Earnings Preview: Twitter, Inc., Yelp Inc., and MasterCard Incorporated

Analyzing recent option activity ahead of earnings from Twitter Inc (TWTR), Yelp Inc (YELP), and Mastercard Inc (MA)

by Griffin Kruse

Published on Apr 28, 2015 at 3:21 PM
Updated on Apr 28, 2015 at 4:16 PM

Among the stocks gearing up to report earnings are microblogging platform Twitter Inc (NYSE:TWTR), restaurant review website Yelp Inc (NYSE:YELP), and credit concern Mastercard Inc (NYSE:MA). Below, we'll take the pre-earnings temperature of TWTR, YELP, and MA.

  • The shares of TWTR fell 5.8% to $48.67, and were subsequently halted, amid reports the company's first-quarter earnings were leaked early. Looking to the options pits, short-term traders have been more put-heavy than usual, as TWTR's Schaeffer's put/call open interest ratio (SOIR) of 0.86 is higher than 89% of all similar readings from the past year. On the earnings front, the security enjoyed a 16.4% post-earnings pop in February, and has moved an average of 15.8% in the session immediately following its last four earnings reports. The equity's near-term straddle, meanwhile, is pricing in a 10.8% swing. Traders are paying relatively fair prices for their short-term bets on TWTR, as its Schaeffer's Volatility Index (SVI) of 68% stands in the 53rd percentile of its annual range.

  • On the other hand, the shares of YELP are up 2.1% at $52.07, ahead of the company's turn in the earnings limelight tomorrow night. Technically speaking, Yelp Inc has been a long-term laggard, with the shares down roughly 40.3% since hitting an annual high of $86.88 last September. However, options traders have shown growing interest in calls over puts lately, as YELP's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 2.87 stands in the 85th percentile of its annual range. In regards to earnings, the stock has spent three of its last four post-earnings sessions in the red, with the shares experiencing an average single-session post-earnings swing of 15.3% over the past year. Furthermore, YELP dropped 21.5% after reporting fourth-quarter earnings in February. According to the stock's near-term straddle, the options market is pricing in a bigger move of 11.1% this time around. Short-term options on YELP are available for middling prices, historically speaking, as its SVI of 71% is higher than 51% of all equivalent readings from the past year.

  • MA has been a technical beast, with the shares up over 25% year-over-year to reach $90.05. Accordingly, sentiment in the options pits has been bullish -- over the past 50 days at the ISE/CBOE/PHLX, 2.13 Mastercard Inc calls have been bought to open for every put, which is a higher ratio than 60% of all similar readings taken over the last 12 months. Elsewhere, three of MA's last four post-earnings sessions were positive -- including a 9.4% gain in October -- with the shares moving an average of 3.4% across all four of those sessions. After MA steps into the earnings confessional after tomorrow's close, the options market is expecting the equity to move 3.4% by week's end, per the pricing of the stock's near-term straddle. Speculators are paying relatively inflated prices for their short-term bets on the stock, as MA's SVI of 27% reads in the 65th percentile of its annual range.

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