Cruise stocks cruised and growth stocks bruised

Stocks staged a solid rally yesterday as investors pondered life beyond Omicron with early hopes that the new variant is less severe than older ones.  China looks like it is ready to ease on monetary policy sparking interest in beaten down Asian shares which were once highfliers.

MOVERS ‘N SHAKERS

:- Looking Back

Norwegian Cruise Lines (NCLH) got the biggest S&P winner distinction with shares trading higher by +9.51%.  The Omicron-variant is now popping up in various US locations with expectations that more is on the way.  The good news, if you can call it that, is that though the variant appears more transmissible, the symptoms appear to be less severe.  That early assessment was good enough to spur an aggressive rally in recovery stocks such as travel/leisure and cyclicals and cruising should benefit if the early assessments are correct.  Norwegian was followed by United Airlines (UAL) and fellow cruisers Royal Caribbean (RCL), and Carnival Corp (CCL) rounding off the top performers of the large cap index.  Norwegian shares are down by -21.23% year to date while the S&P500 Hotels, Resorts, & Cruise Lines sub-industry Index is up by +11.69% in the same period.  Potential average target upside: +54.1%.

Moderna Inc (MRNA) was the biggest S&P loser yesterday with its shares tumbling by -13.49% after its President, Dr. Stephen Hoge said in a Sunday interview that there was a risk that vaccines would be less effective at tackling Omicron.  His admission was admired by the general public, but not so much by the company’s shareholders.  Shares in rival vax maker Pfizer (PFE) were down yesterday as well, giving up -5.14%.  Moderna’s stock is up by +153.98% year to date.  The company’s forward PE multiple is 10.02 compared to comparable multiples of Amgen (AMGN), Regeneron Pharmaceuticals (REGN), and Vertex Pharmaceuticals (VRTX) which sport 12.39, 9.07, and15.82 forward PE multiples, respectively.  We expect to get Moderna’s next earnings announcement on January 25^th and analysts, as of today are looking for $8.917 / share compared to the last announced $7.68 / share for Q3.  Potential average target upside: +3.1%.

Stocks, in general.  Yesterday’s rally was all about acceptance of the Omicron-variant and the realization that the Fed is likely to announce a speed-up of the taper after next week’s FOMC meeting.  Reopening stocks rallied prolifically, while growth shares, which can be sensitive to interest rates sold off.  Growth stocks with larger expected future growth were punished the most in the past week.

Looking forward  -:

Intel (INTC) looks set to rally in today’s session after its plans to list shares of its Mobileye business separately became public.  A formal announcement is expected within days.  This is all part of a shake-up within the company as CEO Pat Gelsinger undertakes extreme measures to regain Intel’s strategic edge against a growing sea of competitors.  Mobileye, which makes chips and software for self-driving vehicles, was acquired by Intel in 2017.  With the explosive growth in electric vehicles and self-driving cars, the unit has been growing at a faster pace than Intel’s traditional business.  Though the company beat on both EPS and Revenue estimates in Q3, it announced that future earnings would be impacted by the turn-around efforts causing the already losing stock to suffer further.  This latest move appears to be positioning the company to have a more acute focus on its core chip business.  Intel is trading higher in pre-market by around +8%.  Potential average target upside: +10.1%.

Juniper Networks (JNPR) shares are higher in the pre-market after receiving an upgrade to BUY from HOLD from Jeffries.  The communications equipment manufacturer has lost a bit of its sales growth momentum as it has been caught in the component supply chain mess of recent.  It missed on sales and EPS estimates for Q3 but reported an increase in orders which is consistent with analysts’ expectations that communications infrastructure capex is on the rise.  This has also helped the company’s stocks rise by +43.9% year to date.  Though analysts’ have been raising the price targets throughout the year, shares are still higher than the average analyst 12-month price target.  Though that can be viewed as the stock being overpriced, it does not mean that the stock cannot continue to rise.  Potential average target upside: -6.9%.

Merck Inc (MRK) is trading lower pre-market after being downgraded to NEUTRAL from BUY from Guggenheim.  The stocks had a rough year with minimal gains but had a pop when it announced that its antiviral pill would reduce hospitalizations back in October.  The company has since relinquished those gains when its latest trial data suggested that the effectiveness of the pill was lower than hoped for.  To add to the company’s woes, it announced yesterday that it was pausing two Phase 3 clinical trials of its PrEP HIV treatment.  The stock is down by -5.87% year to date.  Potential average target upside: +31.1%.

THE MARKETS

Stocks rallied yesterday as investors bet that Omicron would have minimal impact.  The S&P500 rose by +1.17%, the Dow Jones Industrial Average jumped by +1.87%, the Nasdaq Composite Index climbed by +0.93%, the Russell 2000 Index traded higher by +2.05%, and the S&P500 ESG Index added +1.08%.  Bonds slipped and 10-year Treasury yields climbed by +9 basis points to 1.43%.  Cryptos fell by -6.81% and Bitcoin gained +1.81%.

NXT UP

• Trade Balance (Oct) is expected to be -$66.8 billion after a -$80 billion deficit was announced for Sept.
• This morning, AutoZone announced that it beat on both EPS and Sales.  After the close we will hear from SentinelOne, ChargePoint, and Stitch Fix.