Earnings Preview: NQ Mobile Inc., Qihoo 360 Technology Co. Ltd., and Lowe's Companies, Inc.

Analyzing recent option activity ahead of earnings on NQ Mobile Inc (ADR) (NYSE:NQ), Qihoo 360 Technology Co Ltd (NYSE:QIHU), and Lowe's Companies, Inc. (NYSE:LOW)

by Karee Venema

Published on May 19, 2015 at 1:52 PM

Among the stock getting ready to report earnings are Wi-Fi specialist NQ Mobile Inc (ADR) (NYSE:NQ), IT issue Qihoo 360 Technology Co Ltd (NYSE:QIHU), and home improvement retailer Lowe's Companies, Inc. (NYSE:LOW). Below, we'll take the pre-earnings temperature of NQ, QIHU, and LOW.

  • NQ will unveil its first-quarter results after tonight's close, and the options market is expecting an 11.3% swing for the stock -- based on its near-term at-the-money (ATM) straddle. This compares to the 6.2% single-session post-earnings move NQ has averaged over the past eight quarters -- seven of which were to the downside. Drilling down on recent option activity, sentiment has been shifting toward the bearish side in recent weeks. Specifically, NQ's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio has jumped to 0.62 from 0.09 over the past two weeks, and now ranks in the 83rd annual percentile. Those currently purchasing short-term options are in luck, too. The security's 30-day ATM implied volatility of 76.1% rests lower than 96% of all comparable readings taken in the past year. On the charts, NQ Mobile Inc has spent almost the entirety of 2015 bouncing between $3.50 and $4.50, and was last seen lingering near $3.67.
  • QIHU is also slated to report first-quarter earnings later this evening, and ahead of the event, the stock is 0.9% higher at $58.49. Longer term, the shares have surrendered nearly 44% since hitting their most recent high of $103.98 in mid-August, pressured by their 10-month moving average. In the options pits, short-term speculators have rarely been as call-heavy toward QIHU as they are now, per the equity's Schaeffer's put/call open interest ratio (SOIR) of 0.37, which sits just 6 percentage points from a 52-week low. Those buying to open near-term options are currently able to do so at relatively attractive levels, as QIHU's Schaeffer's Volatility Index (SVI) of 53% arrives in the 32nd annual percentile. Meanwhile, looking back over the past eight quarters, Qihoo 360 Technology Co Ltd has moved an average of 6.5% in the session subsequent to reporting. This time around, the options market is expecting a loftier 8.2% move, based on the stock's short-term ATM straddle.
  • LOW's first-quarter results are due out tomorrow morning, and option traders have been growing increasingly skeptical in the weeks leading up to the report. At the ISE, CBOE, and PHLX, the stock's 10-day put/call volume ratio of 5.16 ranks in the 94th percentile of its 52-week range. In other words, puts have been bought to open over calls with more rapidity just 6% of the time within the past year. Speculators are willing to pay relatively fair prices for their short-term bets, as evidenced by LOW's SVI of 23%, which sits higher than 52% of similar readings taken in the last 12 months. The options market, in the meantime, is expecting LOW to move 5.5% in the wake of its results -- based on LOW's near-term ATM straddle -- slightly more than the 3.6% post-earnings shift the security has averaged over the past eight quarters. Technically speaking, Lowe's Companies, Inc. has added 7.7% since taking a sharp bounce off its 120-day moving average in early May. Today, however, the equity is off 0.4% at $72.76, after sector peer Home Depot Inc (NYSE:HD) turned lower in the wake of its quarterly results.

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