Earnings Preview: 3 Cybersecurity Stocks On Watch

As FireEye Inc (FEYE), Symantec Corporation (SYMC), and Imperva Inc (IMPV) prepare to step up to the earnings confessional, option players are anticipating some big post-earnings moves for the three cybersecurity stocks

Nov 3, 2016 at 8:48 AM
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Cybersecurity stocks FireEye Inc (NASDAQ:FEYE), Symantec Corporation (NASDAQ:SYMC), and Imperva (NYSE:IMPV) are all gearing up to present earnings tonight, In the options pits, it looks like some traders are expecting some bigger-than-usual post-earnings moves for FEYE, SYMC, and IMPV.

FEYE dropped 5% to land at $11.32 yesterday-- and touched a new record low of $11.31 -- bringing its year-over-year loss to 60.9%. Considering FEYE's long-term technical troubles, it's hardly surprising that short interest is up 7.1% over the last reporting period. Currently, over 16.4% of FEYE's float is sold short, which would take traders over a week to cover, at FEYE's average daily volume.

This pessimism isn't just confined to the short-selling crowd, either. FEYE's options pits have seen an unusual amount of bearish action as of late, with FEYE's 10-day put/call volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) of 0.41 sitting higher than 94% of all other readings from the past year. Drilling down, FEYE has seen apparently buy-to-open activity at the weekly 11/4 10.50- and 11-strike puts recently, indicating option buyers are betting on record lows by the time the options expire on Friday.

Given FEYE's recent post-earnings performances, this may not be an outlandish bet. FireEye Inc (NASDAQ:FEYE) has averaged a one-day post-earnings move of 10.4% in either direction in the past eight quarters, finishing in the black only twice. This time around, option players are pricing in a bigger-than-usual swing of 20.1% for FEYE. 

SYMC, on the other hand, edged modestly higher to close at $25.23 yesterday, within a chip-shot of its 11-year high of $25.72, tagged in early October, and the cybersecurity stock is up nearly 50% since the beginning of 2016. In SYMC's options pits, bulls are dominant, with the stock's 10-day call/put volume ratio at the ISE/CBOE/PHLX sitting in the top 77% of its annual range, and nearly nine calls bought to open for every put over the last two weeks. However, some of this call buying could be hedging action by short sellers. SYMC's short interest is up 15.5% over the last reporting period, although shorted shares still only account for 4.6% of SYMC's float, which would take just 3.8 days of trading to cover, at SYMC's average daily volume.

Historically, Symantec Corporation (NASDAQ:SYMC) has tended to have a slightly more muted post-earnings reaction than sector peer FEYE, averaging a single-day swing of just 2% over the last eight quarters. This time around, however, option traders are pricing in a bigger-than-usual post-earnings move of 8.2%. A positive earnings reaction could easily boost SYMC into record-high territory.

IMPV dropped 1.9% to land at $35.40, bringing its year-to-date losses to 44%. IMPV has shed roughly one-third of its value in the past month, thanks to a bear gap on Oct. 19, when the firm put its sales process on hold.

In the option pits, IMPV's 10-day call.put volume ratio at the ISE/CBOE/PHLX shows nearly three calls bought to open for every put over the last two weeks, though absolute volume is still light, with just about 1,100 calls and 370 puts traded in the last 10 days. IMPV's option open interest currently sits higher than 92% of all other readings from the past year, with calls nearly doubling puts, 32,178 to 18,613.

Drilling down, the December 55 call is IMPV's top open interest position, followed by the December 60 call. In the front-month November series, the 55- and 60-strike calls are also tops. Given that all of these options are quite a ways out of the money, some recent call buying could be attributable to short sellers hedging their bets.  

Imperva Inc (NYSE:IMPV) shares have averaged a one-day post-earnings swing of 14.3% over the last eight quarters. A similar move to the downside this time around would place the stock near two-year low territory.


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