Earnings Preview: F5 Networks, QUALCOMM and VMware

Analyzing recent option activity on F5 Networks, Inc. (FFIV), QUALCOMM, Inc. (QCOM), and VMware, Inc. (VMW)

Apr 21, 2015 at 1:15 PM
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Among the stocks gearing up to report earnings are application delivery expert F5 Networks, Inc. (NASDAQ:FFIV), digital communications firm QUALCOMM, Inc. (NASDAQ:QCOM), and virtualization specialist VMware, Inc. (NYSE:VMW). Below, we'll gauge the pre-earnings temperature of FFIV, QCOM, and VMW.

  • The shares of FFIV have slipped recently, down 12.6% from their Dec. 24 two-year high of $136.11 to hover near $118.93. Accordingly, put buying in the options pits has hit fever pitch, as F5 Networks, Inc.'s 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 1.38 is the highest such reading taken over the past year. On the earnings front, FFIV has been all over the map, losing 10% last January, but jumping 4% last October. Traders are paying historically inflated prices for their near-term bets ahead of tomorrow evening's scheduled event, as the stock's Schaeffer's Volatility Index (SVI) of 42% ranks in the 82nd percentile of its annual range.
  • QCOM has had a rough start to 2015 as well, with the shares down 7.7% to linger around $68.61, amid pressure from their 200-day moving average. Today, QCOM is flat, as traders digest news the company has chosen Samsung to develop its next generation Snapdragon 820 chip. Not surprisingly, options traders have been taking the bearish route ahead of tomorrow night's quarterly results, as QCOM's 10-day ISE/CBOE/PHLX put/call volume ratio of 0.93 ranks in the 87th percentile of its annual range. Meanwhile, QUALCOMM, Inc. has had several abysmal trips to the earnings confessional over the past 12 months. Specifically, in the session immediately following its last four earnings reports, QCOM has lost an average of 7.3%, including a 10.3% fall in January. Short-term options are available for relatively middling prices, as QCOM's SVI of 28% is higher than 56% of all equivalent readings taken over the past year.
  • On the other side of the coin, the shares of VMW have been on the mend, up 15.6% from their Jan. 29 annual low of $73.65 to hit $85.15 -- including a 1% gain today, in the wake of a price-target hike to $105 from $99 at Citigroup. However, options traders have remained skeptical ahead of tonight's trip to the earnings confessional, as VMware, Inc.'s 10-day ISE/CBOE/PHLX put/call volume ratio of 2.77 is higher than 97% of all similar readings from the past 12 months. Speculators anticipating post-earnings downside for the security have history on their side, with VMW averaging a single-session post-earnings loss of 6.2% over the past four quarters, and failing to achieve a positive post-earnings session since October 2013. Traders are paying historically fair prices for their short-term bets on VMW, as its SVI of 36% ranks in the 43rd percentile of its annual range.






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