JPMorgan bullish on Array Technologies, SolarEdge
Solar is positioned for another year of relative outperformance compared to other energy sources this year, according to JPMorgan. Among its top picks are Array Technologies and SolarEdge Technologies, analyst Mark Strouse wrote in a note Monday.
Falling input prices improve the sector’s economic value and disruptions from geopolitical tensions will ease, he said. In addition, policy tailwinds will create catalysts for manufacturing expansion and order activity, he added.
Array Technologies should partially benefit from the Inflation Reduction Act’s domestic manufacturing incentives, Strouse said.
“ARRY is still a ‘show me’ story for most investors whom we speak with, which we believe sets up for the multiple to continue to rebound as margins recover,” he added.
Meanwhile, SolarEdge should outperform this year as demand remains solid and the company recovers from macro issues. Strouse also believes a potential announcement about new U.S.-based manufacturing to capture IRA incentives could serve as a catalyst this year.
— Michelle Fox
Bed Bath & Beyond stock surges after company closes more stores
Shares of Bed Bath & Beyond advanced more than 10% on Monday after the struggling retailer announced it will close dozens of additional stores.
The company, which is expected to file for bankruptcy after defaulting on its loans, is closing 87 more Bed Bath & Beyond stores, its entire chain of Harmon drugstores, and five buybuy Baby locations. Its stock price has plunged more than 82% last year.
Bed Bath & Beyond said in an earlier securities filing it was considering restructuring its debt in bankruptcy court, as well as attempting to improve its finances by cutting costs, lowering capital expenditures and reducing stores and distribution centers.
— Pia Singh
AMC shares fall below $5 after theater chain schedules shareholder meeting
Common shares of AMC Entertainment fell nearly 10% on Monday to trade below $5 per share after the theater chain announced a shareholder meeting in March for a potential change to its capital structure.
The special meeting would allow shareholders to vote on increasing the total number of shares the company can issue and on a reverse stock split to convert its preferred shares to common shares.
When the company issued the preferred shares, or “APE” shares, last August, it was seen as a way for the company raise more cash without first getting approval to raise the limit for outstanding common shares. Many analysts and investors expected AMC to convert the preferred shares to common shares quickly.
The preferred shares jumped 13% on Monday but still trade at less than half of the value of the common stock.
— Jesse Pound
Credit Suisse downgrades LTL companies, says trucking rates could bottom in coming months
Credit Suisse had estimated 2023 to be the worst year for earnings growth in more than a decade for many transportation carriers. The firm just downgraded LTL carriers Saia and Old Dominion Freight Line, however, believing their gains in recent weeks might be a signal that earnings estimates were too low for the carriers.
“Recent gains in trucking stocks seem to support the view in our 2023 Outlook that trucking rates, which have been under pressure since January 2022, could bottom in the coming months as excess retail inventories get cleared and as truck capacity gets rationalized,” the firm wrote in a note to clients on Monday.
Credit Suisse downgraded Saia from outperform to neutral, saying it sees limited upside given its stock price increase of more than 28% this month. It gave Saia a $288 price target, suggesting its stock price needs to climb about 5.6% from Friday’s close.
The firm also downgraded Old Dominion Freight Line from neutral to underperform, saying the company is trading above its highest pre-Covid valuation, placing a “ceiling on further near-term upside.” The company’s recent gains have lifted its stock price above the firm’s $323 price target. Shares of the transport company are up 14.5% this month.
Credit Suisse analysts noted that both transport companies are likely to give up their recent gains if 2023 sees an economic downside. In the opposite case, the firm said that carriers trading at lower valuations, like ArcBest Corp and XPO, could see greater upside this year.
— Pia Singh
Some stocks that have seen big rallies in 2023 could fall next month, BTIG says
The stocks that have leapt to begin 2023 are facing the most downside risk heading into February, according to BTIG.
“The biggest downside risk we see in the near term are some of the names that have seen big squeezes, especially as we head into February,” BTIG’s Jonathan Krinsky wrote in a Monday note.
“There are over 70 names in the Russell 3k that are up 50% or more YTD, and many of these remain very damaged charts. Mean reversion to start the year isn’t uncommon, but we think many of these names resume their downtrends as February gets underway,” Krinsky added.
The strategist used the Ark Innovation ETF as an example, saying the fund known for speculative names is 37% off its lows after tumbling 67% in 2022. Still, Krinksy said the fund’s gains may not last for much longer.
“The rally off the June lows was 51%, so it wouldn’t be out of the question to even test the 200 DMA (41.07) this week, but we think the bulk of the countertrend rally is likely behind us,” Krinsky wrote.
— Sarah Min
Time to sell Tesla, say technician Carter Worth
Tesla‘s stock has been on a “wild ride” and it’s time to sell, according to Carter Worth, CEO and Founder of Carter Braxton Worth Charting.
Shares of the electric-vehicle maker have surged 38% since the start of the year, following last year’s 65% plunge. Last week, Tesla reported record revenue and an earnings beat. CEO Elon Musk also said the company was on target to potentially produce 2 million vehicles this year.
“It just feels a little bit crowded, steep; too far, too fast,” Worth said on CNBC’s “The Exchange.” The name is also the most active in the options market, he pointed out.
“It is a rally to a difficult level,” he added. “”The play here, if you are long, is to exit and with new money, I would be short.”
Tesla’s year-to-date rally
Shopify gets an upgrade to buy from Roth Capital Partners
Now is the time to snap up shares of Shopify, according to Roth Capital Partners. The firm upgraded shares to buy from neutral and named a $56 price target in a Monday note, implying shares could surge nearly 12% from Friday’s close.
“First, we believe entering 2023, that the last of tough Covid comps are behind the Company,” analyst Darren Aftahi wrote in the note. He added that while Shopify has tripled its revenue in the last three years, it could still grow nearly 20% in 2023 due to new pricing tiers it recently announced.
Those new tiers also could add a two-fold benefit, according to Aftahi.
“Average new monthly prices appear to be approximately 33% higher, annual plans are about on par with legacy pricing,” he said. “While we expect to see some revenue growth benefit from this new pricing tier structure later in ’23, we think the more pronounced benefit will be a bigger portion of SHOP’s merchants moving to an annual membership, which should improve revenue visibility, as well as potentially reduce merchant churn.”
“As a result, we believe the stock should trade with a premium multiple to growth peers,” he added.
Shares of Shopify dipped more than 3% Monday reflecting a conflicting note from UBS reiterating a sell rating on the stock.
—Carmen Reinicke
Don’t count on this early 2023 rally, says JPMorgan’s Kolanovic
Investors should fade the early 2023 rally, warned JPMorgan’s top market strategist Marko Kolanovic.
The first quarter will likely mark a turning point for the market – and its upward trajectory probably won’t continue, he said.
“The fundamental confirmation for the next leg higher might not come,” Kolanovic said in a Monday note to investors. “And instead markets could encounter an air-pocket of weaker earnings and activity as they move through Q2 and Q3.”
He anticipates that the backdrop for corporate profits will start to turn lower as pricing power reverses.
The strategist’s comments arrive as stocks take a breather from their latest run. Still, the S&P 500 is up more than 5% for the year, while the Nasdaq Composite has bounced more than 9%. The Dow Jones Industrial Average is up about 2.3% in 2023.
Kolanovic also foresees a “postponement rather than fading of recession risk.” Though U.S. gross domestic product rose at an annualized pace of 2.9% in the fourth quarter, there is weakness underlying that headline number, “as private demand printed its weakest growth since the start of the recovery,” the strategist said.
“A weak trajectory for US domestic demand keeps recession risk elevated, even as the tightness in labor markets postpones this recession risk,” Kolanovic wrote. “Meanwhile, restrictive real policy rates represent an ongoing headwind, keeping the risk of a recession later in the year high.”
–Darla Mercado
Wolfe Research: The “melt up” continues
Federal Reserve Chairman Jerome Powell’s posture towards battling inflation—scheduled for Wednesday afternoon—will be critical, says Wolfe Research.
Barring any major surprises, Chief Investment Strategist Chris Senyek expects Powell’s tone to be more hawkish than expected as he attempts to rein in the “vicious rally” across the market.
“We attribute the latest leg of this ‘melt up’ to growing expectations for the U.S. economy to glide down for a ‘soft landing’ while the Fed embarks on a prolonged cutting cycle at the same time,” Senyek wrote in an client note.
However, concerns of a resurgence in inflation, as seen in the 1970’s during Paul Volcker’s term as Fed Chairman, is one of the central bank’s biggest worries.
Senyek said that he sees “two potential paths ahead: (1) there’s a “soft landing”, but the Fed hikes to 5%+ and stays there at least into 2024, or (2)…
Read More: Dow sheds more than 200 points as traders prepare for Fed rate decision