Earnings Season Highlights

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A collection of noteworthy post-earnings reactions
Published on Aug 6, 2020 at 4:32 PM
  • Market Recap

All major indexes finished higher on Thursday, lifted by the tech sector and optimistic unemployment data, even as the second round of coronavirus relief was still pending in Congress. The Dow and S&P 500 snagged their fifth-straight win, with the latter just below its February record high.

Meanwhile, the Nasdaq grabbed yet another record high, with giants such as Facebook (FB), Apple (AAPL), Netflix (NFLX) and Microsoft (MSFT) contributing to the broader market's gains. Elsewhere, Wall Street's 'fear gauge,' the Cboe Volatility Index (VIX), logged its fifth straight loss.

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

    • These two video game stocks are worth playing this month.
    • A website domain stock topped out analysts' revenue and outlook estimates.
    • Plus, a hotel stock reported steep losses due to coronavirus; a pharmaceutical stock is starting a company; understand the main difference between calls and long calls.

    The Dow Jones Industrial Average (DJI - 27,386.98) gained 185.5 points, or 0.7% for the day. Apple (AAPL) finished with a 3.5% jump, pacing the 17 gainers. Raytheon Technologies (RTX) paced the 13 laggards with a 0.3% fall.

    Meanwhile, the S&P 500 Index (SPX - 3,349.16) added 21.4 points, or 0.6% for the day. The Nasdaq Composite (IXIC - 11,108.07) rose 109.7 points, or 1% for today's session.

    Lastly, the Cboe Volatility Index (VIX - 22.65) lost 0.3 point, or 1.5%, for the day.

    closing summary august 6

    nyse nas august 6

    1. Mortgage rates continue to fall, breaking a record-low for the eighth time this year. However, rising demand and high prices mean homes are less affordable. (CNBC)
    2. New York Attorney General Letitia James filed a lawsuit to dissolve the National Rifle Association (NRA), alleging a violation of non-profit laws. (MarketWatch)
    3. This hotel stock reported steep quarterly losses after COVID-19 slashed bookings.
    4. This pharmaceutical stock is planning an independent eye-care company.
    5. Our first education series breaks down the difference between calls and long calls.

    earnings august 6

    unusual options august 6

    Data courtesy of Trade-Alert

    Oil Takes a Breather, While Gold Extends Rally

    Oil futures snapped a four-day win streak today, taking a breather as fuel demand concerns flare up again. September-dated crude was down 24 cents, or 0.6%, to end at $41.95 a barrel. 

    Gold futures, however, continued to soar for the fifth consecutive session, coming close to the $2,100 level. Gold for December, which is the most-active contract, rose $20.10, or 1.1%, to settle at $2,069.40 an ounce.

    Published on Aug 6, 2020 at 3:32 PM
    • Best and Worst Stocks
    Gaming stocks Take-Two Interactive (TTWO) and Entertainment Arts (EA) are a few of the best to own in August, and both are just a few days removed from fresh all-time highs
    Published on Aug 6, 2020 at 3:08 PM
    • Strategies and Concepts

    As retail traders flood the market a return to the basics may help novice traders understand the fundamentals of options trading, we're going to run a weekly post about options education. First up is the difference between call and long call options.

    Though their names may sound similar, call and long call options are inherently different. A call option is a contract that gives investors the right -- but not the obligation -- to buy a stock at a certain strike price, allowing them to profit from an asset that rises in value by buying it a lower strike price. Meanwhile, long call options traders are actually buying shares of a certain stock, with the belief that they will rise beyond a certain strike price before a pre-determined expiration date. One of the main differences, therefore, is that long calls can instantly give you equity, while calls give you the ability to buy shares at a discount.

    There are advantages and disadvantages to each one of these strategies. For one, the potential for profit on long calls is astronomical, as there are technically no limits to how high a stock could go. In addition, long call investors get paid dividends, since they are also shareholders. As for call traders, they could get a bargain on a booming stock, and their risk is limited since the cost of contract is the most they could ever lose, should it not live up to expectations.

    That being said, call buyers may not necessarily see as much of a profit, and will not get paid dividends as they do not have equity in a company until they choose to buy shares. Conversely, long call traders could lose money they invested into a certain stock, if shares do not move higher than the strike price before the pre-determined expiration date. In other words, call holders won't benefit from dividend payments the same way a shareholder would.

    These distinctions are important when deciding how to invest in an equity. Next week, we'll dive into how investors can use pairs trades to take advantage of a given sector.

    Published on Aug 6, 2020 at 3:07 PM
    • Editor's Pick
    • Quantitative Analysis
    • Best and Worst Stocks

    Yesterday, we highlighted the 25 best S&P 500 stocks to own in August in the last 10 years. Today, we're going in the other direction, looking at the 25 worst S&P 500 stocks to own in August. A quick scan of the list reveals one theme; a prevalence of oil and gas producers. Among the seven oil-and-gas names on the 25-stock list are, blue-chips Exxon Mobil Corporation (NYSE:XOM) and Chevron Corporation (NYSE:CVX).

    Worst August

    According to data from Schaeffer's Senior Quantitative Analyst Rocky White, over the last 10 years, XOM averages a drop of 3.5% in August, with only two of the 10 returns positive. Last seen trading at $44.45, the $44 level -- which has stymied Exxon Mobil stock in the last month or so -- could continue to serve as a stiff ceiling as summer winds down. Year-to-date the security has taken a 38% haircut.

    Looking at Chevron, White's data shows that the stock's average loss for August comes in at 3.2%, with 20% of the returns positive. CVX was last seen trading at $86.94, down 28% in 2020. 

    Lastly, both Dow names sport attractively priced premiums at the moment. XOM and CVX's Schaeffer's Volatility Indexes (SVI) of 35%, respectively, both sit lower than the bottom 20th percentile of readings from the past year.

    Published on Jun 19, 2020 at 3:18 PM
    Updated on Aug 6, 2020 at 2:56 PM
    • 5-Minute Market Rundown

    The spike in coronavirus cases throughout the U.S. and globally has ever-increasingly plagued the Dow Jones Industrial Average (DJI) this week. However, the blue-chip index rose for the first couple days, as the major indexes received a boost from the  Federal Reserve’s individual bond announcement and a record surge in retail sales. These gains came in spite of the reopened wave of pandemic fear permeating throughout the country, followed by cautious rhetoric from Fed Chair Jerome Powell. Additionally, the Trump administration’s $1 trillion infrastructure proposal helped curb pessimism. Towards the middle of the week, however, the SPX 500 Index (SPX) and Dow snapped their three-day win streaks, while the Nasdaq Composite (IXIC) continued on to five straight wins by Thursday, despite disappointing jobs data for the 13th week straight. Amidst all of this volatility and attention-grabbing headlines, the three benchmarks are looking at sizable weekly wins.

    Tech Bubble Boosting the Nasdaq

    Tech stocks stole the show this week as the Nasdaq inked a four-day winning streak. At the start of this week, Intel (INTC) was upgraded on tech potential, and Finland-based tech company Nokia Oyj (NOK) made a deal with Broadcom (AVGO) to expand its 5G portfolio. FAANG stock Apple (AAPL) hit new highs despite legal trouble with the European Union (EU), while one Apple supplier wasn't as lucky. Also, Coupa Software's record highs came alongside a bull signal, and music streaming service Spotify (SPOT) found all-time highs after a podcast deal

    And speaking of podcasts, check out our rebooted Schaeffer's Market Mashup podcast!

    Reopening Buzz Targets Retailers

    More and more retail companies are rallying out of their pandemic-induced slumps -- as the record high in retail sales this week shows -- while others continue to fall behind under the lasting affects of the coronavirus. Auto retailer CarMax (KMX) has carved out a channel of highs recently, with calls increasingly popular in the options pits. Tanger Factory Outlets Centers Inc (SKT) soared on the announcement that nearly three quarters of its occupied stores were open. On the other end of the spectrum though, home furnishing retailers La-Z-Boy (LZB) and Williams-Sonoma (WSM) both took a breather, the latter after hitting fresh highs

    More Economic Data on Tap Next Week

    The earnings calendar has plenty of economic data for investors to sift through next week. Most notably there will be the first-quarter gross domestic product (GDP) reading, while traders will also keep an eye on another round of jobs data. Wall Street's "fear gauge," the Cboe Volatility Index (VIX) slumped this week, but is still situated below a key trendline that will be one to watch in the future. And in the meantime, check out this study examining what the S&P 500's torrid pace means for these 20 stocks. Lastly and perhaps most importantly, in recognition that everyone is responsible to further educate themselves and elevate the black community, here are two black-owned companies on Wall Street to recognize and highlight.

    Published on Aug 6, 2020 at 12:07 PM
    Updated on Aug 6, 2020 at 12:12 PM
    • Midday Market Check

    The Dow Jones Industrial Average (DJI) is flat at midday, as investors digest better-than-expected weekly jobless claims for the last week of July. The S&P 500 Index (SPX) and Nasdaq Composite (IXIC) are hovering just below breakeven as well, with the market awaiting word on the second stimulus bill. The Trump Administration Wednesday spoke about the potential for executive action if a compromise is not reached in congress this week. 

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

    • What sent Zynga stock to an eight-year high out of the gate. 
    • Pharma name soars amid spinoff buzz. 
    • Plus, analysts and options traders chime in on WDC; Denali Therapeutics stock surges on collaboration; and meal delivery service stock plummets. 

    mmc august 6

    One stock seeing notable activity in its options pits is Western Digital Corporation (NASDAQ:WDC), down 16.6% at $37.08 at last check. Following the company's fiscal fourth-quarter revenue that came in below estimates, Craig-Hallum downgraded the stock to "hold" from "buy," chiming in alongside no fewer than 12 analyst price-target cuts. So far, 29,000 calls and 26,000 puts have crossed the tape -- six times what's typically seen. Most popular is the September 32.50-strike call, where new positions are being opened. Today's bear gap now has the equity swimming in a 40% year-to-date deficit.

    One stock scaling the Nasdaq today is Denali Therapeutics Inc (NASDAQ:DNLI), up 37.4% at $31.93 at last check, after announcing a collaboration with Biogen (BIIB) in regard to Denali's experimental Parkinson's disease treatments. Today, the stock is extending past it's former January record highs, earlier hitting $35.70. Year-to-date, the equity is up 82.7%. 

    Meanwhile, dropping to the bottom of the New York Stock Exchange (NYSE) today is Blue Apron Holdings, Inc (NYSE:APRN), down 20.7% at $9.03, at last check. This slide comes after the company announced a 4 million dollar public share offering -- a deeply discounted rate. However, the 200-day moving average looks to be moving in as a potential layer of support, and the equity is still up 37.5% year-to-date. 

    APRN mmc

    Published on Aug 6, 2020 at 11:31 AM
    • The Week Ahead

    Earnings season is winding down, though reports from several heavy hitters continue to trickle in. Gold stocks will be in focus next week, with quarterly reports due out from sector members Barrick Gold (GOLD) and Wheaton Precious Metals (WPM). Several big names out of China will enter the earnings confessional, too, including Tencent Music (TME), Alibaba (BABA), HUYA (HUYA), NIO (NIO) and JD.com (JD). Dow member Cisco Systems (CSCO) is also expected to post earnings on Wednesday. 

    The economic calendar, meanwhile, is buzzing with activity next week. The latest Job Openings and Labor Turnover Survey (JOLTS) is due out, as well as the Consumer Price Index (CPI), the most recent Federal Budget update, and retail numbers for last month. 

    Below is a brief list of some key market events and a few high-profile earnings releases scheduled for the upcoming week. All earnings and economic dates listed below are tentative and subject to change. Please check with each company's respective website for official reporting dates.

    Monday, August 10, will kick the week off with JOLTS data. Meanwhile. Barrick Gold, Canopy Growth (CGC), JD.com, Royal Caribbean (RCL), Tencent Music, and Tilray (TLRY) will step into the earnings confessional. 

    Economic data will pick up slightly on Tuesday, August 11, with the National Federation of Independent Business (NFIB) index, and the most recent producer price index (PPI) due out. Earnings, will slow down, with reports from Canada Goose (GOOS), HUYA (HUYA), NIO (NIO), and Sysco (SYY) on tap. 

    On Wednesday, August 12, investors will digest the consumer price index (CPI), and the Core CPI, along with the the Organization for Petroleum Exporting Countries (OPEC) monthly report. The Federal Budget is also due out. The earnings docket includes reports from Cisco, Lyft (LYFT), SmileDirectClub (SDC), and Wheaton Precious Metals. 

    On Thursday, August 13, investors will keep an eye on initial and continuing jobless claims, as well as the import/ export price index. It will also be a busy day on the earnings end of things, with Alibaba, Baidu (BIDU), Dillard's (DDS), iQIYI (IQ), and Tapestry (TPR) all set to report. 

    There is ample economic data lined up for Friday, August 14, including retail sales, unit labor costs, industrial production, consumer sentiment, and business inventories.

    Published on Aug 6, 2020 at 11:00 AM
    Updated on Aug 6, 2020 at 11:09 AM
    • Buzz Stocks

    The shares of Bausch Health Companies Inc (NYSE:BHC) are soaring after the company confirmed it is planning to spin off its eye care business, Bausch + Lomb, into a separate publicly traded company. However, potentially paring further gains is BHC's second-quarter report, out this morning, which shows revenue and losses per share missing analysts' estimates. Nevertheless, BHC was last seen up 7.7% at $20.96. 

    Today's rally has Bausch Health stock trading at levels not seen since early March, before the broader market's selloff. Furthermore, the equity just broke above its 160-day moving average for the first time since late February. Year-to-date, BHC is still down 23.5%. 

    On the analyst front, 10 out of 14 in coverage sport a "strong buy," with the remaining four at a "hold" or worse rating. Meanwhile, the consensus 12-month price target of $26.50 is a 17.7% premium to current levels.

    In the options pits, calls have outnumbered puts at a 10-to-1 ratio over the past 10 weeks at the Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio also stands higher than 86% of readings from the past year, meaning long calls are more popular than usual. 

    After today's news, call volume is seeing an exceptional surge. So far, 15,000 calls have crossed the tape -- 14 times what's typically seen. Most popular is the January 2021 15-strike call, followed by the weekly 8/7 23-strike call, with positions being opened at both. 

    That said, now may be a good time to weigh in on BHC's next move with options. The stock's Schaeffer's Volatility Index (SVI) of 66% stands higher than just 19% of all other readings in its annual range, implying that options players are pricing in relatively low volatility expectations at the moment. 

    Published on Aug 6, 2020 at 10:15 AM
    Updated on Aug 6, 2020 at 10:58 AM
    • Intraday Option Activity
    • Buzz Stocks
     
    Published on Aug 6, 2020 at 9:21 AM
    Updated on Aug 6, 2020 at 10:05 AM
    • Intraday Option Activity
    • Buzz Stocks
     
    Published on Aug 6, 2020 at 9:38 AM
    Updated on Aug 6, 2020 at 9:47 AM
    • Buzz Stocks
    • Analyst Update

    Website domain provider Godaddy Inc (NYSE:GDDY) is surging ahead of the bell, up 11.3% to trade at $82.90 following its second-quarter earnings report. The firm reported losses of $4.06 for the quarter, much lower than the 17-cent profit that was expected by analysts. However, Godaddy also reported a revenue beat, and its third-quarter forecast topped expectations.

    In response, no less than eight analysts lifted their price targets for GDDY, including J.P. Morgan Securities, which raised its target to $110, as well as Raymond James, which raised it to $92. Both analysts also upgraded the stock, to "overweight" and "strong buy," respectively. 

    Coming into today, most analysts were already riding that bullish bandwagon. Just one of the 10 in coverage called the security a "hold," compared to nine that carried a "buy" or better rating. Meanwhile, the consensus 12-month price target of $89.86 was a 20.7% premium to last night's close. 

    Options players are in the same boat, per Godaddy's 50-day call/put volume ratio of 4.81 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio stands higher than 91% of reading from the past year, suggesting a healthier-than-usual appetite for long calls of late. 

    Today's move has GDDY breaking recent pressure at its 60-day moving average to circle back to its 22-month high of $84.49 on June 23. While this level -- which sits right underneath its 2018 all-time-highs -- sent GDDY back below its pre-bull gap levels, the 320-day moving average managed to bolster the equity, now on course to notch its third-consecutive win.

     

    Published on Aug 6, 2020 at 9:24 AM
    • Opening View

    Futures on the Dow Jones Industrial Average (DJI) are hovering just above fair market value this morning, following the release of some promising jobless claims data. The Labor Department said initial jobless claims for the week totaled 1.18 million, well below the 1.42 million estimates, and the lowest since the beginning of the pandemic.

    Elsewhere, futures on the S&P 500 Index (SPX) and Nasdaq-100 Index (NDX) are struggling for direction ahead of the open. The latter index ended the day higher yesterday, locking in its 31st record close on the year. Meanwhile, investors are still awaiting a decision regarding additional COVID-19 stimulus.

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

    • Could the election shake up the stalwart semiconductor sector?
    • A bullish signal could mean new highs for Crispr Therapeutics stock.
    • Plus, QSR struggles, despite earnings beat; VIACA climbs on Q2 results; and Live Nation's earnings perform worse than expected

    Futures Chart August 6

    5 Things You Need to Know Today

    1. The Cboe Options Exchange (CBOE) saw over 1.8 million call contracts traded on Wednesday, and 735,927 put contracts. The single-session equity put/call ratio fell to 0.41, and the 21-day moving average stayed at 0.46.
    2. Tim Hortons, Burger King, and Popeyes parent Restaurant Brands International Inc (NYSE:QSR) reported second-quarter profits and revenue that beat Wall Street's forecasts. Despite this, QSR is down 1.3% ahead of the bell. The company added that it managed to recoup 90% of last year's systemwide sales by the quarter's end.
    3. ViacomCBS (NASDAQ:VIACA) reported second-quarter profits and earnings that bested analysts' expectations, resulting in a 3.7% pop before the market open. The company pointed toward growth in its streaming business amid stay-at-home orders, though it did cite a decline in ad revenue for its sliding profits. 
    4. Live even promoter Live Nation Entertainment, Inc. (NYSE:LYV) reported wider-than-expected losses in the second quarter. The company's revenue also missed the mark, undoubtedly due to the near elimination of large gatherings during the pandemic. LYV is down 1.9% before the open. 
    5. Today, investors will keep an eye on weekly jobless claims data, while earnings from Cloudflare (NET), Dropbox (DBX), First Solar (FSLR), GoPro (GPRO), Fortinet (FTNT), Papa John's (PZZA), T-Mobile (TMUS), Uber (UBER), and Yelp (YELP) are on tap. 

    Buzz Chart Aug 6

    Asian Markets Mixed as U.S.-China Tensions Flare; European Stocks Struggling

    Stocks in Asia were a mixed bag in today’s session, despite a rally from their U.S counterparts. Amid an uptick in coronavirus cases in Hong Kong, the Hang Seng lost 0.7%, while Japan’s Nikkei dropped 0.4%. Meanwhile, tension continues to rise between the U.S. and China, as it was announced that President Donald Trump’s administration wants to call for a broad ban on “untrusted” Chinese apps. In closing, China’s Shanghai Composite added 0.3%, and the Kospi in South Korea gained 1.3%.

    In Europe, shares are struggling today, as corporate earnings continue to be highlighted. London’s FTSE 100 is down 1.8%, after the Bank of England (BoE) decided to leave interest rates at 0.1% -- an all-time low. Elsewhere, the French CAC 40 is down 1.3%, and the DAX in Germany has dipped 0.9%.


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