccord analyst Max Masucci said he continues to observe a constrained COVID-19 testing environment in the US which should lead to a solid uptake for the company's suite of COVID-19 offerings, though he expects the bulk of the impact to be recognized in Q4. That said, given the pandemic headwinds are likely to remain intact during the second half of 2020, the stock continues to trade at a roughly 10% premium to its three-year average P/E which suggests a better entry point will likely exist down the road. Masucci maintained his Hold rating and $350 price target on Illumina shares | |
And here is what I am watching today: PTON, ABMD, ALGN, ISRG, SHW, SAM, DXCM, OKTA, SPLK, AYX, MDB, and TNDM.
Let's have a GREAT DAY!
-JB