Schaeffer's Trading Floor Blog

Earnings on Deck: Applied Materials, Inc., NVIDIA Corporation, and Zillow Inc

Previewing AMAT, NVDA, and Z ahead of Wednesday's earnings reports

by 2/11/2014 11:05 AM
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Headed to the earnings confessional on Wednesday are semiconductor concern Applied Materials, Inc. (NASDAQ:AMAT), chip maker NVIDIA Corporation (NASDAQ:NVDA), and real estate website Zillow Inc (NASDAQ:Z). Here's a quick look at these names as earnings approach.

  • Applied Materials, Inc. (NASDAQ:AMAT) is up 2.3% at $17.65 this morning, attempting to claw into the black for 2014. Ahead of the firm's turn in the earnings spotlight tomorrow night, option traders are picking up AMAT calls over puts at a rapid-fire rate. The equity's 10-day call/put volume ratio on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits at 11.93, just 9 percentage points from a 12-month high. However, short interest jumped 18.7% during the past two reporting periods, and would take more than a week to repurchase, at AMAT's average pace of trading. As such, the shorts could be hedging with long calls ahead of earnings. Historically, AMAT has exceeded per-share profit projections in seven of the last eight quarters, but averages a loss of 1.1% in the week after reporting.

  • NVIDIA Corporation (NASDAQ:NVDA) will release its fourth-quarter figures after the close tomorrow. Wall Street is skeptical heading into the event, with just seven out of 24 analysts doling out "buy" or better endorsements. Plus, it would take nearly nine sessions to buy back all of the stock's shorted shares, at NVDA's average daily trading volume. Likewise, the equity's Schaeffer's put/call open interest ratio (SOIR) of 1.10 ranks in the 91st annual percentile, suggesting near-term options traders are more put-heavy than usual right now. In the last seven quarters, NVDA has matched or surpassed the Street's per-share earnings estimates each time, averaging a gain of 1.4% in the subsequent week after reporting. At last check, the stock has added 0.8% to flirt with $16.05.

  • Finally, Zillow Inc (NASDAQ:Z) is also a favorite among short sellers, with short interest accounting for 26.1% of the stock's total available float. In fact, at the equity's average pace of trading, it would take nearly seven sessions to repurchase all of these pessimistic positions. Analysts, on the other hand, are bullishly biased when it comes to Z, offering up seven "buy" or better ratings, compared to three "holds" and just one "sell" or worse suggestion. On the charts, Z has added more than 5% in 2014, but was last seen at $85.90, a loss of 1.1% from yesterday's close. Off the charts, the company beat analysts' bottom-line expectations in each of the past eight quarters, yet averages a one-week, post-earnings deficit of 5%. Zillow Inc will report earnings again tomorrow night.

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