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LinkedIn Corp (LNKD) Option Buyers Bet on More Post-Earnings Upside

Analysts, however, remain wary of outperforming LNKD

by 5/1/2013 10:25 AM
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Option players are optimistic ahead of tonight's earnings release from LinkedIn Corp (NYSE:LNKD), which notched a record high of $195.50 right out of the gate this morning. Over the past two weeks, traders have purchased almost twice as many calls as puts on the social networking concern, as evidenced by the stock's 10-day call/put volume ratio of 1.75 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). In fact, this ratio sits just 10 percentage points from a 52-week peak, implying that option buyers are initiating bullish bets at a faster-than-usual pace.

As a result, the Schaeffer's put/call open interest ratio (SOIR) for the equity stands at 0.88, indicating that calls outnumber puts among options expiring within three months. What's more, this ratio registers in the 21st percentile of its annual range, suggesting near-term options players are more call-skewed than usual right now.

Furthermore, short-term traders are paying a relatively pretty penny to gamble on LinkedIn Corp (NYSE:LNKD). Amid escalating demand ahead of earnings, the stock's Schaeffer's Volatility Index (SVI) has ascended to 63% -- above 49% of all other readings of the past year. Or, in simpler terms, LNKD's near-term option contracts are rather expensive, relatively speaking.

Elsewhere on the Street, though, not everyone is so optimistic when it comes to LNKD. Despite outperforming the broader S&P 500 Index (SPX) by almost 46 percentage points during the past three months, LNKD still harbors 15 "hold" ratings from analysts, compared to 11 "buy" or better endorsements. Plus, the consensus 12-month price target on the shares sits at $178.73, representing a discount to LNKD's new high.

Historically, LinkedIn has bested Wall Street's per-share profit projections in each of the past four quarters, and has gained an average of 11.1% in the session following its report. Ahead of tonight's turn in the earnings limelight, analysts are calling for a first-quarter profit of 31 cents per share. Should the company once again blow expectations out of the water, a round of upgrades and/or price-target hikes could add contrarian fuel to the fire.


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