BYND - Wall Street Lunch: EV Charging Stocks In Spotlight

2024-01-18 13:04:52 ET

Summary

• U.S. DoT plans to repair or replace 4,500 existing EV charging ports nationwide.
• Jobless claims fall to lowest since September 2022, housing starts and building permits show mixed results.
• S3 Partners comes out with a new U.S. short interest recap.

Listen below or on the go on Apple Podcasts and Spotify

The goal is for a nationwide network of 500,000 chargers by 2030. (0:15) Jobless claims fall to 16-month low . (3:03) LL flooring tumbles as founder withdraws takeover offer. (5:15)

This is an abridged transcript of the podcast.

Our top story so far

Electric vehicle battery charging stocks are in focus. The U.S. Transportation Department said it is awarding $148.8 million for projects in 20 states to repair or replace nearly 4,500 existing EV charging ports.

The overall goal is to aggressively expand the nationwide network of chargers to 500,000 by 2030, which includes high-speed chargers no more than 50 miles apart on key highways.

Federal Highway Administrator Shailen Bhatt told Reuters the goal is to help frustrated owners who find chargers out of service, saying, "We know there's going to be more demand for the technology. We anticipate reliability being less of an issue going forward."

The National Electric Vehicle Infrastructure program requires states to operate federally funded charging ports for at least five years, with the charging ports working at least 97% of the time.

Among the EV charging stocks are Blink Charging (BLNK), ChargePoint Holdings (CHPT), and EVgo (EVGO).

In today’s trading

Stocks are mixed, with growth and tech strongly outperforming, thanks mainly to Apple (AAPL).

BofA upgraded Apple to Buy from Neutral , arguing that AI and Vision Pro are drivers for upside to hardware and services. Analysts raised the price target to $225 from $208, which remains underweighted on the buy side versus the S&P, and the anticipation of AI features could prompt institutional investors to increase positions.

The Nasdaq ( COMP.IND ) is up +1%, leading the S&P (SP500), where Info Tech ( XLK ) is the best-performing sector by far. The Dow (INDU), dragged down by a point decline in UnitedHealth (UNH), came in sympathy with Humana ( HUM ) cutting its outlook.

Humana revised its annual profit outlook , citing higher-than-expected medical costs. The company now expects $26.09 in adjusted earnings per common share for the year ended Dec. 31, 2023, compared to previous guidance of at least $28.25. Analysts had expected $28.30 a share.

Among other active stocks

Taiwan Semiconductor ( TSM ) guided for more than 20% growth in revenue in 2024 , driven by demand for advanced chips used in AI applications.

CEO C. C. Wei said, "2023 was a challenging year for the global semiconductor industry, but we also witnessed the rising emergence of generative AI-related applications, which TSMC saw as a key enabler."

And Paramount ( PARA ) was upgraded by CFRA to Buy from Hold , which noted that shares are likely to be impacted by a potential change in the control of the company. Analysts say the company is at a disadvantage as rival platforms invest billions of dollars in new content, but they added they liked Paramount’s media assets and TV and movie content with the Showtime and Paramount+ streaming platforms.

Looking to the morning economic indicators

U.S. data continued to support a soft landing.

Initial jobless claims continue to defy expectations that they will ramp up. In fact, they are not far from levels of the late ‘60s.

Weekly claims fell to 187,000. Economists predicted a small rise to 207,000 from 203,000 the week before.

Claims are now at their lowest level since Sept. 24, 2022. The record for the lowest weekly claims was the week ended Nov. 30, 1968, at 162,000. They got close to that in January 2020, at 166,000.

Pantheon Macro economist Kieran Clancy says snowy weather may have affected claims for benefits but adds that the “underlying trend in claims likely will not be clear until early February. For now, we think the trend is broadly flat, in the low 200s.”

Meanwhile, December housing starts fell 4.3% to 1.46 million , higher than the forecast of 1.426 million. Single-family housing starts were at a rate of 1.027 million in December, 8.6% below the revised November figure of 1.124 million. Building permits rose to 1.495 million vs. the consensus of 1.48 million.

Wells Fargo says that “Although multifamily construction looks set to remain sluggish, another solid gain in single-family permits during December and a jump in builder confidence suggest single-family activity should continue to gradually march higher in the coming months.”

Rounding out the economic data, the Philly Fed Manufacturing Index rose slightly to -10.6 in January from a revised -12.8. The forecast was for a rise to -7. The index remains weak but has avoided the type of plunge seen in the Empire State Manufacturing Index.

Wells Fargo’s equity team says that rather than a soft landing for the U.S. economy, credit markets are signaling no landing at all.

Strategist Chris Harvey writes that “credit spreads have been one of the better long-term GDP indicators, and with IG spreads now at 98 bps (30-year median: 132 bps), sub-2% GDP growth seems unlikely.”

“Since 1998, the only time we had weak GDP growth and tight credit spreads (at the start of the year) was 2020, a pandemic outlier.”

In other news of note

LL Flooring ( LL ) shares plunged after the company's founder withdrew his takeover offer for the flooring retailer.

Tom Sullivan, who founded Lumber Liquidators, which changed its name to LL Flooring in November, had offered $3 a share for the retailer, down from his offer of $5.76. The offer was being made through F9 Investments, which collectively owns about 8.8% of LL Flooring stock.

Sullivan withdrew his latest offer "in light of LL’s demand that, as a prerequisite to engaging with the reporting persons, the reporting persons enter into agreements that may hinder their ability to take actions designed to maximize the value of their investment in LL," according to a filing.

Sullivan withdrew his original offer for LL Flooring in August.

And in the Wall Street Research Corner

S3 Partners, which focuses on short selling, issued a new U.S. short interest recap where it broke down which stocks may have some short squeeze potential.

S3's Ihor Dusaniwsky looked at stock borrow rates to see how crowded a shorted stock is relative to the number of shares there are left to borrow to put on new short positions.

He noted that the higher the stock borrow utilization and stock borrow rates, the more expensive it is to sell a stock short. That could lead to some covering of positions if sentiment shifts.

He says: "Short sellers need strong short-side conviction to keep a short position open when their Alpha is getting eaten away daily, even weekends."

Among the stocks with the highest stock borrow rates that have short interest outstanding of over $25 million are Beyond Meat (BYND), B. Riley Financial (RILY), Sirius XM Holdings (SIRI), ImmunityBio (IBRX), and Hut 8 (HUT).

Of those crowded shorts, ImmuityBio is the only one with a Seeking Alpha Quant Rating of Buy, while Beyond Meat is the only name with a consensus Sell rating on Wall Street.

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