2 Cybersecurity Stocks Poised for a Big Post-Earnings Move

FireEye Inc (FEYE) and Cyberark Software Ltd (CYBR) have historically swung wildly in the aftermath of earnings

by Alex Eppstein

Published on Nov 4, 2015 at 2:04 PM

Wall Street continues to digest earnings data, including the latest results from Tesla Motors Inc (NASDAQ:TSLA). There's plenty more on tap, too, especially within the cybersecurity space. Specifically, FireEye Inc (NASDAQ:FEYE) will step in the earnings spotlight tonight, while sector peer Cyberark Software Ltd (NASDAQ:CYBR) is due to report after tomorrow's closing bell. Below, we'll take a look at the sentiment surrounding FEYE and CYBR ahead of earnings.

  • The options market is pricing in a sharp 11.5% post-earnings move for FEYE, based on its near-term at-the-money straddle. This is bigger than the average 9.6% swing the stock has made in the session following the company's past eight trips to the confessional. Ahead of tonight's report, traders have been betting bullishly, buying to open four times as many calls as puts during the previous 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). The corresponding call/put volume ratio of 4.10 outstrips four-fifths of all readings taken during the last year. Not everyone's a fan, though -- 13.1% of FireEye Inc's float is sold short, representing four sessions' worth of pent-up buying demand, at average trading levels. Technically speaking, it looks like the shares are bouncing from their annual low of $26.03 notched on Monday, up 10.6% since then to trade at $28.79. If FEYE's earnings top estimates, this rebound could get an additional boost as short sellers rush to cover.

  • According to near-term ATM straddle data, the market expects CYBR to swing 9.8% after tomorrow night's quarterly results. However, this is actually smaller than the stock's average single-session post-event move of 12.9%, following the company's previous four visits to the earnings booth. If options traders have their druthers, this move will resolve to the downside. Specifically, Cyberark Software Ltd's 10-day ISE/CBOE/PHLX put/call volume ratio of 0.81 ranks in the top quartile of its annual range, indicating speculators have bought to open puts over calls at a faster-than-usual clip of late. Meanwhile, even though short interest fell off 31% during the last two reporting periods, the shorts still control close to 15% of the stock's total float, suggesting negativity extends well beyond the options pits. This is confounding, considering CYBR has advanced nearly 29% year-to-date at $51.12 -- helped by a recent acquisition and unconfirmed buyout rumors. Should the shares get a boost from a positive earnings report, an unwinding of this collective negativity could result in tailwinds.

A Schaeffer's exclusive!

The Expert's Guide

Access your FREE trading earning announcements before it's too late!


 
 

Partnercenter


NEW! Explore Schaeffer’s Partners' deals and get connected to top online brokerages with deals tailored exclusively for our readers.  Get answers to your questions regarding transfer fees, commission rates, programs and available discounts related to online trading services.

MORE | MARKETstories


Look Who's Going Bankrupt Next in America
Porter Stansberry is making a concerning prediction.
Apparel Name Boosted By Earnings Beat
Three analysts have moved their price targets down to $60
Black & Decker Withdraws 2020 Guidance, Cuts Non-Essential Staff
Black & Decker said it would reduce any non-essential staff and decided to withdraw its 2020 forecast
Look Who's Going Bankrupt Next in America
Porter Stansberry is making a concerning prediction.