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A roundup of some of the North American equities making moves in both directions today

On the rise

ATS Automation Tooling Systems Inc. (ATA-T) soared after reporting stronger-than-anticipated third-quarter 2021 before the bell.

The Cambridge, Ont.-based company reported revenue of $369.7-million, up 1 per cent year-over-year and above the Street’s estimate of $353.2-million. Adjusted EBITDA of $53.1-million, including the impact of CEWS, also topped the consensus projection ($43.5-million).

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In a research report, National Bank Financial analyst Maxim Sytchev said: “While a return to a post-COVID-19 world is taking a bit longer with fits and starts, the manufacturing base globally for the most part has learned to cope with the constraints, including ATA, even though on-site projects commissioning is still difficult to undertake given travel restrictions. The big themes of Healthcare and Food are not slowing down any time soon while Transport restructuring appears to be behind us. Clients thinking about bringing back some production capacity to OECD countries should also provide incremental upside over time; we don’t believe the latter dynamic is reflected in the multiples. Importantly, ATA’s exposure to less cyclical Healthcare / Food / Nuclear markets should garner a better valuation from the Street, over time.”

Canadian Imperial Bank of Commerce (CM-T) was up in the wake of announcing early Wednesday it is abandoning a deal to sell a majority stake in its Caribbean business after it was blocked by regulators.

The Toronto-based bank first reached an agreement to sell a 66.7-per-cent stake in Barbados-based FirstCaribbean International Bank to GNB Financial Group Ltd., a company run by Colombian billionaire Jaime Gilinski, in November of 2019. The deal was to be worth US$797-million, and CIBC had pledged to provide secured financing for part of the purchase price.

But the deal was mired in regulatory delays and uncertainty, exacerbated by the novel coronavirus pandemic. On Wednesday, CIBC said it “did not receive approval from FirstCaribbean’s regulators.”

- James Bradshaw

Google parent Alphabet Inc. (GOOGL-Q, GOOG-Q) rose after it topped quarterly sales expectations for its advertising and Cloud businesses, helped in part by the pandemic, and said it will resume big spending on hiring and facility construction.

Google, which generates more revenue from internet advertising than any other company, benefited from lockdowns that drove retail and other clients online, helping offset cutbacks by travel and entertainment advertisers.

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“Google’s products and support have been a lifeline for millions of small medium businesses hit hard by the pandemic,” Chief Executive Sundar Pichai told analysts on a conference call.

Chief Financial Officer Ruth Porat described the fourth quarter as a “great end to a challenging year.”

Alphabet’s 2020 sales growth of 13 per cent was the slowest increase since 2009 when it posted 8.5-per-cent growth. Still, matched with spending cuts, Alphabet increased its cash hoard by US$17-billion in 2020 to US$137-billion.

But now with coronavirus vaccines deployed and advertising spending on the uptick, Ms. Porat and other executives said the company would return to expanding the Google Cloud business with staff and data centers and incorporating artificial intelligence into more services.

GameStop Corp. (GME-N) shares, which scaled as high as US$483 last week, fuelled by posts on the popular Reddit forum WallStreetBets, erased early declines in pre-market trading and rose on Wednesday.

Other targets of the retail trading frenzy, including BlackBerry Ltd. (BB-T) and AMC Entertainment Holdings Inc. (AMC-N), also rose.

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See also: Ian McGugan: No heroes as dust settles on Reddit revolution

Plunging GameStop shares test the will of investors to stick with the ride

Jazz Pharmaceuticals Plc (JAZZ-Q) was lower after it said on Wednesday it would buy GW Pharmaceuticals plc (GWPH-Q) in a US$7.2-billion cash-and-stock deal to expand its neuroscience business by adding cannabis-based epilepsy treatment to its suite of drugs.

Jazz will acquire GW for US$220 per American depositary share - US$200 in cash and US$20 in Jazz shares. The offer price represents a 50-per-cent premium to GW’s Tuesday close.

The deal, which is expected to close in the second quarter of 2021, will be accretive in the first full year of combined operations, the companies said.

GW Pharma’s cannabis-based drug won U.S. approval in June 2018, permitting its use in patients aged two years and older with Dravet Syndrome and Lennox-Gastaut Syndrome, rare childhood-onset forms of epilepsy that are among the most resistant to treatment.

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Canadian cannabis companies soared in response to the Jazz-GW deal.

Shares of Tilray Inc. (TLRY-Q), Hexo Corp. (HEXO-T), Aurora Cannabis Inc. (ACB-T) and Aphria Inc. (APHA-T) were among those seeing gains.

The deal took some cannabis-focused exchange-traded funds (ETFs) by surprise, while many saw it as a seal of approval for the medical marijuana industry by traditional pharma companies.

“We’re surprised at the news...but not at all surprised by opportunity or the price,” said Dan Ahrens, chief operating officer and portfolio manager, AdvisorShares, which manages the pot ETF.

“More and more companies are learning the benefits of cannabinoid products, and cannabis and cannabinoids products are rapidly gaining acceptance in the public eye and at a Federal government level.”

Earlier this week, a trio of top U.S. Senate Democrats, including majority leader Chuck Schumer, vowed to work toward the legalization of marijuana this year.

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Mr. Schumer, New Jersey’s Cory Booker and Oregon’s Ron Wyden released a joint statement on their plan to lead for policy reform.

“The War on Drugs has been a war on people—particularly people of color. Ending the federal marijuana prohibition is necessary to right the wrongs of this failed war and end decades of harm inflicted on communities of color across the country. But that alone is not enough,” the statement said. “As states continue to legalize marijuana, we must also enact measures that will lift up people who were unfairly targeted in the War on Drugs.”

On the decline

Jeff Bezos’s surprise move to step down as chief executive of Amazon.com Inc. (AMZN-Q) quashed Wall Street optimism about bumper quarterly results, but analysts were upbeat on the promotion of its cloud computing head to the top job.

Andy Jassy has long been considered a strong contender for the top job since Amazon created two CEO roles in 2016 reporting to Bezos, the other held by recently retired consumer CEO Jeff Wilke.

However, few were expecting Bezos to step down when the company on Tuesday reported sales above US$100-billion for the first time in a hugely successful year delivering goods in the coronavirus pandemic.

“We expect Amazon’s equity to trade higher ... but expect a more tempered response given the change in CEO,” Citigroup analysts wrote in a research note.

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Shares of the company, which gained about 76 per cent in 2020, were down slightly on Wednesday morning. They rose 8 per cent since mid-January in the run-up to the results.

“The upside to the stock price is limited given the performance into the numbers and given what’s coming in the next 3-6 months - the vaccine rollouts,” said Keith Temperton, an equity sales trader at Forte Securities.

Chipotle Mexican Grill Inc. (CMG-N) dropped after it missed Wall Street estimates for quarterly profit, hurt by costs related to keeping its business running during the COVID-19 pandemic.

Strong digital operations at the fast-casual chain, a standout performer in the industry during the coronavirus, have helped it ride out the worst of the impact, even as its expenses have climbed as it bolsters its delivery network.

Digital sales rose nearly three-fold and drove a 5.7-per-cent rise in comparable sales, helped by a surge in online orders in some parts of the United States.

Total revenue increased 11.6 per cent to US$1.6-billion for the fourth quarter ended Dec. 31, the company said.

Excluding one-time items, the company earned US$3.48 per share, missing the estimate of US$3.73, according to IBES data from Refinitiv.

“It is now well established that November was weak across the space, and while Chipotle is resilient, it is not immune,” Piper Sandler analysts wrote in a note after earnings report.

Albemarle Corp. (ALB-N) shares slipped after the world’s largest producer of lithium launched a US$1.3-billion share offering to fund its growth plans and pay down debt.

The company last month said it expects demand for the white metal used in electric vehicle (EV) batteries to grow four-fold in the next five years, given a satisfactory recovery in prices.

Albemarle Corp, which has a debt of US$2.9-billion as of Sept. 30, said it would use the net proceeds of the offering to expand operations in Australia, Chile, Nevada and China.

Last month, Charlotte, North Carolina-based Albemarle said it would double production at its lithium facility in Silver Peak, Nevada, part of a plan to boost supply for the burgeoning EV market.

The company’s stock doubled in 2020 as lithium prices rallied on EV demand optimism and a rebound in industrial activity from COVID-19 pandemic lows.

Electronic Arts Inc. (EA-Q) slid after it raised its annual sales outlook, betting on strong sales of its sports titles including FIFA 21 and Madden NFL 21 as more people turn to videogames to keep themselves entertained during COVID-19 lockdowns.

Shares of the company, however, fell after EA’s 98 US cents adjusted profit forecast for the current quarter missed analysts’ average estimate by 2 US cents.

Videogame sales in the United States hit a record US$56.9-billion last year, according to research firm NPD, as demand for virtual entertainment soared after major public events were canceled to stem the spread of the novel coronavirus.

EA said new players on its battle royale game Apex Legends jumped 30 per cent year-over-year. The soft launch of its mobile version is expected in the next three to six months, Chief Financial Officer Blake Jorgenson told Reuters.

The company also extended its multi-year licensing agreement with UEFA for exclusive club competition rights for its FIFA franchise, adding that the latest soccer title would launch on Google’s cloud gaming service, Stadia, on March 17.

Spotify (SPOT-N) fell as it projected revenue and paid subscribers for this quarter that missed Wall Street estimates due to uncertainty over how long the coronavirus crisis would last and with it a surge in demand for its music streaming.

The company has seen a sharp rise in paid subscribers during the pandemic as people have been locked down at home and in the fourth quarter beat revenue estimates as it hit 155 million paid subscribers for its premium service.

While advertising was hit by the pandemic, it had little impact on subscriber growth, and may actually have contributed to pulling forward new signups, Spotify said in a statement, adding that total monthly active users rose 27 per cent to 345 million.

“We do believe that probably some of the growth in 2021 may have been pulled forward into 2020,” Chief Financial Officer Paul Vogel told Reuters. “Russia for example performed extremely well in 2020 while a lot of our expectations initially were we wouldn’t really hit our full stride there until 2021.”

Premium subscribers, who account for most of Spotify’s revenue, were up 24 per cent in the fourth quarter from a year earlier, beating estimates of 153.26 million.

It, however, expects total premium subscribers in the range of 155 million to 158 million for the first quarter, whereas analysts were expecting it to hit 163.5 million.

The company expects quarterly revenue of 1.99 billion to 2.19 billion euros, short of expectations of 2.23 billion.

See also: When losing is winning: Shares of unprofitable companies soar

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