Mid-Morning Look

Wednesday, August 20, 2025

U.S. stocks are lower for a fourth straight day, led by a pullback in the technology/communications sectors as investors question sky-high valuations amid a deluge of earnings reports from retailers, with a closely watched Fed symposium to come. Technology mega cap/momentum names have led the Nasdaq, Dow and S&P to record highs just a week ago (AMZN, AAPL, NVDA, GOOGL, META, MSFT, TSLA, ORCL, PLTR, NFLX etc.), but a few recent comments on Wall Street about valuation, heading into a key FOMC conference this week (Fed Chair Powell speaks Friday), investors have been pulling back the reins on high valuation names the last few days. The Nasdaq 100 extends losses to -4% since August 13^th with selling pressure on the open today after falling over -1% Tuesday. There is no major economic data and retailer earnings have been met mixed (HD, LOW rose on results, TGT tumbles), but tech is getting all the attention following a few notable stories.

Yesterday, tech underperformed after a Bloomberg report discussed options traders increasingly purchasing “disaster” puts to hedge against a potential plunge in technology stocks. The article highlights growing nervousness among traders about a significant selloff in the tech sector, driven by concerns over market volatility. (see article here https://tinyurl.com/3vd8tuzr ). Today, there is a report from MIT’s NANDA (Networked Agents and Decentralized AI) initiative, titled The GenAI Divide: State of AI in Business 2025, which states that 95% of organizations are getting zero return from their investments in generative AI. This story is weighing on AI, data centers, and nuclear power related names for the time being with broad weakness. Still, things can change this afternoon ahead of the FOMC minutes from prior Fed meeting in July and then of course the keynote speech by Fed Chairman Powell Friday in Wyoming conference. https://tinyurl.com/33pzf6vf

• In Utilities: shares of nuclear power names OKLO, SMR, NNE, TLN, VST, CEG all pressured early with tech/AI names taking a breather as valuation concerns come into play. Melius Research initiated largest Independent Power Producers CEG, NEE, NRG, TLN and VST at Buys saying they expect to add additional, relevant verticals as we build out the franchise. A thematic approach to analysis and investment is warranted, especially in a time of dramatic economic transformation. AI is a gold rush and Energy & Power, especially electricity, are the shovels. This also includes the equipment, tools, and industrial processes needed to extract, transport and create Energy and Power.
• In Financial Services/Business Support: JP Morgan with several ratings changes as they: 1) upgraded UPST to Overweight (from Neutral) saying they lean positive on the more seasoned fintech lenders, given a favorable macro backdrop and believes Upstart offers the best risk/reward among personal loan originators (over SOFI, LC); 2) CMPO was downgraded to Underweight noting shares have rallied ~25% following Q2 earnings, and growth has been choppy for several quarters; 3) RSKD was downgraded to Underweight noting revenue and volume growth (LSD-MSD) has trailed broader e-comm (HSD) growth and discretionary spend peers like SHOP and AFRM on the back of a large client loss in Q424 and pockets of weakness within luxury spend and tickets & travel.

• AHL +17%; after Insurance Insider reported that Japan’s Sompo Holdings Inc. is in talks to buy the company, just three months after Aspen’s initial public offering. https://tinyurl.com/2fa7f5ck
• DAY +3%; after confirmed it was in talks to be bought by Thoma Bravo for $70 per share or $11B (confirms prior Bloomberg report on Monday August 18^th).
• GES +25%; shares jumped after Co-founders Maurice and Paul Marciano and CEO Carlos Alberini partner with Authentic Brands Group to take the retailer private as shareholders to receive $16.75 per share in cash in deal valued at $1.4B.
• HTZ +6%; after saying it will start selling pre-owned cars on Amazon Autos, as customers who live within 75 miles of four major cities — Dallas, Houston, Los Angeles and Seattle — can start browsing for Hertz cars on Amazon as soon as Wednesday (shares of CVNA, KMX slipped on the news).
• RCKT +9%; after the FDA lifted its clinical hold on the company’s Phase 2 trial of its RP-A501 treatment for Danon disease; said the FDA confirmed it had satisfactorily addressed issues outlined in the clinical hold and authorized the pivotal study to resume first with a recalibrated dose in three patients.
• TJX +5%; shares bounced on results/raised outlook; posted a Q2 EPS/rev beat and said it sees Fy26 EPS $4.52-$4.57 above the previous expectations of $4.34-$4.43 and guided FY comp sales growth of 3%, at the high end of its prior 2-3% view.

• CAR -4%; was downgraded to Underperform from Buy at Bank America saying the stock significantly outperformed in June, but fundamentals and the macro environment don’t support the current stock price. Also notes the industry faces pricing and demand pressures in the U.S.
• CLDX -9%; after saying it was discontinuing development of barzolvolimab in eosinophilic esophagitis after a Phase-2 study.
• DY -12%; shares tumbled after Q2 revenue of $1.37B topped the $1.2B figure y/y but was below the consensus $1.41B, while EPS of $3.33 topped the $2.92 consensus; also guided Q3 revs $1.38B-$1.43B below the consensus of $1.46B.
• EL -4%; after in-line Q4 results for EPS/revs ($0.09/$3.41B), but guided FY26 adj EPS $1.90-$2.10 below consensus $2.22 and sees FY26 GAAP net sales growth 2%-5%; sees adjusted sales growth 0%-3%; sees tariff headwinds impacting FY26 profit by ~$100M.
• JHX -33%; after its quarterly profit sank and it warned demand for repairs and new construction in North America remains challenging; Q1 EPS $0.29 was in-line with consensus and revs $899.9M missed the $958.5M estimate; said Q2 sales in its N.A. fiber cement business -12% and adj profit fell -29% y/y.
• LZB -13%; shares slumped on miss and lower guidance as Q1 adj EPS $0.47 missed the consensus estimate $0.55 on revs $492Mm vs est. $494Mm, adj op mgn 4.8%; guides Q2 revs $510-530Mm vs est. $531.67Mm and adj operating margin 3.4-6%.
• PLTR -7%; shares are down for a 6^th straight day, pulling back off all-time highs (shares still up 108% YTD) following Citron Research short call on 8/13, saying Palantir is a great stock, but said valuation is absurd. Citron noted on 8/18 “OpenAI valuation of $500B puts Palantir at $40” https://tinyurl.com/y92vwttp
• TGT -7%; after reported its 11th straight quarter of flat or falling sales, though did beat on both the top and bottom-line for Q2 ($2.05/$25.21B vs. $2.03/$24.93B) and maintained its yearly guidance, but Wall Street was disappointed by news CEO to be replaced with in-house hire (COO) vs. external.