Will Amazon.com, Inc. (AMZN) Be the Next Google Inc (GOOGL)?

A pre-earnings look at Amazon.com, Inc. (AMZN) options

by Adam Warner

Published on Jul 21, 2015 at 9:52 AM
Updated on Jul 21, 2015 at 9:57 AM

It's been a fun earnings season if you like explosive rallies in big tech names. I'm not sure who exactly counts as a "Horseman" these days, but last week saw gigantic lifts in a couple biggies. Netflix, Inc. (NASDAQ:NFLX) and Google Inc (NASDAQ:GOOGL) both lifted about 13.5% close to the open, and rallied even further intraday. GOOGL was particularly impressive vs. the expectations of the options marts, which had priced in only about a 4% move ahead of the number.

And fortunately it's not done. We have Apple Inc. (NASDAQ:AAPL) tonight, and the market is pricing in about a 4.8% move, per the stock's short-term at-the-money straddle. But strange as it is to say, that's not the most interesting one on tap. For that I'm going to go with Amazon.com, Inc. (NASDAQ:AMZN). From Nasdaq:

"Amazon.com, Inc. is expected* to report earnings on 07/23/2015 after market close. The report will be for the fiscal Quarter ending Jun 2015. According to Zacks Investment Research, based on 16 analysts' forecasts, the consensus EPS forecast for the quarter is $-0.18." 

So, what's so interesting about a gigantic company that's been around like 20 years now, can sell $40 bazillion worth of merchandise, and yet not turn a profit? Well, it's the options, of course. AMZN is on quite a run of outperformance, per Joe Kunkle.

Or, if you prefer in table form:

150721AMZN

 

AMZN's weekly chart is quite impressive as well. The release dates are noted on the lower portion; the big green and red bars would probably give them away anyway. 

150721AMZN2

 

Options still may pop in the next couple of days, but for now they're not all that fat, pricing in a 7.29% move. In the last two years, AMZN has not moved less than 9.3% on earnings week. What's more, the overall context of this earnings season has been one of actual moves surpassing expected moves in higher-profile names. 

None of this means, of course, that AMZN will follow the others and make a sizeable move. It's more that I'm just surprised that in this backdrop, AMZN options vol hasn't lifted more.

It also speaks only of magnitude, not direction. As a general rule, I'd always go with "present trend continues." If AMZN is in an uptrend, and the other Horsemen are popping on earnings, odds favor an upside move. That's just a probability, not a prediction. 

Disclaimer: Mr. Warner's opinions expressed above do not necessarily represent the views of Schaeffer's Investment Research.


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