Schaeffer's Trading Floor Blog

Is Amazon.com (AMZN) Primed for a Big Post-Earnings Move?

It's been a calm earnings season, but perhaps AMZN can break that trend

by 7/24/2014 7:39 AM
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Quite the calm earnings season so far. Well, unless you trade aggressively in the first two minutes after the numbers come out. Here's Microsoft Corporation (NASDAQ:MSFT), for example:

Microsoft Corporation (MSFT) Post-Earnings Reaction

There's a lightning quick drop and pop, but by the next open, the shares had gapped up all of 1%.

Similar story in Apple Inc. (NASDAQ:AAPL).

Apple Inc. (AAPL) Post-Earnings Reaction

By the next morning, it had moved less than McDonald's Corporation (NYSE:MCD), at least on the open.

Netflix, Inc. (NASDAQ:NFLX) did drop $20, and Google Inc (NASDAQ:GOOGL) lifted $20, but in percentage terms, those are just in the 4-5% range.

Which brings us to Amazon.com, Inc. (NASDAQ:AMZN), set to report after the close today.

The options board is pricing in a roughly 6% move. That basically means that if AMZN moves exactly 6%, the decline in implied volatility after the news will offset the absolute move in the stock, such that delta-neutral volatility plays will break even for both the shorts and longs. Think straddles and strangles as basic examples of such strategies.

That's a little high in relation to the moves seen in AMZN's high-profile brethren so far this cycle. But AMZN has more of a history of earnings gaps than the Apples and Googles of the world. Shares of the Internet marketplace opened up 7.5% in October 2013, gapped down about 7.5% in January 2014, then gapped down 9% in April. So, given the recent history in and of itself, maybe the options pricing is a little light?

As to direction, well, I tend to look for a stock to react in the same direction it's already moving. But you can kind of argue that both ways for AMZN. The stock's intermediate-term trend is definitely higher, as it's grinded up like pretty much everything else over the last quarter. But longer term, it's still down a bit off its early 2014 highs.

Interest in puts has picked up recently -- though this, too, is well off its relative (vs. calls) highs.

Amazon.com, Inc. (AMZN) Put/Call Open Interest Ratio

I guess what's most noteworthy is that the Schaeffer's put/call open interest ratio (SOIR) has trended up along with the stock this quarter. That's usually a bullish sign, in that traders aren't believing the stock strength.

So here's my bold call: small upside surprise! Oh, and ignore the two-minute initial reaction that's my permanent call in everything, by the way.

Disclaimer: Mr. Warner's opinions expressed above do not necessarily represent the views of Schaeffer's Investment Research.


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U.S. stocks are mixed this afternoon, after a downwardly revised U.S. economic forecast from the International Monetary Fund (IMF) dampened a round of well-received earnings reports. Meanwhile, among the equities in focus are tech issue EMC Corporation (NYSE:EMC), as well as drug makers Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) and Cubist Pharmaceuticals Inc (NASDAQ:CBST), which have all attracted analyst attention.

  • EMC is 1.1% higher at $28.83, and earlier notched a new two-year high of $29.59, after the company reported in-line second-quarter earnings and revenue, and upped its full-year profit guidance. In addition, EMC Corporation accelerated its stock repurchase program, and is fending off pressure from Elliott Management to spin off VMware, Inc. (NYSE:VMW). "I don't know another tech company that has [spun off one of its most strategic assets] and been successful," opined EMC CEO Joe Tucci in a conference call. On the analyst front, Piper Jaffray and FBN Securities are counting on higher highs for EMC, lifting their respective price targets on the stock to $33 and $29. In addition, the brokerage firms reiterated their "overweight" and "outperform" recommendations.

  • Biotech stocks are on the Street's collective radar today, and TEVA is no exception. The shares were last seen 0.5% higher at $55.19, after Deutsche Bank launched coverage with a "buy" endorsement and $63 price target -- which would represent a new four-year high for the stock. Despite fighting in Gaza, Israel-based Teva Pharmaceuticals Industries Ltd (ADR) has moved steadily up the charts, and touched a three-year peak of $55.33 just yesterday. The company is slated to report second-quarter earnings before the open on Thursday, July 31, and has matched or exceeded analysts' bottom-line estimates in seven of the past eight quarters.

  • Finally, fellow drug maker CBST is bucking the sector trend higher today, down 3.9% at $63.15. The firm last night confessed to weaker-than-expected second-quarter revenue, and received subsequent price-target cuts from Cantor (to $64 from $73) and Oppenheimer (to $83 from $86). In addition, JMP Securities downgraded Cubist Pharmaceuticals Inc to "market perform" from "market outperform." From a broader technical perspective, the equity has shed 8.5% in 2014, but has found a foothold atop its 20-month moving average.

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Earnings on Deck: Cirrus Logic, Inc., General Motors Company, and Nokia Corporation (ADR)

Taking a closer look at CRUS, GM, and NOK ahead of their earnings results

by 7/23/2014 2:37 PM
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We're in the thick of earnings season, and in today's session, Wall Street is digesting reports from a number of notables including Apple Inc. (NASDAQ:AAPL) and Microsoft Corporation (NASDAQ:MSFT). Looking ahead, integrated circuit specialist Cirrus Logic, Inc. (NASDAQ:CRUS) will report earnings after tonight's close, while automaker General Motors Company (NYSE:GM) and technology device maker Nokia Corporation (ADR) (NYSE:NOK) will take their turns at the earnings plate bright and early tomorrow morning. Here's a quick look at this trio of names as earnings approach.

  • Over the past eight quarters, CRUS has bested analysts' bottom-line expectations each time. However, the stock's post-earnings price action doesn't translate, with CRUS averaging a single-session loss of 2.1% in the wake of its report. For the company's fiscal first quarter, Wall Street has forecast a per-share profit of 30 cents -- a 26-cent decline over Cirrus Logic, Inc.'s year-ago results. It appears option traders in today's session are gambling on another post-earnings slide, with buy-to-open activity detected at the stock's weekly 7/25 22-strike put. With CRUS last seen at $24.19, it would take a drop of nearly 10% by this Friday's close for these puts to move into the money.

  • GM's fundamental woes have been fodder for the Street for some time, and moments ago, the automaker announced a fresh round of recalls. Against this backdrop, the stock is down 0.4% to trade at $37.62. If history is any guide, the equity could be on pace to pare a portion of these losses after the firm reports earnings tomorrow morning. Specifically, the stock has averaged a single-session post-earnings gain of 1.2% over the past eight quarters, which widens to 1.9% going out one week. For General Motors Company's second quarter, the consensus estimate is for a profit of 59 cents per share, well below the 84 cents per share the firm banked one year ago.

  • Despite matching or exceeding analysts' profit expectations in each of the past seven quarters, NOK has averaged a loss of 3.6% in the subsequent session, which jumps to 5.3% the following week. On the charts, the stock has been struggling over the past month under the weight of its 40-day moving average -- currently located at $7.77 -- and in today's session, the stock was last seen 0.6% lower at $7.67. Despite the equity's recent technical troubles, six out of 20 covering analysts still maintain a "buy" or better rating toward Nokia Corporation (ADR), while the consensus 12-month price target of $8.46 stands in territory not charted since May 2011. Another poorly received earnings report may prompt a change of heart among these remaining holdouts, which could translate into near-term headwinds for NOK.

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Stocks on the Move: Puma Biotechnology Inc, Intuitive Surgical, Inc., and Biogen Idec Inc

PBYI, ISRG, and BIIB are moving sharply in Wednesday's trading

by 7/23/2014 1:20 PM
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U.S. markets are mixed at midday -- with the S&P 500 Index (SPX) notching a new intraday record earlier -- as traders weigh another round of upbeat earnings against geopolitical concerns and a downwardly revised domestic growth outlook from the International Monetary Fund (IMF). Among specific equities in focus, development stage biopharmaceutical firm Puma Biotechnology Inc (NYSE:PBYI), surgical robot manufacturer Intuitive Surgical, Inc. (NASDAQ:ISRG), and biotechnology concern Biogen Idec Inc (NASDAQ:BIIB) are all seeing big moves on the charts today. Here's a quick roundup of how this trio of names is performing on the charts so far.

  • PBYI is 289% higher today to trade at $229.72, after announcing upbeat late-stage trial results for its experimental breast cancer drug. Earlier the stock tagged a new record peak of $236.91 -- nearly 65% above its previous all-time high of $143.65, tagged on Jan. 22. From a contrarian perspective, additional upside could by on the horizon for Puma Biotechnology Inc, considering the consensus 12-month price target of $122.67 stands at a steep discount to present trading levels.

  • Also seeing a notable move to the upside today is ISRG, thanks to last night's strong showing in the earnings confessional and subsequent round of bullish brokerage notes. At last check, the stock was up 14.7% at $449.74 -- easily filling in the earnings-induced bearish gap from late April. Diving deeper, some of today's rally could be attributable to short sellers. Although short interest declined 13.9% over the last two reporting periods, nearly 8% of the stock's float is still sold short, representing more than a week's worth of pent-up buying demand, at ISRG's average pace of trading. A continued capitulation by these bearish bettors could help propel Intuitive Surgical, Inc. even further up the charts.

  • BIIB has charged 10.7% higher this afternoon to linger near $336.19, after reporting second-quarter earnings that beat analysts' estimates by the largest margin in 10 years. What's more, the equity is now trading comfortably above previous congestion in the $330 area, suggesting a new layer of support may be forming. Heading into today's session, the security was already up an impressive 36.4% year-over-year, so it's not surprising to find sentiment tilted toward the bullish side. For starters, short interest accounts for a low 1.3% of the stock's float, and would take fewer than three sessions to cover, at BIIB's average daily pace of trading. Plus, 72% of covering analysts maintain a "buy" or better rating toward Biogen Idec Inc, with not a single "sell" to be found.

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Buzz Stocks: Starbucks Corporation, Puma Biotechnology Inc, Safeway Inc., and Amazon.com, Inc.

Today's stocks to watch in the news are SBUX, PBYI, SWY, and AMZN

by 7/23/2014 9:28 AM
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Futures on the major U.S. markets are little changed ahead of the bell, as traders digest a slew of corporate earnings reports and geopolitical developments. In company news, here are some stocks to watch.


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