3 Video Game Stocks to Watch Ahead of Earnings

ATVI, TTWO, and GLUU stocks are in focus with earnings around the corner

Feb 7, 2017 at 1:20 PM
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Earnings season continues to roll along, with a slew of tech stocks set to report this week. Among the specific names in focus over the next few days are video game makers Activision Blizzard, Inc. (NASDAQ:ATVI), Take Two Interactive Software Inc (NASDAQ:TTWO), and Glu Mobile Inc. (NASDAQ:GLUU). Below we'll take a look at how options traders are lining up, and which way the shares of ATVI, TTWO, and GLUU could be headed next.

ATVI Options Traders Extremely Put-Heavy

ATVI hit a record high in late October, and then pulled back to its 80-week moving average. The shares have been climbing again in recent months, and are now up 40% year-over-year, at $40.29. If history is any indicator, ATVI could be set to move even higher after the company reports its quarterly results this Thursday evening. The shares moved to the upside in the post-earnings session in five of the past eight quarters, averaging a 5.3% move in either direction. Options traders are currently pricing in a wider 10.3% swing for Friday.

It appears speculators are expecting a downside move, though. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), ATVI's 10-day put/call volume ratio of 1.05 ranks in the 91st percentile of its annual range. What's more, the stock's Schaeffer's put/call open interest ratio (SOIR) is seated at a 12-month high of 1.93 -- indicating near-term options traders are at a put-heavy extreme. Analysts seem to be in the stock's bullish corner, at least, with 11 out of 15 rating Activision Blizzard, Inc. (NASDAQ:ATVI) a "buy" or better, and not one giving it a "sell" recommendation.

TTWO Has Moved Higher After Last Five Earnings Reports

Last seen off 0.8% at $53.76, TTWO is preparing to report earnings after tonight's close. Historically, earnings have been a boon for the shares, with the stock moving higher in the session subsequent to reporting in six of the last eight quarters, including the last five in a row. TTWO has seen an average one-day post-earnings swing of 5.6%, but options traders have their sights set on more, pricing in an 8.6% move for tomorrow.

Analysts and options traders both have high expectations for TTWO. Of 13 analysts following with stock, nine call it a "strong buy," versus four "holds." And although options volume is light on an absolute basis, speculators have been purchasing TTWO calls over puts at extreme rates, per the equity's 10-day call/put volume ratio of 5.37 on the ISE, CBOE, and PHLX -- just 7 percentage points from an annual bullish peak. But this sentiment is hardly surprising, considering Take Two Interactive Software Inc (NASDAQ:TTWO) has tacked on about 60% over the last 12 months, and hit a record high of $55.47 just last Friday.

GLUU Analysts Optimistic Ahead of Earnings

Finally, GLUU is on track for its highest close in six months, up 1.6% at $2.52, ahead of tomorrow night's earnings event. The shares have surged almost 30% so far in 2017, with the help of their rising 20-day moving average, but are still seated south of the year-over-year breakeven level. GLUU could see some volatility later this week, however, if history is any indicator. Over the last eight quarters, the stock has endured an average single-day swing of 17.9% after reporting earnings, but five of those moves have been to the downside. Options traders seem to be taking a cautious approach, pricing in a slightly narrower 12.5% move for Thursday.

As far as direction, it appears GLUU options traders largely expect another post-earnings drop. While the stock's 10-day ISE/CBOE/CBOE put/call volume ratio of 0.36 is call-skewed on an absolute basis, it also ranks in the bearish 73rd percentile of its annual range. What's more, GLUU sports a SOIR of 0.87 -- just 3 percentage points from a 12-month put-heavy high. However, it's worth noting that GLUU options volume is also typically light, on an absolute basis. Still, analysts remain optimistic, with two-thirds rating Glu Mobile Inc. (NASDAQ:GLUU) a "strong buy," and not a single "sell" on the books.

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