Earnings Season Highlights

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A collection of noteworthy post-earnings reactions
Published on May 22, 2015 at 9:25 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Buzz Stocks

U.S. stocks are signaling a strong open, ahead of Fed Chair Janet Yellen's afternoon speech. Among the equities in focus are smartphone maker BlackBerry Ltd (NASDAQ:BBRY), farming equipment firm Deere & Company (NYSE:DE), and online travel concern eLong, Inc. (ADR) (NASDAQ:LONG)​. 

  • BBRY is moving higher on news the company will buy back up to 12 million shares. In pre-market action, the stock is 3% higher, after finishing yesterday at $10.27. BlackBerry Ltd could feel some tailwinds, too, if analysts and/or option traders change their skeptical tune. For instance, 16 of 19 brokerage firms say BBRY is a "hold" or worse. Also, at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 50-day put/call volume ratio of 0.55 represents an annual bearish peak. Should sentiment shift in a more positive direction, BBRY could add to its 41% year-over-year lead.

  • A fiscal second-quarter earnings beat has DE 3.4% higher ahead of the open. Like BBRY, Deere & Company could see an added boost if it can sustain today's potential rally, and answer the skeptics. Twelve of 15 analysts say the stock is only a "hold" or worse. What's even more eye-popping, though, is short interest on DE. Almost 10% of the security's float is sold short, and would take close to three weeks to repurchase, at average daily volumes. There's certainly potential for a short-squeeze situation. The shares settled at $89.46 yesterday. 

  • LONG is booming in electronic trading, boasting a 33.7% lead, after Expedia Inc (NASDAQ:EXPE) announced it sold its stake in the company to Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRP) and several other parties. This will just add to eLong, Inc.'s impressive 15.1% year-to-date lead, finishing yesterday at $20.65. In fact, these pre-market gains have LONG poised to hit levels not seen since May 2011. There's plenty of sideline cash to fuel additional upside, too, as current short interest levels would take one week to buy back, at the stock's typical daily trading rate.
Published on May 22, 2015 at 9:35 AM
Updated on Mar 19, 2021 at 7:15 AM
  • VIX and Volatility

It's Friday. It's Memorial Day weekend. It's … very likely to be really slow, as far as options go today.

Just a quick refresher before we get to the disjointed "random thoughts" section of our show. Options have time value. Not all time is created equal. Time that includes three days of no trading and a fourth day that contains very little trading and price action has way less value than four normal trading days. As such, traders tend to lower bids and offers into long weekends. This translates into lower implied volatility readings and declines in indexes like the CBOE Volatility Index (VIX) that proxy volatility.

Yada, yada, yada … we may see the 2015 VIX lows pierced again today, followed by a VIX "rally" on Tuesday, when the calendar itself catches up. It's not terribly meaningful; it won't really effect the tradable VIX complex.

Anyway, way back when, companies had to trade for a few months before their options listed. That's not at all true anymore; it takes like a week now, for most names. But not all names…

I'm not entirely sure which condition Shake Shack Inc (NYSE:SHAK) violates. I also don't care; let's waive it. It figures to be a very popular options series when it lists. Not to mention it's going to see some nice high volatility, and we could use that in a widely followed name.

While you're waiting for SHAK options to trade, I highly recommend eating an actual Shack Burger -- they're awesome. Not sure they're "5,000x earnings" awesome, but I know more about burger eating than proper burger chain valuations. And besides, it's not just burgers:

"Shake Shack is considering the launch of a Chick-fil-A killer, according to a company filing.

"The burger chain's subsidiary, SSE IP, filed an application to trademark the name 'chicken shack,' CNBC reports.

"That could mean the company is testing a chicken sandwich or a new chain with a chicken-based menu.

"Shake Shack hasn't revealed any details of its plans."

And after that? How about going after Sirius XM Holdings Inc. (NASDAQ:SIRI)? We can call it "Radio Shack." Then a foray into '80s pop music with "Love Shack." Followed by a white paper on NBA fouling titled "Hack a Shaq."

OK, sorry. Never mind.

I do have a white paper for you, though, h/t Alexander Aljechin. So don't tell me you have nothing to read at the beach this weekend!

"This working paper develops first a mean-reverting logarithmic model for the VIX. In the next step the relation between the VIX and VIX Futures is modeled. VIX Options are evaluated by Monte-Carlo Simulation of Option-Trading Strategies. The model is also applied to the VIX based ETN VXX and VXX Options and extended to the VSTOXX and VSTOXX Futures."

And finally, #ThanksDave. I'm talking the David Letterman from the Late Night NBC years -- he was just awesomely funny and off the wall. I'm not sure old clips would do it justice. It was just great.

Disclaimer: Mr. Warner's opinions expressed above do not necessarily represent the views of Schaeffer's Investment Research.

Published on May 22, 2015 at 9:39 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Analyst Downgrades

Analysts are weighing in on computer issue Hewlett-Packard Company (NYSE:HPQ), semiconductor concern Marvell Technology Group Ltd. (NASDAQ:MRVL), and biopharmaceutical firm Otonomy Inc (NASDAQ:OTIC). Here's a quick roundup of today's bearish brokerage notes on HPQ, MRVL, and OTIC.

  • HPQ received price-target cuts from Cantor (to $33), RBC (to $37), and BMO (to $38), after the firm posted mixed results for its fiscal second quarter, and said it will endure around $400 million in costs when it splits into two separate companies in November. These aren't the first headlines HPQ has made this week, with yesterday's M&A news providing Hewlett-Packard Company shares with a quick shot in the arm. Longer term, though, the stock has been a laggard, shedding more than 14% of its value year-to-date. Another round of downwardly revised price targets could be in the pipeline, should HPQ continue to struggle. The security's average 12-month price target of $40.40 represents expected upside of 17.4% to HPQ's present price of $34.42.
  • A number of brokerage firms chimed in on MRVL, following the company's first-quarter revenue miss. Additionally, Marvell Technology Group Ltd. offered up a lower-than-expected current-quarter forecast and announced the retirement of Chief Financial Officer Mike Rashkin. Included in the bunch was Credit Suisse, which cut its price target to $13 from $16, and Jefferies, which reduced its target price to $14 from $15. Raymond James, meanwhile, boosted its price target to $16 from $15 -- a 14.7% premium to the stock's current perch at $13.95. Against this backdrop, MRVL is down 2.9% at the open, which could prompt some option bulls to hit the bricks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), MRVL's 50-day call/put volume ratio of 11.52 sits in the 94th annual percentile. In other words, calls have been bought to open over puts with more rapidity just 6% of the time within the past year.
  • OTIC plunged 18.4% out of the gate to $25.35, after the company's experimental ear drug, OTO-104, failed to meet the main goal of its mid-stage trial. Adding to the bearish bias is a downgrade to "neutral" from "overweight" and price-target cut to $30 from $42 at J.P. Morgan Securities. Bernstein also weighed in on Otonomy Inc, reducing its target price to $30 from $34. Heading into today's session, the stock had already lost over a quarter of its value since topping out at a record high of $41.99 in mid-March, and short sellers have likely been cheering. At present, more than 10% of the equity's float is sold short.
 

 

Published on May 22, 2015 at 10:39 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Intraday Option Activity
FireEye Inc (NASDAQ:FEYE) has jumped 4.3% this morning to trade at $45.14, following a plug from Hewlett-Packard Company (NYSE:HPQ) CEO Meg Whitman during an interview with CNBC.  As such, FEYE calls are flying off the shelves at four times the usual intraday rate, and three times the pace of puts.

The cybersecurity stock's most active strike is the out-of-the-money June 46 call, which is seeing possible buy-to-open activity. By initiating these positions, option bulls anticipate FEYE will topple $46 by the close on Friday, June 19, when the front-month series expires. The shares haven't explored territory north of $46 since late February, but delta on the option has jumped to 0.45 from 0.30 at Thursday's close, signaling growing odds of an in-the-money finish.

A capitulation among skeptics on Wall Street could give FEYE the boost it needs. For instance, half of the analysts tracking the stock consider it a "hold" or worse, and its average 12-month price target of $47.50 stands at a slim 5.2% premium to current trading levels. Also, 11.6% of the equity's float is sold short, suggesting there's plenty of sideline cash available to fuel a short-covering rally.

On a longer-term basis, FireEye Inc (NASDAQ:FEYE) has been impressive. Since the end of 2014, the shares have surged over 43%, ushered higher by their 80-day moving average.

Published on May 22, 2015 at 10:58 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Intraday Option Activity
Similar to fellow drugmaker Otonomy Inc (NASDAQ:OTIC), Esperion Therapeutics Inc (NASDAQ:ESPR) is having a rough day. The shares were off nearly 11% at their intraday low -- and were last seen down 6.8% at $106.02 -- after receiving a dreary analyst note. What's more, the stock has earned itself a spot on the short-sale restricted list. The sell-off has done little to sway option traders' enthusiasm, with calls changing hands at seven times what's typically seen at this point in the day, and outpacing puts by a nearly 3-to-1 margin.

Seeing the most action in ESPR's options pits thus far is the June 115 call. It appears as if traders are purchasing new positions here for a volume-weighted average price (VWAP) of $3.46, making breakeven for the call buyers $118.46 (strike plus VWAP). This is just a stone's throw away from the security's record high of $120.96, tagged yesterday.

Today's call-skewed session is just more of the same toward a stock that had nearly tripled in value year-to-date heading into today's trading. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open 2.57 calls for each put over the past two weeks.

Plus, ESPR sports a Schaeffer's put/call open interest ratio (SOIR) of 0.50. In other words, call open interest doubles put open interest among options expiring in three months or less.

As touched upon, Esperion Therapeutics Inc (NASDAQ:ESPR) is falling today after receiving some bearish backlash from the brokerage bunch. Specifically, Chardan Capital Markets initiated coverage on the stock with a "sell" rating and a $55 price target -- a more than 48% discount to current trading levels -- citing a dangerous risk-reward profile. Analysts seem to be at odds, as this runs counter to the upbeat "overweight" initiation ESPR received at Barclays Wednesday, which went along with a $150 price target.
Published on May 22, 2015 at 11:38 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Intraday Option Activity
Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRP) is soaring today -- up 14% at $82.09, and fresh off a record high of $82.82 -- after the company took over part of Expedia Inc's (NASDAQ:EXPE) stake in eLong, Inc. (ADR) (NASDAQ:LONG)​. The news is being well-received in all corners of Wall Street, with Raymond James boosting its outlook to "strong buy" from "market perform," and calls trading at five times the average intraday pace.

Short-term options are in high demand, as evidenced by CTRP's 30-day at-the-money implied volatility, which is up 11.9% at 36.8%. Specifically, the stock's June 80 and 81 calls have received notable attention, and it looks as if some of the activity is of the buy-to-open kind. If traders are indeed initiating new long positions here, the goal is for CTRP to extend today's rally, and settle north of the strikes at the close on Friday, June 19 -- when front-month options expire.

Widening the sentiment scope reveals puts buyers have been active in CTRP's options pits in recent months. In fact, the stock's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.93 sits just 2 percentage points from a 52-week peak. In other words, puts have been bought to open over calls at a near-annual-high clip.

On the charts, today's bull gap is just par for the stock's recent course, with shares of CTRP up 29% month-to-date -- thanks in part to a strong showing in the earnings confessional and a subsequent round of upbeat analysts notes in mid-May. Longer term, the security is boasting a year-to-date lead of 80%. As such, it's possible some of the recent put buying -- specifically at out-of-the-money strikes -- is a result of Ctrip.com International, Ltd. (NASDAQ:CTRP) shareholders protecting paper profits against an unexpected pullback.

Published on May 21, 2015 at 12:14 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Analyst Update

Analysts are weighing in today on software firm Open Text Corporation (USA) (NASDAQ:OTEX), telecom titan T-Mobile US Inc (NYSE:TMUS), and blue chip Pfizer Inc. (NYSE:PFE). Here's a quick roundup of today's brokerage notes on OTEX, TMUS, and PFE.

  • OTEX is fresh off an annual low of $42.29, as the company's strategic update last night -- which included lackluster guidance and a planned 5% workforce reduction -- failed to impress. Brokerage firms panned the presentation, with no fewer than 10 cutting their price targets on Open Text Corporation. At last check, the shares were perched nearly 12% lower at $43.19. Should this technical trajectory persist, additional price-target cuts could come down the pike. OTEX's average 12-month price target is $72.82 -- a 69% premium to current trading levels, and in all-time-high territory.

  • On the flip side, TMUS hit a multi-year high of $36.81 earlier, after the CEO of parent company Deutsche Telekom vowed to consider partners to improve the subsidiary's performance, and also added that it is in a better condition now than two years ago. Subsequently, Bernstein upped its price target on T-Mobile US Inc to $36 from $32 -- still a discount to the stock's current price of $36.36. Put buyers may be wringing their hands amid the equity's 3.3% rally. TMUS sports a 10-day put/call volume ratio of 7.31 across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Not only does this ratio indicate more than seven puts have been bought to open for every call during the last two weeks, it likewise stands in the 93rd percentile of its annual range.

  • PFE is up 0.3% at $34.41, after being named a "top global pick" by Jefferies. The shares have performed well in 2015, cruising atop their 20-week moving average for a 10.5% year-to-date gain. It also appears Pfizer Inc.'s 10- and 20-day moving averages are on the verge of a bullish cross, suggesting potential upside ahead. Options traders at the ISE, CBOE, and PHLX have been betting bullishly on PFE of late. The stock's 10-day call/put volume ratio checks in at 5.25 -- higher than four-fifths of comparable readings from the past 12 months.
Published on May 21, 2015 at 1:17 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Intraday Option Activity
Similar to the broader equities market, Netflix, Inc. (NASDAQ:NFLX) is waffling around record highs, despite an upbeat outlook from Citigroup and a shout out from CNBC's Jim Cramer. At last check, the shares were off 0.2% at $620.51 -- after earlier being within striking distance of a new all-time peak. In the options pits, each of the stock's 10 most active strikes reside in the weekly 5/22 series, with a number of speculators gambling on a steeper retreat through tomorrow's close.

Specifically, the equity's weekly 5/22 620-strike put has seen the most action, and it looks as if new positions are being purchased for a volume-weighted average price (VWAP) of $3.27. In other words, speculators will profit if NFLX breaches the breakeven price of $616.73 (strike less VWAP) by week's end.

Widening the sentiment scope reveals it's been NFLX call buyers who have been busy in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day call/put volume ratio of 1.15 rests in the 82nd percentile of its annual range.

Regardless, those purchasing NFLX's short-term options are doing so at a relative bargan. In fact, the equity's Schaeffer's Volatility Index (SVI) of 27% sits lower than 91% of similar readings taken in the past year, and its 30-day at-the-money implied volatility of 26.7% is docked in the 16th annual percentile. In other words, premium on the stock's near-term options is pricing in relatively low volatility expectations at the moment.

On the charts, Netflix, Inc. (NASDAQ:NFLX) has been a force to be reckoned with this year, up 81.5%. As touched upon, Citigroup thinks there's more room to run. While not as bold as Pivotal Research's price-target hike earlier this week, the brokerage firm upped its target price to $722 -- representing expected upside of 16.4% to current trading levels, and a move into never-before-seen territory.
Published on May 21, 2015 at 1:48 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Intraday Option Activity
Yahoo! Inc. (NASDAQ:YHOO) is up 2.1% at $43.67 -- perhaps on an analyst-induced halo lift from Alibaba Group Holding Ltd (NYSE:BABA). Option traders are responding in kind, with calls crossing the tape at nearly two times what's typically seen at this point in the day, and outpacing puts by an almost 2-to-1 ratio.

Receiving notable attention has been YHOO's weekly 5/22 44-strike call, where it appears new positions are being purchased. If traders are indeed buying to open the near-the-money calls, the goal is for the stock to rally north of the strike through tomorrow's close -- when the weekly series expires. Amid today's pop, delta on the call has almost tripled to 0.34 from 0.12 at last night's close, indicating an increased probability of an in-the-money finish.

This optimism runs counter to the withstanding trend seen in YHOO's options arena. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security's 10-day put/call volume ratio of 0.69 sits just 1 percentage point from a 52-week peak. In other words, puts have been bought to open over calls at a near-annual-high clip.

Echoing this is the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.65, which ranks in the 92nd percentile of its annual range. Simply stated, short-term speculators are more put-heavy than usual toward YHOO.

On the charts, Yahoo! Inc. (NASDAQ:YHOO) has struggled since hitting a 13-year high of $52.62 in November, off 17%. These recent technical troubles were exacerbated earlier this week, when YHOO took an IRS-related dive -- a move that analysts were quick to take note of.
Published on May 21, 2015 at 1:54 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Intraday Option Activity
Hewlett-Packard Company (NYSE:HPQ) options are flying off the shelves ahead of the company's fiscal second-quarter earnings report, due out this evening.  At last check, over 82,000 contracts were on the tape, compared to an expected intraday amount of 11,000.

Digging deeper, speculators are gambling on post-earnings upside for HPQ. The June 36 call is the most active strike, and is seeing buy-to-open activity. In other words, these buyers anticipate the shares will topple $36 by the close on Friday, June 19, when front-month options expire.

Taking a step back, short-term traders have tended to be more put-focused on HPQ. The equity's Schaeffer's put/call open interest ratio (SOIR) of 1.17 outranks 77% of comparable readings from the past year.

Historically speaking, HPQ tends to move big in the session following earnings. Specifically, looking back eight quarters, the shares have swung 9% in the day after the company's reported -- including a nearly 10% loss in late February.

Today, Hewlett-Packard Company (NYSE:HPQ) is up 2% at $33.72, on the news the firm has sold a controlling stake in its China-based server and storage business to Tsinghua Holdings for more than $2 billion. Nevertheless, HPQ remains 16% lower year-to-date, and is now approaching its 80-day moving average -- which served as support earlier this year, but could reverse roles to act as resistance.
Published on May 21, 2015 at 2:24 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Intraday Option Activity

Put buying has been nearing an annual-high pace in CVS Health Corp's (NYSE:CVS) options pits in recent weeks. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) reveals more than two puts have been bought to open for every call during the past two weeks. Furthermore, the resultant 10-day put/call volume ratio of 2.23 is only 2 percentage points from an annual bearish peak.

It's a different set-up today, however, after the company announced the purchase of Omnicare, Inc. (NYSE:OCR) for nearly $13 billion. Now, it's calls that are seeing heavy action, changing hands at twice the expected intraday pace. There's a chance traders are buying to open the June 105 call -- CVS' most active strike -- betting on the shares to topple $105 before front-month options expire at the close of Friday, June 19. 

Since a brief foray above $105 in late March -- en route to a record high of $105.46 -- CVS has been consolidating in the $98-$105 range. CVS Health Corp (NYSE:CVS) topped out at $104.93 today, and at last check, the shares were 3.2% higher at $104.49. 

Published on May 21, 2015 at 2:40 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Intraday Option Activity
A week ago at this time, Seadrill Ltd (NYSE:SDRL) was getting devastated. Today, however, the shares are blistering up the charts -- surging 8.6% to trade at $13.90, as crude bounces back on overseas unrest. As such, calls are being exchanged at 1.2 times the typical intraday rate.

Among the most popular SDRL options is the weekly 5/29 15-strike call, and data suggests new positions are being purchased. By scooping up these out-of-the-money calls, speculators are banking on the shares to topple $15 by next Friday's close, when the series expires -- a time frame that includes the company's first-quarter earnings report, due out next Thursday, May 28.

Longer term, it's puts that have been the options of choice among SDRL traders. During the past 50 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock has accumulated a put/call volume ratio of 1.44 -- higher than roughly two-thirds of comparable readings taken in the last year.

This skepticism isn't all too surprising, considering Seadrill Ltd's (NYSE:SDRL) technical woes. Year-over-year, the shares have plummeted 62%, and more recently, have found a stern layer of resistance at their 160-day moving average.

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