Earnings Preview: Twitter, Yelp, and MasterCard

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

Apr 28, 2015 at 3:21 PM
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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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