Earnings Preview: Care.com, Zillow Group, and Renren

Analyzing recent option activity ahead of earnings from Care.com Inc (NYSE:CRCM), Zillow Group Inc (NASDAQ:Z), and Renren Inc (NYSE:RENN)

May 11, 2015 at 3:08 PM
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Among the stocks gearing up to report earnings tomorrow are online family care marketplace Care.com Inc (NYSE:CRCM), real estate website Zillow Group Inc (NASDAQ:Z), and Chinese social networking platform Renren Inc (NYSE:RENN). Below, we'll take the pre-earnings temperature of CRCM, Z, and RENN. 

  • CRCM has struggled since going public in early 2014, and is down 22.1% year-to-date to linger near $6.45. What's more, the stock touched an all-time low of $6.23 earlier this month. Accordingly, short-term options traders have been put-skewed, as Care.com Inc's Schaeffer's put/call open interest ratio (SOIR) rests at 5.17. Simply stated, put open interest is five times higher than call open interest, when it comes to options that expire in three months or less. In the same vein, short interest skyrocketed 32.2% over the last two reporting periods, and now accounts for 16.6% of CRCM's available float, which would take nearly 21 sessions to cover, at average trading volumes. However, despite the equity's lackluster technical picture, CRCM has spent its only two post-earnings sessions in the black, with the shares experiencing an average gain of about 6%. After CRCM releases its earnings tomorrow morning, the options market expects the equity to move 22.4% by Friday's close, per its near-term at-the-money (ATM) straddles. Short-term options players have been paying relatively bottom-of-the-barrel prices, as CRCM's Schaeffer's Volatility Index (SVI) of 79% reads in the 10th percentile of its annual range. 
  • SunTrust Robinson upgraded to "buy" from "neutral" and raised its price target by $20 to $130, ahead of the company's trip to the earnings confessional tomorrow night. At last check, the shares of Zillow Group Inc were up 7.5% to $99.17, paring their year-to-date loss to 6.4%. What's more, Z is up 22.3% since touching an annual low of April 14. Looking to the options pits, sentiment has been bearish, as Z's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 1.04 stands in the 74th percentile of its annual range. Meanwhile, the security has moved an average of 2.7% in the session immediately following its last four earnings reports. However, the options market is anticipating a post-earnings move of 7.8%, per the stock's short-term ATM straddle. Near-term options are available for historically deflated prices, as Z's SVI of 46% is higher than just 15% of all comparable readings from the last year. 
  • On the other hand, RENN is up 25% from its March 20 all-time low of $2.35 to hover around $2.94. However, the equity has struggled to surmount the $3.20 region, which acted as support for most of 2014. Short-term traders have been more put-skewed than usual, as Renren Inc's SOIR of 0.37 is higher than 78% of all equivalent readings taken over the last 12 months. Elsewhere, the equity has moved an average of 3.9% in the session immediately following its last four earnings reports, including a 10.1% drop in November. Accordingly, after RENN reports its earnings data tomorrow night, the options market is pricing in a move of 7.7%, per the stock's near-term ATM straddle. Short-term options players are paying relatively inexpensive prices for their bets on RENN, as its SVI of 56% stands in 17th percentile of its annual range.  

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