Daily US Equity Opening News - APO interested in INTC investment; Truist downgrades MCHP and semiconductor industry

TODAY'S AGENDA:

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  DAY AHEAD: After the US cash open, the day will see the US S&P PMI flash data for September. On the speakers front, Bostic (2024 voter) and Kashkari (2026 voter) have already spoken, with the latter due to appear again as is Goolsbee (2025 voter). Speaking in early September Goolsbee said there was a consensus for multiple rate cuts, adding that the challenge was not to let the economy turn for the worse), Fed's Kashkari (2026 voter) are due to speak.


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  BROKER MOVES: KDP upgraded at Citi; MCHP downgraded at Truist Secs amid a semiconductor sector downgrade as revenue growth enters a "slow fade". For the full list, please click here.
  


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  WEEK AHEAD: On the data slate, this week's highlights include US PCE inflation, policy announcements from the RBA and SNB, and inflation metrics from Australia and the Tokyo region. On the earnings front, highlights include AZO on Tuesday, CTAS and MU on Wednesday, ACN and COST on Thursday. Fed speak will also be in focus, with the likes of Bostic, Goolsbee and Kashkari on Monday; Bowman on Tuesday; Kugler on Wednesday; Powell, Williams and Barr on Thursday, as well as Collins and Cook.

US EQUITY NEWS:

TECH

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  US-China - The US Commerce Department plans to propose a ban on Chinese software and hardware in connected and autonomous vehicles, citing national security concerns. The ban targets communications and driving system components and includes a public comment period before finalisation. It could take effect starting from 2027.


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  Intel (INTC), Qualcomm (QCOM), Apollo Global Management (APO) - Reports late Friday said Qualcomm had approached Intel in recent days regarding a potential takeover, although no formal offer has yet been made. If completed, it could become the largest tech acquisition ever, but Intel is said to be wary of antitrust issues and potential shareholder concerns. The deal would likely be presented to regulators as a strategy to bolster US competitiveness against Chinese firms, according to the FT. Separately, Bloomberg Sunday reported that Apollo has proposed a multibillion-dollar investment in Intel, potentially up to USD 5bln, to support the chipmaker's turnaround efforts; Intel's management is considering the offer.


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  Nvidia (NVDA) - Speculation is rising in China about Nvidia potentially discontinuing its H20 chip as the US prepares for its annual export control review, DigiTimes reports. The chip is specifically designed for the Chinese market, and concerns about future availability are growing.


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  Apple (AAPL) - A constructive mention in Barron's; said that despite being the world's most valuable stock, Apple is often underestimated. It noted that new iPhone launches typically see a slight decline in share prices on announcement and launch days, followed by underperformance in the subsequent week; however, consumer enthusiasm tends to outpace market expectations, suggesting a disconnect between investor sentiment and actual demand. Elsewhere, a JPMorgan (JPM) analyst noted that lead times for the iPhone 16 have expanded, indicating healthy demand, particularly for the iPhone 16 Plus, although Pro models show weaker demand compared to last year; JPM maintained an Overweight rating on Apple shares. Elsewhere, Citi's tracker indicates increasing delivery times for Apple's iPhone 16 base models across the US, China, India, and the UK, averaging an additional week; Pro model delivery times also rose in some regions, while supply chain improvements are noted. Citi maintained a Buy rating on Apple.


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  Microchip Technology (MCHP) - Downgraded to ‘Hold’ from ‘Buy’ at Truist with a PT of USD 80 (prev. 89); believes Microchip's fundamentals have recently bottomed, expecting a significant recovery in 2025, but the stock is trading at a 26-times estimated 2025 earnings, a historical peak for the Co. At the same time, the firm downgraded the semiconductor industry to ‘Neutral’ from ‘Constructive’, citing industry revenue growth has peaked and is entering a "slow fade", while stock investment returns have been robust cycle-to-date, making significant additional returns from here more challenging.


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  Microsoft (MSFT) - Downgraded to ‘Neutral’ from ‘Buy’ at DA Davidson with an unchanged PT of USD 475; thinks competition has "largely caught up with Microsoft on the AI front" which reduces the justification for the current premium valuation. The firm added that AWS is already adding as nearly as much cloud business as Azure after a few quarters of Microsoft adding more business and that Google's (GOOGL) GCP's growth has already seen its business accelerate to comparable growth rates as Azure last quarter. Believes Microsoft's lead is now diminished in both the cloud and code generation business, arguing it will make outperformance in the shares from here on out difficult.


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  TSMC (TSM), Samsung Electronics (SSNLF) - TSMC and Samsung are discussing establishing large chip-making factories in the UAE, which could significantly impact the industry and support AI investments in the region. Executives from both Cos. have recently visited the UAE to explore these opportunities.


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  Samsung Electronics (SSNLF) - Restructuring its Semiconductor Research Institute, shifting its DRAM and NAND flash memory teams to enhance production efficiency and profitability, DigiTimes reports. The move aims to accelerate memory development amid competitive pressures.


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  GlobalFoundries (GFS) - At the Quad Leaders Summit, the US and India announced enhanced semiconductor collaboration, including plans for a national security fabrication plant, DigiTimes reports. GlobalFoundries will establish an R&D centre in Kolkata to support this initiative.


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  Adobe (ADBE) - Positive mention in Barron's; said Adobe's stock was an unappreciated AI play, and it was time to buy the stock.


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  Intuit (INTU) - Intuit responded to Spruce Point's negative report, highlighting its strong FY24 performance with a 13% revenue increase. Intuit also emphasised its transformation into a global financial technology platform, focusing on five strategic priorities that address customer needs. Intuit said it will share further insights at its Investor Day on September 26th.


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  Zoom Video Communications (ZM) - Cutting back on stock-based compensation, citing unsustainable levels of equity grants that have led to significant share dilution, Bloomberg reports. CEO Yuan indicated the need for proactive reductions, aligning with trends from other tech firms like Salesforce (CRM) and Workday (WDAY).


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  Palantir (PLTR) - Downgraded to ‘Market Perform’ from ‘Outperform’ at Raymond James. The firm remains "enthusiastic" about Palantir's longer-term positioning in AI, but the downgrade stems from the belief the stock "needs to consolidate stellar gains over the last couple of years and grow into its rich valuation".

COMMUNICATIONS

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  Alphabet (GOOG) - Bloomberg on Friday reported that Google faces potential fines and demands for business model changes from EU regulators due to concerns over how it displays rival products in its search services. Under the Digital Markets Act, Co. could incur penalties of up to 10% of its global annual revenue if it fails to comply.


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  Netflix (NFLX) - India is investigating Netflix over allegations of visa violations and racial discrimination, prompted by claims from a former executive who is also suing the company for wrongful termination, ET reports. Netflix denies the allegations and says it was unaware of the probe.


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  REA Group (RPGRY), Rightmove (RTMVY) - REA Group has raised its bid for UK property listings firm Rightmove to GBP 6.1bln, a nearly 40% premium over its pre-bid share price, FT reports. This marks REA's third attempt, as the Rightmove board previously rejected lower offers, citing them as "opportunistic." REA is urging Rightmove to engage in negotiations before the end of the month, with plans to expand Rightmove's services if the deal proceeds.


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  News Corp (NWS) - Activist investor Starboard Value announced it holds 8.732mln Class B and 13.979mln Class A shares of News Corporation, positioning itself as a significant stockholder. It proposes eliminating News Corp's dual-class structure to enhance shareholder value and governance, urging stockholders to support this initiative in the upcoming 2024 AGM.


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  Sirius XM (SIRI) - Positively mentioned in Barron's; said Sirius' stock may be a buying opportunity, arguing that despite a 50% drop in share price this year, the stock is considered undervalued at eight times estimated earnings, complemented by a 4.5% dividend yield.


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  Pinterest (PINS) - Initiated with a ‘Buy’ at Deutsche Bank with a USD 43 PT. Views Pinterest as an "under-monetised", scaled, increasingly personalised "digital catalogue" that attracts an affluent, high purchase-intent user base.

FINANCIALS

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  Bank Capital Rules - A plan to ease bank-capital requirements in the US is facing opposition at the FDIC, Bloomberg reports. Three of the five directors, including Democrat Rohit Chopra and two Republicans, have expressed significant concerns about the proposed changes by the Fed.


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  Citigroup (C) - Cos. expansion plans in China face delays due to US regulatory issues, Bloomberg reports, as the Fed's penalties for data management and risk controls have hindered Citi's ability to secure necessary clearance for establishing a securities firm.


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  Commerzbank (CRZBY), UniCredit (UNCRY) - Germany has halted any further sales of its shares in Commerzbank to block a potential takeover by UniCredit, Bloomberg reports. The government said it will maintain its shareholding for the foreseeable future, including any related to share buybacks. Commerzbank's labour representatives are fiercely opposing a potential merger with UniCredit, fearing it could lead to significant job cuts, and have urged Berlin to block the deal.


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  Italian Banks - Italy is considering a one-time payment from banks based on profits from the last two years, at between 1-2%, according to Corriere della Sera.


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  Blackstone (BX) - India-based hotel giant Oyo has purchased Motel 6 from Blackstone for USD 525mln, WSJ reports. The acquisition of the 1,500-location chain is part of Oyo’s strategy to expand its presence in the US.


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  Bank of America (BAC) - To open more than 165 financial centres by the end of 2026.


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  KKR & Co (KKR) - Raised USD 4.6mln for its debut fund focused on mid-sized deals in North America.

CONSUMER DISCRETIONARY

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  General Motors (GM) - Unifor union members at GM's CAMI plant in Ontario ratified a two-year contract granting a 15% wage increase, with 10% effective immediately. The deal aligns with agreements at other GM plants, introducing a new defined-benefit pension and reinstating cost-of-living allowances while aiming to return to two shifts by 2025. Elsewhere, the stock was downgraded to ‘Market Perform’ from ‘Outperform’ at Bernstein with USD 53 PT. Bernstein's data now signals rising earnings headwinds and thinks there's a risk GM will announce additional capital requirements during its October capital markets day. As such, Bernstein wants to "wait and see" which updates GM shares with the market. Lastly, Bernstein shared, that continued inventory build in the US will lead to pricing headwinds next year, a delayed ramp on EVs and Cruise pushes losses into next year, and headwinds in GM's international businesses are increasing.


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  Volkswagen (VWAGY) - Begun the process of reducing several hundred corporate jobs in China over the next three years as part of a global effort to cut overhead by 20%, Bloomberg reports. The layoffs come amid declining sales in China and the shift toward EVs. Elsewhere, Manager Magazin Friday reported that Volkswagen could cut up to 30k jobs out of 130k in Germany over the medium term.


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  Mercedes-Benz (MBGYY) - CEO called for an easing of emissions rules and backed plans to boost European competitiveness. CEO reiterated that emissions targets could cost the industry billions of EUR in fines.


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  Continental (CTTAY) - CEO said preparations to spin off its car parts business are on track and is confident the move will go ahead as planned, Bloomberg reports.


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  Luxury Sector - Positive mention in Barron's; said that luxury stocks have struggled in 2024 due to decreased demand for high-end goods. But despite concerns about economic slowdowns, the newspaper suggests that select luxury stocks -- like Burberry (BURBY), LVMH (LVMUY), Tapestry (TPR) and Richemont (CFRUY) -- look attractive.


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  Vail Resorts (MTN) - Pursuing more Alpine acquisitions in Europe as it aims to diversify holdings and address climate change risks, Bloomberg reports. Recent purchases include Swiss resorts Crans-Montana and Andermatt Sedrun.


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  Hyatt Hotels (H) - On September 22nd, entered a purchase and sale agreement to buy about 1.6mln class b shares owned by a seller at USD 152.23/shr.


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  Amazon (AMZN) - Has placed thousands of people in a new team under Prasad to develop AI products for an Alexa upgrade and other businesses, WSJ reports.

HEALTHCARE

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  Insulin Prices, Cigna (CI), CVS Health (CVS), UnitedHealth (UNH) - FTC on Friday filed a lawsuit against the three largest pharmacy-benefit managers, alleging they inflated insulin prices by profiting from negotiated discounts while directing patients to higher-cost products, WSJ reports. The lawsuit targets practices that compromise consumer protection and competition in the drug market. The FTC suit does not specifically mention Eli Lilly, Novo Nordisk, or Sanofi, but reserves the right to sue later.


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  Eli Lilly (LLY), Novo Nordisk (NVO) - A price war has erupted in the weight-loss drug market, with Eli Lilly and Novo Nordisk offering discounts to attract insurance coverage, WSJ reports; discounts could reduce prices by up to 50% on these USD 1,000+ monthly medications.


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  Drug Pricing - Democrat Presidential nominee Kamala Harris, while publicly campaigning against big business, has privately engaged with corporate leaders, including Texas billionaire Mark Cuban, WSJ reports.


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  Johnson & Johnson (JNJ) - Subsidiary Red River Talc LLC has filed for Chapter 11 bankruptcy for the third time, aiming to settle thousands of lawsuits related to its talc-based baby powder, Bloomberg reports. About 83% of claimants have accepted a proposed USD 8bln settlement; some objections may yet arise during the bankruptcy proceedings.


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  AstraZeneca (AZN) - FluMist approved for self-administration in the US. Elsewhere, Datopotamab deruxtecan final overall survival results reported in patients with metastatic HR-positive, HER2-low or negative breast cancer in the TROPION-Breast01 Phase III trial; did not significantly improve overall survival for patients with certain types of breast cancer. Meanwhile, the company says its Fasenra has been recommended for approval in the EU as an add-on treatment for adult patients with relapsing or refractory eosinophilic granulomatosis with polyangiitis.


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  Sanofi (SNY) - FDA approves isatuximab-irfc with bortezomib, lenalidomide, and dexamethasone for newly diagnosed multiple myeloma.


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  Roche (RHHBY) - WHO endorses dual-stain cytology (CINtec PLUS) testing in its cervical cancer prevention guidelines, advancing patient care and underlining Roche’s role in pioneering cervical cancer solutions.


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  Teva Pharmaceuticals (TEVA) - Reported positive Phase 3 results from the SOLARIS trial for TEV-'749, showing significant improvements in schizophrenia symptoms and no instances of post-injection delirium/sedation syndrome, highlighting its potential as a long-acting treatment option.


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  IDEAYA Biosciences (IDYA) - Announced positive interim Phase 2 data for darovasertib in neoadjuvant uveal melanoma (UM) and a successful FDA Type C meeting on registrational trial design.


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  Owens & Minor (OMI) - Announced it has named Jonathan Leon as Executive VP and CFO, effective immediately. Leon will continue with his corporate treasurer responsibilities until a successor is found.


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  Merck & Co (MRK) - The US appeals court on Friday revived over 500 lawsuits claiming that the company failed to warn that its osteoporosis drug Fosamax increased the risk of thigh bone fractures.


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  Alkermes (ALKS) - Presented clinical data from its Phase 1b study of ALKS 2680: ALKS 2680 showed improved wakefulness compared to placebo in both NT2 and IH patient cohorts; ALKS 2680 was generally well tolerated in the Phase 1b study.


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  Black Diamond Therapeutics (BDTX) - Reported promising initial Phase 2 data for BDTX-1535 in patients with recurrent EGFRm NSCLC. Key findings include A 200 mg daily dose selected for pivotal development, showing a favourable tolerability profile.

INDUSTRIALS

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  Taiwan-US - Taiwan is facing delays in US weapons shipments due to conflicts in Gaza and Ukraine, affecting its defence preparations against China, WSJ reports. Taiwan's military showcased new Humvees but used older, shorter-range missiles during recent exercises.


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  Boeing (BA) - Cos. defence and space chief Ted Colbert has left amid ongoing losses, production delays, and issues with the Starliner programme, which stranded two astronauts, WSJ reports. His departure is the first major exit since the new CEO Ortberg took over. Separately, CNBC reports that the strike at Boeing by over 30k machinists is costing the company USD 50mln daily; the strike has halted aircraft production, exacerbating Boeing's financial troubles.


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  Southwest Airlines (LUV) - Warned employees of upcoming difficult decisions to restore profitability, Bloomberg reports, as the airline plans further changes to its route and flight network amid pressure from activist investor Elliott Investment Management.


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  Maersk (AMKBY) - CEO speaking on green technology said that European innovation is at a first-mover disadvantage due to China and the US offering subsidies to ensure there is no need to wait. Elsewhere, Maersk has decided to reinstate the Charleston call on Oceania service.


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  United States Postal Service - The US Postal Service said it will not raise stamp prices in January for the first time since 2022. In July, the price increased to 73 cents from 68 cents, marking a 36% rise since early 2019 when stamps cost 50 cents.


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  Rolls-Royce (RYCEY) - Said to be moving closer to two deals to build its mini nuclear power plants in Sweden and the Netherlands, following the successful deal with Czech announced last week, whilst delays in the UK were reported, CityAM reports.


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  RTX (RTX) - Awarded USD 279.6mln Navy contract modification, exercising an option to procure up to a maximum quantity of 8,493 AN/ARC-210 radios and ancillary equipment.


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  BAE Systems (BAESY) - Awarded a USD 184.4mln Army contract modification for Armored Multi-Purpose Vehicles.


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  General Dynamics (GD) - Awarded a 103.6mln Army contract for tools and equipment to support initial fielding for the M10 Booker vehicles.

ENERGY

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  Shell (SHEL) - Said it would shut production at its Stone and Appomattox facilities in the Gulf of Mexico as a precautionary measure in response to a tropical disturbance.


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  Uranium Energy (UEC) - To acquire 100% of Rio Tinto's Wyoming (RIO) assets for USD 175mln.


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  TotalEnergies SE (TTE) - Signed a 10-year agreement with Air France-KLM to supply up to 1.5mln metric tonnes of sustainable aviation fuel.

MATERIALS

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  Uranium Prices - FT reports that nuclear fuel prices have surged since 2022 due to supply bottlenecks from Russia's invasion of Ukraine. Enriched uranium prices have more than tripled, while conversion costs have quadrupled, highlighting a significant squeeze in conversion capacity, with Russia controlling a large portion of the global market.


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  US Steel (X), Nippon Steel (NPSCY) - White House adviser Sullivan downplayed the significance of an extension granted to Nippon Steel's USD 14.1bln acquisition of US Steel, stating that it was a procedural step for a thorough review. Biden is said to prefer keeping US Steel domestically owned, potentially jeopardising the deal.


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  Rio Tinto (RIO) - Chairman said more mines are needed to cope with increasing demand for energy-transition metals such as copper, and added that M&A will not fill the supply gap, Bloomberg reports.

CONSUMER STAPLES

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  Mondelez International (MDLZ) - Agreed to acquire a majority stake in Evirth, a Chinese manufacturer of cakes and pastries, pending regulatory approval. No terms were provided.


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  Keurig Dr Pepper (KDP) - Upgraded to ‘Buy’ from ‘Neutral’ at Citi with a PT of USD 43 (prev. 36); sees volume improvement in US coffee (26% of Cos. sales) in H2 ‘24 supported by easier comparisons, the recent improvement in scanner data, new brands contributions, and potential upside from the recently launched K Brew + Chili.

UTILITIES:

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  Constellation Energy Corporation (CEG), Microsoft (MSFT) - CEG and MSFT signed a power agreement to restart a unit of Pennsylvania's Three Mile Island nuclear plant, marking a potential first for such a revival, it was announced on Friday. However, key regulatory permits for the plant's reactivation have yet to be submitted. The move reflects rising US electricity demand from tech firms, particularly for AI and cloud computing.

23 Sep 2024 - 13:55- EquitiesExclusive- Source: Newsquawk