Earnings Preview: Amazon.com, Inc., Alphabet Inc, and McDonald's Corporation

A pre-earnings look at Amazon.com, Inc. (AMZN), Alphabet Inc (GOOGL), and McDonald's Corporation (MCD)

by Alex Eppstein

Published on Oct 21, 2015 at 2:41 PM

The earnings calendar shows no signs of slowing down, with at least one notable name set to report after the close today, and several others tomorrow. Of particular interest are Internet marketplace Amazon.com, Inc. (NASDAQ:AMZN), tech behemoth Alphabet Inc (NASDAQ:GOOGL), and blue chip McDonald's Corporation (NYSE:MCD). Below, we'll take the pre-earnings temperature on AMZN, GOOGL, and MCD.

  • AMZN, which is set to report tomorrow night, has averaged a 10.7% single-day post-earnings swing over the past eight quarters. This time around, the options market is pricing in a slightly smaller 9.2% move, based on the stock's near-term at-the-money (ATM) straddle. Nonetheless, Amazon.com, Inc.'s front-month options are relatively pricey at the moment, based on its Schaeffer's Volatility Index (SVI) of 45% -- which ranks in the 84th annual percentile.

    Ahead of the event, option traders have been quite bearish toward AMZN. Its 50-day put/call volume ratio across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is 1.07 -- just 4 percentage points from a 12-month high. Similarly, AMZN's Schaeffer's put/call open interest ratio (SOIR) of 1.28 sits in the top quartile of its annual range. Of course, it's possible some of these bearish bets were initiated by shareholders hedging against a post-earnings pullback, as the equity has advanced over 78% year-to-date at $553.57. Finally, AMZN today announced the expansion of Prime free same-day delivery to Chicago and Orlando.

  • GOOGL has been successful on the charts, adding 27% in 2015 to trade at $673.85, thanks to a few recent bounces from its 20-week moving average. Options traders have been jumping on the bullish bandwagon, per the stock's 10-day ISE/CBOE/PHLX call/put volume ratio of 2.41 -- 3 percentage points from an annual peak. Turning to tomorrow night's earnings report, Alphabet Inc's near-term ATM straddle is pricing in a 6% post-event move, compared to a typical swing of 6.5% over the prior eight quarters. On the news front, GOOGL just announced the launch of its subscription-based YouTube Red service, which allows members to play videos without commercials and save clips for offline use.

  • MCD has moved, on average, just 1.1% in the session following the company's last eight quarterly reports. Based on the stock's near-term ATM straddle, the market is pricing in a 3.2% swing in the immediate aftermath of tomorrow morning's release. Ahead of the event, option bears have been piling on, as McDonald's Corporation's 50-day ISE/CBOE/PHLX put/call volume ratio rests at an annual high of 0.95. Likewise, the security's SOIR of 0.72 is located in the 94th percentile of its annual range, hinting at a pronounced preference for puts over calls among short-term speculators. Technically speaking, MCD has had a nice run since hitting a two-year low of $87.50 in late August, surging 16.8% to trade at $102.23 -- and last week touching a record peak of $105.20. As such, recent put buyers could simply be shareholders seeking protection against an unexpected drop.


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