Ambarella reports earnings after the close tomorrow
While earnings season has mostly wrapped up, some companies are still waiting for their turn in the spotlight. GoPro (GPRO) supplier Ambarella Inc (NASDAQ:AMBA) steps into the earnings confessional this week, reporting third-quarter earnings after the market closes tomorrow. Here's a closer look at AMBA stock's performance lately, and how options traders are playing the GoPro supplier ahead of earnings.
It's been a subpar year for AMBA stock. An earnings-induced bear-gap subsequently sent AMBA to an annual low of $40.06 on Sept. 6, though the stock has recovered about 35% since then. At last check, AMBA was down 2.5% to trade at $54.16, trading right around breakeven for 2017.
The semiconductor name has a dismal history of post-earnings price action, with the shares plummeting in the session following seven of its last eight earnings reports. As alluded to above, AMBA stock fell 22.4% after earnings last September, and suffered a 10.2% post-earnings drop in June. In fact, the security hasn't enjoyed a positive earnings reaction since reporting in June 2016.
The equity has averaged a one-day post-earnings move of 9.4%, regardless of direction, over the last eight quarters. This time around, the options market is pricing in a much larger one-day swing of 14.3%, based on the stock's at-the-money (ATM) implied volatility (IV) data.
Another poor earnings result would be a boon to short sellers. Although short interest decreased during the last reporting period, the 5.1 million shares of AMBA sold short represents a healthy 15% of the stock's total available float, or more than seven sessions' worth of pent-up buying demand.
AMBA options traders, however, have kept the faith. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 50-day call/put volume ratio of 3.80 ranks in the 79th annual percentile, meaning calls have been bought to open over puts at a faster-than-usual pace in the past 10 weeks. However, those buying to open out-of-the-money calls could be Ambarella shorts seeking an options hedge.