Options Bulls Blast Broadcom Stock Ahead Of Earnings

AVGO reports earnings after the close on Thursday

Managing Editor
Mar 14, 2018 at 12:32 PM
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Broadcom Ltd (NASDAQ:AVGO) is slated to report fiscal first-quarter earnings after the market closes on Thursday, March 15. The chip name could use a win, after ending its hostile bid for Qualcomm (QCOM), which was blocked earlier this week by President Donald Trump -- citing national security concerns. Ahead of tomorrow's earnings report, AVGO options are pricing in an outsized move for Friday's trading. 

Taking a quick step back, AVGO stock has had a positive earnings reaction in five out of the past eight quarters, averaging a next-day move of 4% in either direction over the last two years. This time around, the options market is pricing in a larger-than-usual 7.1% one-day move, per implied volatility (IV) data.

Looking at the charts, AVGO hit a record high of $285.68 on Nov. 27, before pulling back to its 320-day moving average. The shares successfully bounced from here in early February, and thanks to a bull gap earlier this week on rumors of a potential bid from Intel (INTC), they are now trading back above their 120-day moving average -- a trendline which served as support in late 2017. At last check, Broadcom stock was down 1.5% to trade at $257.41.

Meanwhile, analysts are stoutly in the bullish camp ahead of earnings. All 15 brokerages covering AVGO rate it a "strong buy," and the stock's average 12-month price target of $319.11 represents expected upside of 24% to its current perch.

Likewise, speculative players have shown a stronger-than-usual interest in long call options over puts on AVGO ahead of earnings. During the past 10 sessions, traders on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) bought to open 14,707 calls, compared to 4,008 puts. The resulting 10-day call/put volume ratio of 3.67 registers in the 94th percentile of its annual range.

 

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