Options Bulls Blast Alphabet Stock Before Earnings

The Google parent will report earnings after Monday's close

by Karee Venema

Published on Jul 20, 2018 at 2:11 PM

Alphabet Inc (NASDAQ:GOOGL) kicks off a busy week of FAANG earnings, with the Google parent set to unveil its quarterly results after Monday's close. Ahead of the event, Deutsche Bank lifted its GOOGL price target to $1,350 from $1,225 -- a nearly 13% premium to last night's close -- saying the stock is attractive at current levels, but cautioned about "slightly tricky" second-quarter revenue for the tech company.

It's been a toss of the coin as to whether GOOGL's earnings reaction has been positive or negative over the past eight quarters, split evenly at four of each -- though the two most recent reactions have resulted in next-day moves lower for the stock. On average, the equity has moved 3.2% the day after earnings over this two-year time frame, regardless of direction. This time around, the options market is pricing in a bigger-than-usual 5.5% single-session post-earnings swing.

Recent options activity suggests speculators are positioning for a move to the upside. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security's 10-day call/put volume ratio of 2.12 ranks in the 94th annual percentile, meaning calls have been bought to open over puts at a quicker-than-usual clip.

This optimism is seen outside of the options pits, too, where 27 out of 29 brokerages maintain a "buy" or better rating on GOOGL, with not a single "sell" on the books. However, there's certainly room for more analysts to lift price targets on the FAANG stock, considering the average 12-month price target of $1,286.27 is a slim 7.3% premium to current trading levels.

Meanwhile, short sellers have been throwing in the towel on their bearish Alphabet bets. Short interest plunged 20.8% in the latest reporting period to 2.43 million shares -- just 0.4% of GOOGL's available float. It would take shorts just about a day to cover these remaining bearish bets, at the average pace of trading.

On the charts, Google stock has been chopping higher since a successful test of the millennium mark in late March -- up almost 22%. More recently, a late-June bounce off its 40-day moving average has GOOGL up 6.3% so far in July, and fresh off Wednesday's record high of $1,221.59.

googl stock dailyprice chart on july 20


a schaeffer's exclusive

PLAY TRENDS LIKE A PRO!

5 tips to leverage profits in this FREE insider report!


 
 

Partnercenter


NEW! Explore Schaeffer’s Partners' deals and get connected to top online brokerages with deals tailored exclusively for our readers.  Get answers to your questions regarding transfer fees, commission rates, programs and available discounts related to online trading services.

MORE | MARKETstories


The Trend Minting Millionaires -- But Who Is Really Paying?
Porter Stansberry is making a concerning prediction.
Roller Coaster Week Defined by Trade Headlines, Jobs Report
The Dow made outsized moves in both directions this week
Needham is Buying Trade Desk Ahead of the 2020 Election
Trade Desk stock has more than doubled in 2019
The Trend Minting Millionaires -- But Who Is Really Paying?
Porter Stansberry is making a concerning prediction.