Barclays Just Upgraded Victoria’s Secret Parent L Brands As “Change Is Afoot” At The Company

Plus, there are now more than 600 confirmed cases of the coronavirus in China, Trump’s impeachment trial is headed into day 3, and Southwest Airlines and American Airlines reported earnings. 

Stocks fell to start Thursday with the Dow dropping 126 points, or 0.4%. The S&P 500 dipped 0.3%, while the Nasdaq traded down 0.1%.

The total number of cases of the coronavirus in China rose to 634 as local authorities expand the quarantine area to two major cities and canceled Lunar New Year’s events in Beijing. That brings the total number of people infected worldwide to 650, including patients in Singapore and Saudi Arabia. Chinese officials have now quarantined Wuhan and Huanggang, cities with a combined population of 17 million, have planned a similar shutdown of Ezhou, and have placed travel bans on seven cities in an effort to stop the spread of the virus. The U.S. Centers for Disease Control and Prevention updated its travel alert to Watch Level 2, or “Practice Enhanced Precautions,” due to the virus, and U.S. officials have continued screening passengers flying from China at major international airports across the country to identify those who may have contracted the virus. The World Health Organization is reconvening an emergency meeting today to discuss whether to designate the coronavirus as a global emergency, which is spooking global trade. While General Motors and Ford both said they would temporarily restrict employee travel to China in light of the virus, and MGM Resorts said it has canceled its Lunar New Year’s celebration at its Macau resort in an effort to protect employees and guests.

House managers will push their case against President Donald Trump in the Senate’s impeachment trial today. Representative Adam Schiff said in proceedings yesterday that Trump “does not, under our laws and under our Constitution, have a right to use the powers of his office to corruptly solicit foreign aid, prohibited foreign aid, in his reelection. He does not have the right to withhold official presidential acts to secure that assistance, and he certainly does not have the right to undermine our elections and place our security at risk for his own personal benefit. No president, Republican or Democrat, can be permitted to do that.” Meanwhile, Jay Sekulow, one of the lawyers representing the president, said that there’s no question Trump will be acquitted by the Senate. Trump’s lawyers expect to begin to present their case on Saturday and have yet to decide how much time they’ll need. 

Southwest Airlines and American Airlines reported Q4 earnings this morning, with both discussing complications from the grounding of the Boeing 737 Max plane. Southwest, the carrier with the most 737 Maxs in its fleet, said profit fell more than 21% in the fourth quarter after the grounding of the plane drove up costs. While American said earnings and revenue came in slightly above estimates, though the airline said it canceled 10,000 flights in Q4 alone due to the grounding of the Boeing jet. 

In other earnings news, Comcast shares have fallen 3% this morning even after the media company reported Q4 earnings that exceeded estimates on both top and bottom lines. Comcast said it added 442,000 new high-speed internet customers, and said that that was its best result for a fourth quarter in five years, however it also reported a net drop in video customers of 149,000. Procter & Gamble also delivered its earnings results this morning, reporting that quarterly revenue fell short of estimates as sales were hurt by a stronger dollar and a struggling baby segment. “We continue to face the challenges of a very volatile macro and geopolitical landscape and a competitive response to our growth, but all-in, we’re continuing to make progress behind a set of integrated and mutually reinforcing strategies,” said Procter & Gamble CFO and Operating Officer Jon Moeller.

And L Brands shares are up more than 3% this morning on the heels of an upgrade from Barclays. The investment bank said in a note this morning that “change is afoot” at the Victoria’s Secret parent company, and upgraded the stock to Overweight from underweight and boosted their price target from $15 to $30 – 45% above the share price as of this writing. “While we cannot be certain what form change will take, what we can say is the status quo is not an option,” said Barclays analyst Adrienne Yih in the note. L Brands said in September that an “evolution” is coming for Victoria’s Secret, a brand that has struggled in the last couple of years, though evidence of any big changes remain to be seen. According to the company, Victoria’s Secret’s same-store sales fell 12% during the 2019 holiday shopping season.

Stocks We’re Watching

One Stop Systems (NASDAQ: OSS): One Stop Systems shares jumped nearly 47% yesterday after the specialized high-performance edge computing company reported preliminary Q4 results. The company said it expects revenue for the quarter to come in at around $18.4 million, representing a 28% year-over-year jump. “Our record growth in 2019 resulted from growth of our major customers, new design win revenue and revenue from acquisitions,” said Steve Cooper, president and CEO of One Stop Systems. “It also reflects our expanding presence in the worldwide market for specialized high-performance edge computing.”

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