Daily Update - March 6, 2023

Selected highlights of the day

By: Matthew Otto

CYTK

Cytokinetics has announced positive results from Cohort 4 of REDWOOD-HCM and long-term results from FOREST-HCM at the American College of Cardiology 72nd Annual Scientific Session. Cohort 4 of REDWOOD-HCM showed that treatment with aficamten resulted in significant improvements in heart failure symptoms and cardiac biomarkers in patients with non-obstructive hypertrophic cardiomyopathy (nHCM) and was well-tolerated. The results support the advancement of aficamten into a pivotal Phase 3 clinical trial in patients with nHCM. Additionally, FOREST-HCM demonstrated that long-term treatment with aficamten for 48 weeks is well-tolerated and associated with sustained treatment effect. The drug was safe and well-tolerated, with no treatment-related serious adverse events. It is estimated that HCM affects 600,000 to 1.5 million Americans or 1 in 500 people.

  • JMP Securities analyst Jason Bazinet gives a Market Perform rating and holds a $71 price target.
  • Needham analyst Serge Belanger has reaffirmed his Buy endorsement and maintained a target price of a $60.

HIBB

Hibbett has reported its financial results for the fourth quarter and full year ended January 28, 2023. The athletic-inspired fashion retailer saw a 15.5% increase in comparable sales over the fourth quarter of the prior year, and a 39.6% increase compared to the fourth quarter of fiscal 2020 (pre-pandemic). For the full year, comparable sales declined 2.2% versus the prior year but increased 40.9% compared to fiscal 2020 (pre-pandemic). Hibbett’s net sales for the 13-weeks ended January 28, 2023, increased 19.6% to $458.3 million compared with $383.3 million for the 13-weeks ended January 29, 2022. Gross margin was 35.2% of net sales, compared to 35.1% of net sales for the prior year. Net income for the quarter was $38.4 million, or $2.91 per diluted share, compared to $17.7 million, or $1.25 per diluted share, for the prior year. The company opened nine new stores and closed two stores during the quarter.

Outlook

The company expects to face a number of business and economic challenges in Fiscal 2024, including inflation, an increased promotional environment, wage pressures, higher interest rates, intermittent supply chain disruptions, a more cautious consumer, and ongoing geopolitical conflicts.

As a result of an increased promotional environment, a higher mix of e-commerce sales, potential supply chain disruptions, and inflationary pressure on certain store occupancy costs, gross margin as a percent of net sales is anticipated to decline by approximately 20 to 30 basis points compared to Fiscal 2023 results. SG&A as a percent of net sales is expected to increase by approximately 40 to 50 basis points in comparison to Fiscal 2023 results due to new store growth, wage inflation, increased incentive compensation, and an increase in data and transaction processing fees. Operating profit is expected to be in the range of 9.0% to 9.3% as a percent of sales, also remaining above pre-pandemic levels. Diluted earnings per share are anticipated to be in the range of $9.50 to $10.00.

  • Benchmark analyst John Lawrence reiterates his Buy rating and maintains the price target of $80.
  • Baird analyst Peter Benedict maintains an Outperform rating and raising the price target from $75 to $80.
  • Joseph Feldman from Telsey Advisory Group reaffirms an Outperform rating while keeping his price target of $80.

AAPL

  • Goldman Sachs analysts Michael Ng have initiated coverage on Apple with a Buy rating and a $199 price target, implying a 32% upside to Friday’s close. The bank’s analysts believe the market is too focused on revenue headwinds and should instead focus on the company’s installed user base and recurring revenue growth from services, or as they put it, the “Apple-as-a-Service” opportunity. Quoted on Barrons, The analyst believes that Apple’s installed base growth, secular growth in services, and new product innovation should “more than offset cyclical headwinds,” such as softer iPhone demand and consumer electronics demand. The analysts noted that Apple’s valuation is currently attractive and that services will account for the majority of the company’s gross profit growth over the next five years, with ample market share opportunities in the app store and content subscriptions, including Apple TV and Apple Music.

KBH

  • JP Morgan analyst Michael Rehaut has recommended a downgrade for KB Home from Overweight to Underweight. He has additionally decided to lower its price target, adjusting it from the current rate of $36 down to $32.5. The downgrade is currently  the biggest move of the today as we write the update.

DHI

  • Rahut also is reevaluating the prospects of D.R. Horton, the analyst lowered his recommendation from an Overweight rating to Neutral and dropped the price target from $107 to $102.5.

SI

  • Wedbush analyst David Chiaverini downgraded Silvergate Capital’s rating from Neutral to Underperform and set a price target of $4.

This decision comes after Silvergate Capital issued a warning of its “going concern” and postponed filing its annual report last week. This news seems to have raised concerns for Chiaverini, leading him to revise his rating downward.

MO

Altria Group has announced that it will acquire NJOY Holdings for $2.75bn in cash, which includes $500m in cash payments that are contingent upon regulatory outcomes for some of NJOY’s products. This acquisition will give Altria full global ownership of NJOY’s e-vapor product portfolio, including NJOY ACE, which is currently the only pod-based e-vapor product authorized by the FDA. The e-vapor category is the largest smoke-free category in the US, with approximately $7bn in retail sales generated in 2022. The acquisition is expected to enhance Altria’s smoke-free portfolio and help more adult smokers transition to smoke-free alternatives.

Tesla has once again cut prices

For its Model S and Model X vehicles in the US, with the former now starting at $89,990, down $5,000, and the latter at $99,990, down $10,000. The cut comes in the wake of price reductions in China and the US earlier this year, and could boost sales in the final month of Q1. The models are Tesla’s higher-priced, lower-volume vehicles, with 66,705 sold in 2022, accounting for around 5% of total vehicle deliveries.

  • Jefferies analyst Philippe Houchois remains bullish on Tesla. He has kept the rating at Buy and has increased the company’s price target from $180 to $230.