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Intuitive Surgical soars as Q3 earnings beat sparks a wave of analyst upgrades

Intuitive Surgical shares leapt nearly 17% Wednesday morning after the company topped Q3 estimates after the bell on Tuesday.

Adjusted earnings per share came in at $2.40, beating the Street’s estimate of $1.99. Revenue reached $2.51 billion, easily above the forecast of $2.41 billion.

The results were largely powered by strong demand for its da Vinci and Ion robotic surgical systems. Worldwide procedures for both da Vinci and Ion systems grew approximately 20% compared with the same quarter a year ago. Analysts were quick to take action on the strong results:

Piper Sandler maintained its “buy” rating on the stock and raised its price target to $610 from $595.
Wells Fargo reiterated a “buy” rating and lifted its target to $600 from $599.
BTIG kept a “buy” rating and increased its target to $589 from $529.
Evercore ISI maintained an “in-line” rating but raised its target to $540 from $450.
Baird reiterated a “buy” rating and hiked its price target to $655 from $536.

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Southwest Airlines At Ronald Reagan Washington National Airport

Southwest’s first full quarter charging for checked bags drives it to record Q3 revenue

Southwest became the third major airline to report its third-quarter earnings when it dropped its results after the bell Wednesday.

Max Knoblauch29m

IBM Q3 Earnings Numbers

IBM slides despite earnings beat

Here’s how Big Blue did.

Matt Phillips33m

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J. Edward Moreno47m

Moderna drops after reporting trial for birth defect vaccine failed

Moderna dropped in after-hours trading Wednesday after it reported that its experimental vaccine for cytomegalovirus (CMV), which can cause birth defects, failed in a late-stage trial.

The company is perhaps best known for being tapped by the government to quickly develop a vaccine for COVID-19 in 2020, which remains its single source of revenue. Investors have been eager for signs that it will add more vaccines to its portfolio soon.

The CMV vaccine was the main product in Moderna’s pipeline prior to the COVID-19 pandemic. In the most recent results, the vaccine was only between 6% and 23% effective in blocking infection, which was “well below” the company’s target of at least 49%, the company said in a statement.

In statements announcing the results, Moderna’s leaders described the results at “disappointing.” The company fell more than 5% after-hours and is down more than 35% this year.

Toby Bochan, Luke Kawa

US stocks tumble as momentum trades unwind, earnings disappoint

The S&P 500, Nasdaq 100, and Russell 2000 all ended Wednesday in the red.

Bear Tearing Fabric

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Max Knoblauch4h

Carvana plunges as investors respond to another subprime lender’s bankruptcy filing

Used car retailer Carvana is plunging on Wednesday, with the stock on pace for its worst day since auto tariffs took effect in April.

Likely spooking investors is a fresh bankruptcy filing by PrimaLend, which specializes in financing for dealerships focused on subprime borrowers (customers with lower credit scores, typically below 600, as defined by Experian). The news follows last month’s bankruptcy filing by another subprime auto lender, Tricolor Holdings.

Carvana doesn’t appear to work directly with PrimaLend, but it does likely have significant exposure to subprime loans. According to a January report by Hindenburg Research, which was shorting Carvana, 44% of the loans Carvana packages into asset-backed securities (ABS) are classified as nonprime (601-660 credit scores). More than 80% of its recent nonprime ABS deals had average FICO scores in the “deep subprime” range, or the riskiest levels, according to the report. Carvana at the time called the report “intentionally misleading and inaccurate.”

Carvana has massive growth goals, saying earlier this year that it aims to sell 3 million retail units per year within 5 to 10 years. (Wall Street expects it to sell about 580,000 units this year.) Lower-income buyers could be a significant part of that growth.

Following Tricolor’s implosion last month, JPMorgan CEO Jamie Dimon said: “When you see one cockroach, there are probably more. Everyone should be forewarned on this one.” With investors pouring out of Carvana on Tuesday, it seems Wall Street isn’t taking that warning lightly.

There is likely also some momentum pullback baked into Carvana’s drop: the stock, which has been a favorite among retail traders, is still up 58% this year, even after Wednesday’s drop.

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