Today's column includes the latest quarterly results from TiVo Inc. (TIVO), an executive departure at Ambac Financial Group, Inc. (ABK), a fourth-quarter update from EMC Corporation (EMC), and more safety issues at Toyota Motor Corporation (TM). Each day, Options Edge focuses on the hot stocks in the news and gives you a unique insight into each stock's sentiment backdrop. Our time-tested contrarian approach centers on options, and gives you the trading tools to approach the day with a much-needed edge over the investing herd.
TiVo Inc.
TiVo Inc. (TIVO: sentiment, chart, options) reported last night that it swallowed a third-quarter loss of $6.67 million, or 6 cents per share, compared to its year-ago profit of $100.63 million, or 98 cents per share. Service and technology revenue for the period fell 21% to arrive at $47.1 million. Analysts, on average, were expecting TIVO to lose 6 cents per share on $49.7 million in revenue.
For the current quarter, TIVO expects service and technology revenue to range between $43 million and $45 million, with the company's net loss projected at $13 million to $15 million. Analysts are looking for revenue of $46.2 million for the fourth quarter.
Separately, TIVO announced that it entered a partnership with Virgin Media (VMED) to develop interactive programs for the latter firm's high definition set-top boxes. Additionally, TIVO inked a pact with Google (GOOG) to license its TV data.
TIVO is up 1.7% in pre-market trading, adding to its year-to-date gain of 53.2%. The equity is lingering atop support from its 10-week and 20-week moving averages, but pressure in the $11-to-$12 neighborhood is directly overhead.
Ahead of last night's report, option players gravitated toward bullish bets on TIVO. The stock's December 12.50 call saw 3,995 contracts cross the tape, with the majority trading hands at the ask price. Implied volatility on this option shot 7.2% higher as a result, and open interest at this out-of-the-money strike rose overnight from 5,270 contracts to 6,516 contracts.
Ambac Financial Group, Inc.
Late Tuesday, struggling insurance issue Ambac Financial Group, Inc. (ABK: sentiment, chart, options) announced that its chief financial officer, Sean Leonard, resigned effective Tuesday "to pursue other interests." Leonard's staff will report directly to CEO David Wallis until a replacement is named. The CFO's departure comes at a troubled time for ABK, with the company rushing to raise its regulatory capital to meet statutory minimum requirements.
After slumping last night, ABK is on the rebound in electronic trading this morning. However, the equity still faces stiff pressure from its 20-day moving average, which has offered resistance since early October.
Unfortunately, a notable accumulation of overhead call open interest could also stifle ABK's progress during the near term. In the newly front-month December series, peak call open interest of 4,942 contracts lies at the narrowly out-of-the-money 1 strike.
EMC Corporation
After the close on Tuesday, EMC Corporation (EMC: sentiment, chart, options) updated its fourth-quarter earnings outlook. The company said it will record $100 million in charges as it reorganizes its international operations into a single holding company, a move that's expected to trim administrative expenses in the future. EMC still expects a fourth-quarter profit of 30 cents per share, excluding items, with revenue arriving at $4 billion. However, net earnings are now expected to range between 16 cents and 21 cents per share.
EMC shares are holding steady ahead of the bell, with the equity perched above support from its 20-day moving average. The equity pulled back earlier this month, but the dip was contained by EMC's rising 80-day trendline.
As a result of the stock's year-to-date uptrend, option players are favoring calls over puts on this tech issue. During the past 10 days, traders on the International Securities Exchange (ISE) bought to open 5.78 calls for every put on EMC. This ratio ranks in the 96th annual percentile, marking a near-peak of optimistic speculation.
Toyota Motor Corporation
Toyota Motor Corporation (TM: sentiment, chart, options) announced on Tuesday that it will recall 110,000 Tundra pick-ups due to a corrosion problem. The cause of the problem has not yet been identified, but it's just the latest in a string of safety-related issues for the Japanese automaker. Toyota also noted this morning that it will repair the gas pedal on 3.8 million Toyota and Lexus models that were recalled in September. Those vehicles were prone to "sudden acceleration issues" which occurred when the pedal stuck on the floor mats.
Despite the recall issues, TM is up 3.7% in pre-market action. However, the security's progress could be capped by resistance at its 10-week and 20-week moving averages, which have guided the shares lower since mid-September.
The equity's technical troubles haven't spooked option traders, who are relatively complacent toward TM. The stock's Schaeffer's put/call open interest ratio (SOIR) weighs in at 1.17, which ranks in the 31st annual percentile -- suggesting that short-term speculators have been more upbeat less than one-third of the time during the past year.
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