3 Apple Suppliers to Watch Ahead of Earnings

QRVO options traders are betting on a post-earnings slump

by Patrick Martin

Published on May 2, 2018 at 12:33 PM
Updated on May 2, 2018 at 3:02 PM

It's the thick of earnings season, and Apple (AAPL) is dominating headlines today with its impressive results. In response, several Apple suppliers are trading higher today including Cirrus Logic, Inc. (NASDAQ:CRUS), Qorvo Inc (NASDAQ:QRVO), and Skyworks Solutions Inc (NASDAQ:SWKS). The three names will remain in focus, too, with CRUS and QRVO slated to report earnings after tonight's close, and SWKS on tap for tomorrow night.

Cirrus Logic Trades Below Familiar Resistance

Over the last eight quarters, Cirrus Logic stock has closed lower in the session after the company reports earnings four times -- including the three most recent. On average, the shares have swung 7.9% the next day, regardless of direction. This time around, the options market is pricing in a bigger one-day move of 11.4%.

Based on its current price at $38.43 -- up 1.4% on the day -- a move of similar magnitude lower would put CRUS stock below its two-year low of $34.78, which it touched on April 25. More broadly, the shares have given back nearly 25% in 2018, guided lower by their descending 40-day moving average.

Another negative post-earnings reaction could have analysts re-evaluating their bullish outlooks. Of the nine brokerages covering CRUS, four still rate it a "buy" or "strong buy." Furthermore, CRUS's average 12-month price-target of $51.33 represents a 32% premium to the stock's current perch. 

Put Buyers Blast Qorvo Stock Ahead of Earnings

Qorvo has a mixed history of earnings reactions. While the shares gained more than 16% in the session following the company's February report, it's logged single-session post-earnings losses in five of the last eight quarters. For tomorrow's trading, the options market is pricing in a move of 8.7% in either direction, larger than the average swing of 5.6% in the past two years.

Looking closer at the charts shows Qorvo stock has struggled since hitting a two-year high of $86.84 on March 12 -- down 17%. And while the shares are trading up 0.4% at $72.08 today, they are running out of steam near their 120-day moving average, which contained a mid-April rebound attempt, too.

Options traders have been bracing for even more downside. The stock's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 5.10 is in the 98th annual percentile. This indicates long puts have been initiated relative to calls at a much quicker-than-usual clip over the past two weeks, albeit amid relatively low absolute volume.

Skyworks Solutions Stock at Risk for Downgrades

Skyworks Solutions stock popped 10.4% in the session after the Apple supplier unveiled earnings last February. However, SWKS has closed lower the next day in five of the past eight quarters. For Friday's trading, the options market is pricing in a 9.1% post-earnings move, more than the 6% swing in either direction the stock has averaged over the last two years.

With SWKS last seen at $91.42-- up 0.6% so far today -- a drop of this amount would have SWKS trading near $83 for the first time since the January 2017 bull gap. This negative price action would be more of the same for the shares, which have been racing lower since their mid-March highs near $116.

Upbeat analysts have refused to budge on Skyworks stock, though. Of the 22 brokerages covering SWKS, 18 rate it a "buy" or better. Even the security's average 12-month price target of $114.63 sits at a 26% premium to its current perch. Continued technical struggles could prompt analysts to downwardly revise their optimistic outlooks.


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