Weibo has a history of negative post-earnings reactions
The shares of Weibo Corp (NASDAQ:WB) are taking a breather this afternoon, last seen down 0.6% to trade $45.65. The equity has cooled off a bit since bouncing off its 80-day moving average, a trendline of support since late September. Quarter-to-date, WB is up 25%. This all comes just a few days ahead of its third-quarter earnings report, which is due out before the open on Monday, Dec. 28.
Analysts are relatively divided concerning Weibo stock. Of the seven brokerages in coverage, three call it a "strong buy," versus the four recommending a tepid "hold" rating. Meanwhile, the consensus 12-month price target of $42.38 is a 7.2% discount to current levels.
However, the options pits have been overwhelmingly bullish of late. In the last 50 days, 6.90 calls were picked up for every put at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits higher than all but 1% of readings from the past year, implying a healthier-than-usual appetite for long calls of late.
Also worth noting, though WB's short interest is falling off, there's still an impressive amount of pent-up buying power. The 10 million shares sold short account for 8.1% of the stock's available float, and would take nearly nine days to cover at the stock's average pace of trading.
A look back at its past eight reports shows a generally negative post-earnings response for Weibo stock, which has only ended three of these next-day sessions higher. The security has averaged a post-earnings swing of 8.2%, regardless of direction. This time around, the options market is pricing in a slightly bigger move of 9%.