Schaeffer's Trading Floor Blog

Earnings on Deck: Netflix, Inc., AT&T Inc., and Cree, Inc.

Previewing NFLX, T, and CREE ahead of their upcoming earnings reports

by 4/21/2014 10:51 AM
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Earnings season is in full swing this week, with a number of notable names slated to report. Stepping up to the plate in the near future are streaming video provider Netflix, Inc. (NASDAQ:NFLX), telecom titan AT&T Inc. (NYSE:T), and semiconductor concern Cree, Inc. (NASDAQ:CREE). Here's a quick look at these names as earnings approach.

  • Netflix, Inc. (NASDAQ:NFLX) will report first-quarter earnings after the close tonight. The company has topped the Street's bottom-line earnings projections in seven of the past eight quarters, averaging a one-week post-earnings gain of 6.4%. In fact, the security rallied nearly 20% in the week after its last turn in the earnings confessional, and has more than doubled over the past year. It's no surprise, then, to find option buyers betting bullishly on NFLX. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day call/put volume ratio of 1.35 stands just 1 percentage point from an annual high, implying that speculators have bought to open NFLX calls over puts at a much faster-than-usual clip during the past two weeks. As a result, the security's Schaeffer's put/call open interest ratio (SOIR) sits at 0.87 -- 2 percentage points from a 52-week nadir, suggesting short-term options players have rarely been more call-heavy during the past year. At last check, NFLX has shed 1.1% to flirt with $341.81.

  • AT&T Inc. (NYSE:T) will unveil its first-quarter figures after the close tomorrow. The blue chip has matched or exceeded analysts' per-share profit estimates in six of the past eight quarters, yet averages a loss of nearly 1% in the subsequent session. Against this backdrop, option players have picked up T puts over calls at an annual-high clip during the past two weeks, as evidenced by the stock's 10-day ISE/CBOE/PHLX put/call volume ratio of 6.10 -- a 12-month peak. However, there's still plenty of room in the bears' corner. The equity is battling familiar resistance in the $36-$36.50 region -- which has rejected T's rally attempts since mid-2013 -- yet nine out of 25 analysts maintain "strong buy" opinions. A weaker-than-expected turn in the earnings spotlight could translate into a wave of downgrades for the stock. In early trading, T is fractionally higher at $36.06.

  • Finally, Cree, Inc. (NASDAQ:CREE) is slated to report fiscal third-quarter earnings after the close tomorrow. While the company has matched or exceeded the Street's per-share projections in each of the past seven quarters, CREE averages a three-day post-earnings loss of 0.9%. In fact, the equity has been in the red in the subsequent week after its last four earnings reports. Nevertheless, the stock's 10-day ISE/CBOE/PHLX call/put volume ratio of 5.62 stands higher than 87% of all comparable readings from the past year. However, considering short interest accounts for nearly 10% of the stock's total available float -- representing more than a week's worth of pent-up buying demand, at CREE's average pace of trading -- it's possible that some of the recent call buying could be attributable to short sellers looking for a pre-earnings hedge. After underperforming the S&P 500 Index (SPX) by more than 12 percentage points during the past three months, the shares of CREE were last seen 0.8% lower at $56.11.

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