3 Tech Earnings to Watch Tomorrow

CRM and MOMO stocks are hovering near record highs ahead of earnings

Karee Venema
Aug 21, 2017 at 2:18 PM
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It's nearing the end of earnings season, but there's still a handful of high-profile names still waiting to report. In addition to a busy week of retail earnings, several tech firms will unveil their quarterly results tomorrow, including cloud issue salesforce.com, inc. (NYSE:CRM), LED specialist Cree, Inc. (NASDAQ:CREE), and Chinese social media platform Momo Inc (ADR) (NASDAQ:MOMO). Here's a closer look at shares of CRM, CREE, and MOMO ahead of earnings.

Salesforce Options Traders Buy Pre-Earnings Calls

CRM options traders have been loading up on long calls ahead of tomorrow night's quarterly earnings event. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day call/put volume ratio of 2.40 ranks in the 76th annual percentile, meaning calls have been bought to open over puts at a faster-than-usual clip.

Drilling down, peak open interest of 13,124 contracts is found at the September 90 call. For those that purchased new positions here, the goal is for CRM shares to be sitting north of $90 at the close on Friday, Sept. 15 -- when the front-month options expire.

At last check, Salesforce stock was trading up 0.2% at $90.90, bringing its year-to-date gain to 32.8% -- and putting the shares not far from their Aug. 17 record high of $92.49. The stock has a positive history of post-earnings reactions, too, having settled up in the session subsequent to reporting six of the last eight quarters. This time around, the options market is pricing in a 7.4% post-earnings swing, regardless of direction.

Cree Stock Has a Recent History of Negative Earnings Reactions

Options traders are blasting Cree before the company's after-the-close earnings announcement tomorrow. Roughly 5,363 options have changed hands -- five times the average daily volume of 1,403 contracts, and volume pacing in the 94th annual percentile. Pre-earnings traders are opening new positions at the weekly 8/25 and 9/1 23.50-strike calls, though it's not clear if they're buying or selling the options.

Technically, CREE was trading north of $23.50 last Thursday, but was more recently seen hovering near $22.70. Longer term, CREE is down 14% year-to-date, and if history is any guide, the shares could be in for even bigger post-earnings losses. In the last four quarters, specifically, the stock has gapped lower in the session subsequent to reporting three times, averaging a 12.4% drop.

And while options bulls may not cheer another post-earnings plunge, short sellers most certainly would. Short interest on CREE is up 51% year-to-date to 11.79 million shares, or 18.4 times the stock's average daily trading volume.

MOMO Stock Hovers Near Record High Ahead of Earnings

MOMO options volume is running at a faster-than-usual clip this afternoon, as the company prepares to tell all in the earnings confessional ahead of tomorrow's opening bell. At last glance, 8,782 calls and 3,539 puts were on the tape -- 1.8 times what's typically seen at this point in the session.

Most active is the weekly 8/25 45-strike call, where it looks like traders may be buying and selling to open the options. If this is the case, those initiating new long positions are betting on MOMO shares breaking out above $45 by expiration at this Friday's close, while those writing the calls expect the strike to serve as a short-term ceiling. 

Earlier, the Momo stock topped out at an intraday peak of $44.89, last seen trading at $44.38. And while the shares have surged more than 141% in 2017 and hit a record high of $46.69 on Aug. 8, they have closed lower in the session subsequent to the firm's earnings report in four of the past eight quarters. For tomorrow's trading, the options market is expecting a 13.9% move in the underlying, regardless of direction.

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