Tuesday’s Pre-Market: Here’s What You Need To Know Before The Market Opens

Following yesterday’s heavy sell-off, futures tied to the S&P 500 are rebounding 0.48% this morning. Dow futures are trading 0.33% higher, while Nasdaq futures are also up 0.56%.

The big news this morning is that AMD has sealed a definitive agreement to snap up rival chip maker Xilinx in an all-stock deal valued at $35B. AMD is now sinking 2.5% while Xilinx is up 11%. AMD said the transaction will create the industry’s leading computing company, significantly boosting its product portfolio and customer breadth across diverse growth markets. The deal is expected to be immediately accretive to AMD margins, EPS and free cash flow generation. Rosenblatt analyst Hans Mosesmann says that “given Xilinx shares have been relatively distressed” over the past 18 months the valuation is relatively reasonable. “AMD’s move is strategic and at the same time necessary to counter data center dynamics that a strong CPU and GPU portfolio is not alone enough to stay in the game longer term” Mosesmann told investors. 

Turning to the latest batch of earnings, Twilio reported stronger-than-expected 3Q results as sales and earnings rose from the year-ago period. However, shares are currently trading slightly lower, on a weak earnings outlook for 4Q. “Our performance in the third quarter is further evidence that Twilio’s platform provides three things that every company needs today — digital communications, software agility, and cloud scale” Twilio’s CEO Jeff Lawson said. Earlier this month, Twilio confirmed that it is buying customer data startup Segment in a $3.2B all-stock deal. Post-print, Stephens analyst Ryan MacWilliams reiterated a Hold and $300 PT, saying: “Overall, Twilio posted a solid beat-and raise print, however, the pre-announcement ahead of its Segment acquisition took away much of the drama for this quarter, in our view.”

Varonis Systems is jumping 10% in Tuesday’s pre-market after the data security software provider reported adjusted EPS of $0.06 that exceeded analysts’ expectations of a loss per share of $0.13. The bottom-line result also compared favorably with the year-ago quarter’s adjusted loss per share of $0.16 mainly driven by strong top-line growth.

However online education provider Chegg is trading down 4% in even as the company reported better-than-anticipated third-quarter results and raised its full-year guidance. In reaction to the results, Northland Securities’ Michael Grondahl reiterated a Buy rating and $95 PT, saying “Going forward, international growth, continued restriction of password sharing efforts, Bundle/Chegg Study Pack at $19.95 a month, online learning, can support this hyper growth for at least 6 more months.”

Meanwhile Facebook Gaming has launched several cloud-streamed games in the Facebook app and on browser. This means the games can be played instantly, with no downloads required. “We recently had 200,000 people playing our cloud-streamed games per week in limited regions, so while it’s not exactly a secret, I’m excited to lay out what we’re building” FB’s Jason Rubin wrote in a blog post. FB is starting with free-to-play games that don’t need special hardware or controllers. The games will only be launched on Android and web, rather than iOS. “Even with Apple’s new cloud games policy, we don’t know if launching on the App Store is a viable path” Rubin explained, writing “Apple treats games differently and continues to exert control over a very precious resource.”

Moving higher this morning, AIG is spiking 6% after unveiling a plan for the divestment of its life and retirement business and named a new CEO. AIG said the separation from its life and retirement business will create a simplified corporate structure and unlock significant value for shareholders by establishing two independent companies. The insurer added though no decision has yet been made how to exercise a full separation.  

On the corona front, Eli Lilly is down 4.5% after announcing that it will stop a US-based clinical trial for its COVID-19 antibody treatment after data found that it is “unlikely” to help hospitalized patients recover from the advanced stage of the disease. The move comes after the Phase 3 trial of the monoclonal antibody treatment was paused this month by the US FDA over safety concerns.

In other healthcare news, Mirati Therapeutics has announced an underwritten public offering of $700M of shares. A selling stockholder also intends to offer 375,000 shares. Shares in the oncology company are now dropping 3%. The news follows Mirati’s preliminary results from its mutant KRAS selective inhibitor programs showing promising anti-tumor activity, which sent the stock 9% higher on Monday.