Earnings Season Highlights

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A collection of noteworthy post-earnings reactions
Published on May 26, 2022 at 4:32 PM
  • Market Recap
    
Published on May 26, 2022 at 3:19 PM
  • Best and Worst Stocks

Carrier Global Corp (NYSE:CARR) has been middling above the $37 level for the past month -- struggling to rally from its April 28 annual low of $36.23. Today, however, the stock is up 2.7% to trade at $39.34, and back above its 20-day moving average. Plus, this upcoming month has been a strong one for CARR, historically.

CARR May26

With the help of Schaeffer's Senior Quantitative Analyst Rocky White, we've compiled a list of the 25 best S&P 500 stocks to own in June, going back 10 years. Carrier Global stock is third on the list, averaging a June return of 7.2%, with 100% of the returns positive. From its current perch, this would put CARR just below the $43 level. 

There is plenty of room for upgrades, too, which could send the stock higher. Of the 16 analysts in coverage, 10 carry a "hold" rating on CARR. 

An unwinding of pessimism among short-term options traders could put additional wind at CARR's back, as these players are more put-biased than usual right now. This is per the security's Schaeffer's put/call open interest ratio (SOIR) of 0.89, which sits higher than 77% of readings from the past 12 months. 

Published on May 26, 2022 at 3:11 PM
Updated on May 26, 2022 at 3:12 PM
  • Best and Worst Stocks

Edwards Lifesciences Corp (NYSE:EW) has taken a tumble in the second quarter, shedding nearly 25% since its mid-April peak near the $131 mark. The stock looks to have found a bottom near the $91 level, which also captured a pullback in May of 2021, and recently broke back above its 10-day moving average after several weeks below here. With the security last seen up 1.7% at $98.50 and headed for its highest close in almost three weeks, plus a promising seasonal signal flashing for the medical equipment concern, it could be time to look into a rebound for EW in the coming month. 

ew may 26

A study put out by Schaeffer's Senior Quantitative Analyst Rocky White detailing the 25 best performing stocks in the month of June shows EW high on the list. During the past 10 years, Edward Life Sciences stock has enjoyed a positive one-month return nine times, averaging a 5.5% bounce during this time period. A similar move from EW's current perch would put it just below the $104 level. 

best of june

A unwinding of pessimism among options traders could create additional tailwinds. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), 3.81 puts have been picked up for every call in the past two weeks. This ratio its higher than 90% of readings from the past year, suggesting this penchant for bearish bets is unusual. 

Finally, EW sports a Schaeffer's Volatility Scorecard (SVS) of 85 out of a possible 100. This implies Edwards Lifesciences stock has tended to outperform options traders' volatility expectations of late -- a good thing for call buyers. 

Published on May 26, 2022 at 2:36 PM
  • The Week Ahead
 
Published on May 26, 2022 at 9:51 AM
Updated on May 26, 2022 at 1:54 PM
  • Buzz Stocks

Bally's Corp (NYSE: BALY) is a global casino-entertainment company with a presence in Online Sports Betting and iGaming. In early May, BALY announced that Bally's Chicago, its $1.7 billion destination casino, entertainment, and hotel project, was selected by the City of Chicago as the preferred bidder in the city's request for proposal process to construct and operate a casino resort in downtown Chicago.

Bally’s stock has lost 33% in 2022, and 54% in the last 12 months. The equity has seen a slight rise off its May 10, annual low of $21.25, though a former floor near the $26 level has kept a stiff lid on the shares, while the 20-day moving average looms ahead as potential resistance as well.

BALY may 26

This negative price action has attracted short sellers, with short interest surging 41.5% in the last two reporting periods. The 3.02 million shares sold short now make up 9.3% of the stock's available float, or over a week's worth of pent-up buying power. 

The casino stock now offers a low valuation at a price-sales ratio of 0.83, following its bearish form this past year and a surge in the company's revenue growth. Bally’s reported 254.7% revenue growth for fiscal 2021 and has already increased its trailing 12-month revenues by 26.9% since fiscal 2021. BALY is also estimated to end fiscal 2022 with 80.7% revenue growth, making the stock a strong option for growth investors to diversify their portfolios. In addition, the casino company is estimated report a positive earnings per share (EPS) of $1.00 for fiscal 2022. On top of that, Bally’s is estimated to grow revenues by 10.3% and earnings by 55% for fiscal 2023.

BALY, however, comes with a high level of risk due to its awful balance sheet. The company currently has $4 billion in total debt, which is about triple the casino stock's market cap of $1.31 billion. BALY also holds just $165.77 million in cash on its balance sheet, limiting potential expansion opportunities. Still, the reward potential remains high for Bally's stock due the business’ high sales growth rate and the expected shift into profitability, making it an intriguing short-term play, despite the company’s flawed fundamentals.

Published on May 26, 2022 at 1:36 PM
  • Best and Worst Stocks

Shares of Wynn Resorts, Limited (NASDAQ:WYNN) are trading 7.6% higher today, last seen at $64.24. While WYNN continues to distance itself from a May 12, roughly 26-month low of $56.36, the descending 20-day moving average has once again stepped in to cap any breakout attempts. What's more, the equity sports a year-over-year and year-to-date deficit of 51.5% and 24.4%, respectively, and history shows June may see these losses grow even more. 

WYNN Chart May 26

In fact, according to data from Schaeffer's Senior Quantitative Analyst Rocky White, Wynn Resorts has been one of the worst stocks to own in June on the S&P 500 Index (SPX), looking back over the past 10 years. The shares have averaged a June loss of 2.9%, and finished the month higher just three times over the last decade. 

Worst of Chart May 26

Despite this lack of technical backdrop in place, there's plenty of optimism to be unwound on the casino stock. Of the nine analysts covering the shares, four maintain a "buy" or "strong buy" rating. What's more, the equity is ripe for some price target adjustments, as the 12-month consensus price target of $91.50 is a 42.5% premium to current levels.

Options traders, meanwhile, have favored calls in the last two weeks, and should this bullish sentiment begin to unwind, it could pressure the security even lower. In fact, at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), WYNN's 10-day call/put volume ratio of 2.81 sits higher than 80% readings from the past 12 months. 

It's also worth noting that short interest rose 28.4% in the most recent reporting period. Now, the 6.99 million shares sold short make up 6.6% of Wynn Resort stock's available float, or just over two days' worth of pent-up buying power. 

Published on May 26, 2022 at 1:17 PM
  • Quantitative Analysis
  • Editor's Pick

Struggling Kroger Co (NYSE:KR) stock has seen a steady downtrend exacerbated by a few bear gaps since an April 8 record high of $62.78. The Cincinnati-based grocery giant has struggled in lockstep with the broader market in recent weeks, but has managed to cling above its year-to-date breakeven level. The silver lining? This recent pullback has put the stock near a trendline that could have historically bullish implications for KR, if past is precedent.

The trendline in question is Kroger stock's 160-day moving average. According to a study from Schaeffer's Senior Quantitative Analyst Rocky White, the stock has come within 2% of this trendline five other times in the past three years. The shares saw a positive one-month return after every single one of these signals, and averaged a 9.2% jump during that time period. From Kroger stock’s Thursday close of $48, a similar move would put KR just above $52.

It's also worth noting --like most of the broad market -- that the grocery stock sits firmly in "oversold" territory, indicating that a short-term bounce could be looming. This is per its 14-day Relative Strength index (RSI) of 27.

kr may 26 cotw

Options traders have been quite bearish amid the recent slide. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock sports a 10-day put/call volume ratio of 1.80, which sits higher than 96% of readings from the past year. In other words, options traders are picking up puts at a much quicker-than-usual clip, and an unwinding of this bearish sentiment here could send the stock even higher.

Analysts are also looking ripe for a drastic shift. Heading into Friday’s trading, 14 of the 18 covering brokerage firms carry a tepid "hold" or "strong sell" recommendation. Should this pessimism begin to fuel an unwind, we could see a slew of bull notes in the coming weeks and months for KR.

Now looks like the opportune time to get in on this rally with options. Specifically, KR’s Schaeffer's Volatility Scorecard (SVS) sits at 96 out of 100, implying the equity tends to outperform volatility expectations.

Subscribers to Chart of the Week received this commentary on Sunday, May 22.


Published on May 26, 2022 at 11:58 AM
Updated on May 26, 2022 at 12:03 PM
  • Midday Market Check

Stocks are sharply higher at midday, with investor sentiment improving amid talks that inflation may have at last reached its peak. The Dow Jones Industrial Average (DJI)  is sporting a 476-point lead this afternoon, looking to nab a fifth-straight gain as the retail sector rallies following a batch of upbeat earnings reports. The S&P 500 Index (SPX)  and Nasdaq 100 Index (NDX) are comfortably in the black as well, after Tesla (TSLA) CEO Elon Musk upped his personal financial commitment in his takeover bid of Twitter (TWTR) to $33.5 billion. In other major news, Broadcom (AVGO) is planning to buy VMware (VMW) for $61 billion.

Continue reading for more on today's market, including: 

  • Discount retail name getting blasted in the options pits.
  • Higher profit guidance helps Macy's stock charge higher.
  • Plus, meme stock avenged; Build-A-Bear stock pops on earnings beat; and unpacking this soccer stock's record low.

MMC Stats 0526

GameStop Corp.(NYSE:GME) is getting blasted in the options pits today. So far, 151,000 calls and 70,000 puts have crossed the tape, which is seven times the intraday average. The most popular contract is the 5/27 150-strike call, followed by the 140-strike call in the same weekly series, with positions being opened at both. The equity was last up 19.4% at $137.37, after the U.S. Securities and Exchange Commission (SEC) fined TradeZero over false statements regarding meme stocks. The shares earlier surged to their highest level since mid-April, and are today looking to settle well above their 120-day moving average. Year-over-year, though, GME still carries a hefty 43.5% deficit.

GME 120 Day

Near the top of the New York Stock Exchange (NYSE) is Build-A-Bear Workshop, Inc(NYSE:BBW), last seen up 15% to trade at $19.21. Today's bull gap came after the toy maker reported a first-quarter earnings and revenue beat. The company also issued an upbeat 2022 revenue forecast. It has been a volatile year so far for BBW, though the stock still sports a 45% year-over-year lead. Shares are today pacing for their best day since December, however, should these gains hold, and their second-straight daily win.

The worst performer on the NYSE is Manchester United PLC (NYSE:MANU), last seen down 12.5% at $11.38. The football club earlier posted worse-than-expected first-quarter losses and revenue, as higher wages and lower broadcast revenues weighed after it failed to qualify for next season's European Champions League. As a result, shares earlier hit an all-time low of $10.55, and now carry a 21.1% year-to-date deficit.

Published on May 26, 2022 at 10:21 AM
Updated on May 26, 2022 at 11:02 AM
  • Intraday Option Activity
  • Buzz Stocks
 
Published on May 26, 2022 at 10:54 AM
  • Buzz Stocks

Snowflake Inc (NYSE:SNOW) is down 12.8% to trade at $115.74 at last check, after the cloud name noted growth concerns said it doesn't expect a positive adjusted operating margin this quarter. The stock is being flooded with bear notes, too, as no fewer than 15 analysts slashed their price targets despite the company's strong first-quarter results. 

As a result, SNOW is trading at fresh record lows -- earlier falling to $112.10. Down 65.7% year-to-date, the stock is pacing for its seventh-straight monthly loss as we near the end of May. 

Put traders targeted Snowflake stock ahead of the earnings event. The equity's 10-day put/call volume ratio of 1.33 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits higher than 100% of readings from the past year. 

Options traders are still leaning bearish today, with 29,000 puts and 21,000 calls across the tape so far -- six times the intraday average. The weekly 5/27 100-strike put is the most popular contract, followed by the weekly 5/27 120-strike call, with new positions being opened at the latter. Unsurprisingly, today's volatile price action has SNOW on the short sale restricted (SSR) list.

Published on May 26, 2022 at 10:16 AM
Updated on May 26, 2022 at 10:17 AM
  • Intraday Option Activity
  • Buzz Stocks
Drilling down to today's options activity, 4,356 calls and 6,702 puts have crossed the tape in just the first half hour of trading, which is nine times the usual intraday amount. Most popular is the 5/27 75-strike put, followed by the 155-strike put in the same weekly series.
Published on May 26, 2022 at 9:28 AM
  • Buzz Stocks

The shares of Wiliams-Sonoma, Inc. (NYSE:WSM) are up 8.7% at $125.00 ahead of the bell, following the cookware retailer's first-quarter earnings report. Williams-Sonoma posted profits of $3.50 per share on $1.89 billion in revenue, topping analysts' estimates. Its same-store sales growth also tripled forecasts, and the company reiterated its full-year guidance, as it expects profit margins will remain stable. 

Analysts aren't so convinced. So far, at least seven brokerages have cut their price targets, including Jefferies by $35 to $130, after it warned on an "increasingly competitive environment." J.P. Morgan Securities also lowered its price objective to $114 from $120, noting that its consensus sales forecast is now looking harder to beat as demand begins to moderate. 

Still, the 12-month consensus price target of $149.35 is a healthy 30% premium to last night's close. Heading into today, however, the brokerage bunch was lukewarm, with five "buy" or better recommendations, compared to eight "holds," and two "sell" or worse ratings. 

Short sellers were swarming Williams-Sonoma stock ahead of its earnings event, rising 24% in the last two reporting periods. The 11.52 million shares sold make up 16.7% of the stock's available float, or nearly eight days' worth of pent-up buying power.

Like much of the market, its been a rough road for WSM, which has caved to pressure at its 20-day moving average during the past month-and-a-half. However, the equity could topple this trendline today, should these gains hold, as it chips away at its 32% year-to-date deficit. 

 

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