Earnings Preview: First Solar, Inc., Etsy Inc, and Zillow Group Inc

Analyzing pre-earnings options trends on First Solar, Inc. (FSLR), Etsy Inc (ETSY), and Zillow Group Inc (Z)

Aug 3, 2015 at 11:08 AM
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Although earnings season is winding down, there's still plenty of action to digest this week. Tuesday night, in particular, will be busy, as a number of big-name companies will step into the limelight -- including blue chip Walt Disney Co (NYSE:DIS). Among them are alternative energy issue First Solar, Inc. (NASDAQ:FSLR), Wall Street rookie Etsy Inc (NASDAQ:ETSY), and real estate resource Zillow Group Inc (NASDAQ:Z). Below, we'll take the pre-earnings temperature on FSLR, ETSY, and Z.

  • FSLR tends to swing sharply in the aftermath of earnings. Following the company's last eight turns in the confessional, the stock has moved an average of 8.8% -- in either direction -- in the ensuing session. The options market is currently pricing in expectations for a similarly sized 8.6% swing, based on near-term at-the-money (ATM) straddle data. Hopes are high ahead of tomorrow night's report. Traders at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 2.27 First Solar, Inc. calls for every put, during the last 10 weeks. The corresponding call/put volume ratio ranks in the 90th percentile of its annual range. However, on the charts, FSLR is sitting close to its year-to-date breakeven mark, last seen at $44.19, and struggling to break north of its 10-week moving average.

  • ETSY will make its second-ever appearance in the earnings confessional tomorrow night, after going public in mid-April. In the session following the company's May 20 report, the stock lost 18.1%. This time around, the options market is pricing in a 21.5% absolute move, based on the equity's short-term ATM straddle. Since reaching a record $35.74 on its first day of trading, Etsy Inc has stumbled, losing 43% to trade at $20.50. Short sellers have been turning up the heat, too. During the latest reporting period, short interest on ETSY spiked 16%, and now accounts for 21.5% of the total float -- an amount that would take over eight sessions to repurchase, at typical volumes. Similarly skeptical are option traders, who have bought to open 5.67 puts for every call during the last two weeks, according to data from the ISE, CBOE, and PHLX.

  • Finally, after Z reports earnings tomorrow night, the options market is expecting a 10.6% swing in the ensuing session, per near-term ATM straddle data. These expectations are sky-high, considering the shares have only moved 3.4%, on average, in the immediate aftermath of the company's last eight quarterly events. Short-term options traders have rarely been as put-skewed toward Zillow Group Inc as they are now. The stock's Schaeffer's put/call open interest ratio (SOIR) of 1.16 ranks higher than 91% of comparable readings from the past year -- mirroring the negativity witnessed among analysts. And why not? Z has plunged more than 24% year-to-date to trade at $80.05.

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