Earnings Season Highlights

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A collection of noteworthy post-earnings reactions
Published on Apr 8, 2020 at 2:09 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Buzz Stocks

UnitedHealth Group Inc (NYSE:UNH) announced last night that it will speed up payments and support totaling nearly $2 billion to health care providers in order to combat the financial challenges posed by the coronavirus pandemic. Additionally, UNH is just one of many health insurers getting a bump after Senator Bernie Sanders announced that he is pulling out of the Democratic presidential race, effectively setting the stage for a general election between current U.S. President Donald Trump and former Vice President Joe Biden. At last check, UNH stock is up 4.4% to trade at $258.85.

Today’s surge has the security on track to close above it’s 200-day moving average for the first time in nearly a month. While UNH is still down 12.1% year-to-date, it has added almost 38% since its March 23 three-year low of $187.72. 

UNH chart APR 8

Analysts are extremely bullish on the blue chip. Of the 18 analysts covering the equity, 15 rate it a “buy” or better. The remaining three all say “hold.” Adding to this is UNH’s consensus 12-month price target of $321.39 which is a 24.1% premium to the stock’s current levels.

In the options pits, puts have been the preference in the last 10 days. UNH sports a 10-day put/call volume ratio of 1.58 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which sits higher than all but 1% of readings during the past 12 months, suggesting a higher-than-usual appetite for long puts of late.

Echoing this, UNH's Schaeffer's put/call open interest ratio (SOIR) of 0.97 sits in the elevated 82nd percentile of its annual range. In other words, short-term options players have rarely been more put-heavy during the past 12 months.

Published on Apr 8, 2020 at 9:40 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Buzz Stocks

Tesla Inc (NASDAQ:TSLA) is up 1.9% $555.75 this morning after announcing its imminent plans in response to the coronavirus via email to U.S. employees. TSLA said it would furlough all non-essential workers for the time being and cut pay for salaried employees until the end of the second quarter The firm plans on resuming normal operations by May 4, barring any significant changes. 

Today, TSLA is eyeing its fourth consecutive win, as well as its highest close in nearly a month. The equity has found padding on the charts at its 200-day moving average, and more recently its 140-day moving average. Furthermore, Tesla boasts a year-to-date gain of roughly 30%. 

This positive price action, especially relative to the broader market, could attract some bull notes to the table. Coming into today, just six analyst considered TSLA a "strong buy" while 11 said "hold" and six called it a "strong sell." Meanwhile, the consensus 12-month price target of $454.57 is a 16.7% discount to current levels. 

While short interest has fallen 12.1% in the last two reporting periods, there's still plenty of pessimistic positions to be unwound, which could keep some wind at TSLA's back. The 16.16 million shares sold short represent a healthy 11.1% of the stock's available float. 

Published on Apr 8, 2020 at 9:59 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Buzz Stocks

After it previously announcing that due to the impact of COVID-19 it was temporarily reducing the salaries of its executives, senior leadership and other teammates, Dick’s Sporting Goods (NYSE:DKS) this morning said it will furlough a significant number of the workforce beginning April 12. The company, however, will continue to provide health benefits. At last check, DKS stock is up 2.6% trading at $24.46.

Today’s surge, along with a slight bump yesterday, has the security pacing toward a third-straight close above its 20-day moving average, a trendline that’s acted as resistance on the charts since late January. DKS still finds itself in a 51.8% year-to-date deficit; however, it is worth noting that the equity just recently bounced back from its lowest level in over a decade at just under the $14 level.

Analysts are leaning bearish on DKS stock. Of the 17 in coverage, 12 sport a “hold” or worse position. However, the stock’s consensus 12-month price target of $33.33 is a 39.8% premium to the stock’s current levels.

DKS stock currently sports a Schaeffer's put/call open interest ratio (SOIR) of 1.07 sits in the elevated 91st percentile of its annual range. In other words, short-term options players have rarely been more put-heavy during the past 12 months.

Published on Apr 8, 2020 at 10:13 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Analyst Update

Extra Space Storage Inc (NYSE:EXR) is down 0.6% to trade at $96.89 this morning, following a downgrade from Raymond James. Their analyst in coverage, Jonathan Hughes, cited that the "risk/reward skews negatively," and moved EXR to "underperform" from "market perform."

Since a three-year low of $72.70 on March 23, Extra Space Storage stock has been moving up on the charts -- and on Monday toppled resistance at the 30-day moving average for the first time since early March. The equity is up 3% in the last week, though still down 8.4% year-to-date. 

Raymond James' downgrade reflects the overall analyst sentiment. Coming into today, six out of 10 analysts sported a lukewarm "hold," with three considering a "strong buy" and one at "strong sell." Meanwhile, the 12-month consensus price target of $104.3 is a slim 7% premium to current levels. 

Short interest has started falling off, down 9.7% in the last reporting period. The 5.71 million shares sold short still accounts for 4.5% of the stock's available float, and would take six days to cover at EXR's average pace of trading. This indicates bears remain firmly in control of the equity.

 

Published on Apr 8, 2020 at 6:30 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Indicator of the Week

The Relative Strength Indicator (RSI) is a popular technical analysis tool. It’s an oscillator that ranges from zero to 100, in which many people focus on the 30 and 70 levels. Those levels are often used to define a market that is oversold or overbought, respectively. I’m looking at it a little differently. As you can see in the chart below the RSI level for the S&P 500 Index (SPX) is currently right in the middle of the range and looks poised to overtake 50. Stocks have taken a beating but now the oscillator is moving into the upper half of its range. I look at the historical data to see if this could be an all-clear signal for buyers.

S&P 500_RSI Comparison April 7

RSI Crosses Above 50 After Losses

I went back to 1950 and found each time the RSI crossed above the 50-level. Crosses above 50 are common, however, and I want only the signals after stocks pulled back significantly. So, I added on criteria that the S&P 500 had to be down at least 15% since its RSI first fell below 50. The table below shows the individual instances of this signal.

The last time we’ve seen this was the financial crisis of 2008. That instance was by no means an all-clear signal for buying stocks. The S&P 500 lost over 10% during the following week and was down 16% a month later. The time before that was in 2002, a few months before the market ultimately bottomed during the bear market that followed the tech bust.

Just eyeballing the returns, they look more promising the further out you get. The one-year returns were positive after all seven signals.

New IotW Chart

The table below summarizes the returns in the table below. The second table show typical returns for the S&P 500 since 1950 for a benchmark. The RSI moving above 50 in this situation isn’t quite an all-clear signal. After these seven signals, at least, there was bearishness in the short term. The longer-term returns, however, were more promising with the 12-month returns positive after every occurrence, averaging a gain of nearly 20%.

S&P 500_RSI Crosses & Anytime April 7

Published on Apr 7, 2020 at 1:53 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Intraday Option Activity

Social media giant Facebook Inc. (NASDAQ:FB) is up 2.1% at $169.14 at last check, despite a report from Reuters that the European Union (EU) antitrust regulators sent out follow-up questionnaire to companies focusing on Facebook's Marketplace. The document touched on ways the platform's online marketplace is unfairly benefiting from its massive collection of user data, suggesting that EU regulators are building up a case against FB. In separate news, Barclays trimmed FB's price target all the way down to $175 from 260.

Meanwhile, Facebook said its Data for Good program, which uses data from the company's collection of apps to inform academic research being used to understand and combat the coronavirus, released three new maps forecasting the virus' spread and showing where people are practicing quarantine regionally. 

The company's headline-heavy day is attracting options bulls. Calls are running at two times the norm today, with 165,000 contracts across the tape so far, compared to 75,000 puts. Most popular are the weekly 4/9 180- and 175- strike calls, with new positions being opened at both. 

Taking a broader look though shows that puts have picked up in popularity in recent weeks. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), FB sports a 10-day put/call volume ratio of 0.74, which sits higher than all other readings from the past year. This means long puts haven't been more popular in the past 12 months. 

Mirroring this is FB's Schaeffer's put/call open interest ratio of 0.84. This ratio stands in the elevated 84th percentile of its annual range, implying short-term options players have rarely been more put heavy during this same 12 month time period. 

Conversely, analyst sentiment remains overwhelmingly optimistic. Of the 27 in coverage, 26 call FB a "buy" or better, with not a single sell to be seen. Adding to this, the 12-month consensus price target of $226.53 is a healthy 32.9% premium to current levels. 

Today's pop has FB stock eyeing its highest close in nearly a month, with recent support from its 10-day moving average helping guide the stock further away from its mid-March annual lows. While the stock is still down 16.6% in 2020, it's already up 10.6% for the week, and on track to topple its 30-day moving average since its February peak. 

FB Chart Apr 7

Published on Apr 7, 2020 at 2:37 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Stocks On the Move

AT&T Inc. (NYSE:T) announced this morning a $5.5 billion term-loan agreement to give themselves "financial flexibility" during the global pandemic, and reaffirmed its commitment to pay a dividend. In response, the shares of the mobile are up 4% at $30.62 in afternoon trading.  

It's been a slippery slope downward for AT&T during the past few months. The equity hit a nine-year low of $26.08 on March 23, with its 10-day moving average guiding the stock lower. While T has since toppled this trendline, it is now contending with pressure at the $31 region, and is down 22.1% in 2020. 

Coming into today, six analysts considered T a "strong buy" or "buy," while the remaining 10 called it a "hold" or worse. Meanwhile, the 12-month consensus target price of $36.7 is a 19.7% premium to current levels. 

Puts have been dominating the options pits. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), 2.06 puts have been bought for every call in the past 10 days. This ratio sits in the 100th percentile of its annual range, suggesting the appetite for puts is much higher than usual. 

Today, however, sentiment has reversed. So far, 159,000 calls have crossed the tape -- three times the intraday average -- compared to 49,000 puts. Most popular is the April 31 call, where new positions are being opened. 

Published on Apr 7, 2020 at 9:54 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Buzz Stocks

Shares of leading rural lifestyle retailer Tractor Supply Company (NASDAQ:TSCO) are down 1.1% at $87 this morning, as traders take a moment to digest the company's preliminary first-quarter update. TSCO posted $1.96 billion in sales, which exceeded analysts' estimates, and said its same-store sales for March were 12% above the prior year. The company said it benefited from consumers stocking up on core everyday merchandise in response to the COVID-19 outbreak. The firm also decided to withdraw its fiscal 2020 guidance. 

In recent weeks, TSCO has found support at its 20-day moving average, which has helped guide the equity off its March 17, two-year bottom near the $65 level. Now, the stock is pushing back up against pressure at its $88- $87 region, which has kept a lid on the shares since their early March bear gap. 

Analysts have remained optimistic for the most part. Of the 18 in coverage, 13 call Tractor Supply Company a "buy" or better, while the remaining five say "hold." The consensus 12-month target price of $97.63 is a healthy 11% premium to current levels. 

The options pits have been singing a different tune. TSCO sports a 10-day put/call volume ratio of 2.83 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits higher than 86% of all other readings from the past 12 months, suggesting long puts are being picked up at a much quicker-than-usual clip. 

 

 

Published on Apr 7, 2020 at 10:05 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Buzz Stocks

AutoZone, Inc (NYSE: AZO) announced a series of precautions it will take in response to COVID-19. One of those precautions included adding additional time off for eligible employees, with 80 hours for full-time employees and 40 hours for part-time. Additionally, AutoZone has also reduced most stores’ hours, increased cleaning and disinfecting, and now offers curbside pickup options. At last check, AZO stock is up .15% trading at $919.28.

Today's bump puts the security just above its 20-day moving average, a trendline that’s acted as pressure on the charts since early January. And while AZO stock still sits at a 26.5% deficit year-over-year, it did just recently bounce back from a nearly two-year low just above the $684 level.

AZO Chart

Analysts are bullish on AZO stock. Of the 13 analysts in coverage, nine rate it as a “buy” or better, while the remaining four sport a “hold” position. Mirroring this is the stock’s consensus 12-month price target of $1,104.60, which is a 26.2% premium of the stock’s current levels.

In the options pits, puts have been preferred in the last 10 days. AZO sports a 10-day put/call volume ratio of 2.28 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which sits above all but 1% of readings during the past 12 months. In other words, this ratio suggests a higher-than-usual appetite for puts.

Published on Apr 7, 2020 at 10:29 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Buzz Stocks

Shopify Inc (NYSE: SHOP) is down 2.5% to trade at $380.36 this morning, succumbing to a downgrade from Raymond James to "market perform" from "outperform." This comes just one day after D.A. Davidson cut its price target to $500 from $675. The latter did maintain its "buy" rating, calling SHOP "one of the most attractive long-term open-ended growth" holdings. 

The analyst chatter surrounding SHOP recently has been deafening, with several analysts in coverage slashing their price targets just last week. Coming into today, SHOP held 13 "hold" or worse ratings, and 11 "buy" or better recommendations. Meanwhile, the 12-month consensus target price of $496.32 is a 26.7% premium to current levels. 

SHOP has had a rocky ride, alongside the broader market, since its mid-February record high of $593.89. Today's attempt at a breakout was curbed by its 30-day moving average, which has kept a cap on the shares since early March. 

Since we last checked in with SHOP, puts are still incredibly popular. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), 1.33 puts have been bought for every call in the past 10 days. This ratio sits in the 94th percentile of its annual range, suggesting a heavier-than-usual appetite for long puts of late. 
Published on Apr 7, 2020 at 11:43 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Editor's Pick
  • Bernie's Content

Blue chip and household technology name Microsoft Corporation (NASDAQ:MSFT) has succumbed to nearly every hill of the stock market roller-coaster that has become 2020. In late February, the company warned investors that it expected its Windows units to miss their third-quarter guidance due to the coronavirus outbreak. The resulting stock drop-off forced MSFT to breach its 50-day moving average for the first time since October 2019. However, since bottoming out near $132 late last month, the equity has seen a recovery in its year-to-date performance. Below, I will take a deep dive into recent stock market action we’ve seen from the software as a service (SAAS) leader, and speculate on what the current volatile Wall Street climate could mean for the security – from both sides of the spectrum.

With much of the world stuck at home following widespread "stay at home" orders, it comes with little surprise Microsoft has seen an uptick in use from both its Xbox video game device and Microsoft Teams, a workplace communications platform. Over the past 12 months, the stock has climbed 30%, and is now seeing support from both the 200-day and 320-day moving averages.

CotWMSFTChart

However, it would be naive to assume a few trendlines of support and a fresh lift off a recent bottom was means for a successful long-term run higher. To be safe, we must look at all sides and possibilities of Microsoft stock’s future, including the short-term, which could be unstable at best. For instance, the aforementioned 50-day moving average has now shifted into a stiff ceiling for the shares, capping a March 31 breakout attempt by the equity. MSFT has also been inching below its year-to-date breakeven mark, a sure signal of uncertainty in how the tech giant will perform in the coming weeks.

Regardless, its important to note the expansive 49% increase in short interest on the equity in the most recent reporting period. Although this accounts for less than 1% of the stock’s total available float, it does indicate that bears are starting to gain more control over MSFT. Either way, Microsoft stock is almost guaranteed to make notable moves in the coming weeks, as the volatile stock market climate continues to unfold.

Subscribers to Bernie Schaeffer's Chart of the Week received this commentary on Sunday, April 5.

Published on Apr 6, 2020 at 12:42 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Analyst Update

JetBlue Airways Corp (NASDAQ: JBLU) is up 7% to trade at $8.05 at last check. This comes amid a slew of skepticism and downgrades throughout the airline sector. J.P. Morgan Securities is increasingly convinced that the airline industry's road to recovery back to 2019 levels of output will be a multi-year affair. The analyst subsequently downgraded JBLU to "neutral" from "overweight" and cut its price target to $10 from $15. 

Since hitting a six-year low of $6.61 on March 23, the equity has struggled to break out past the 20-day moving average. JBLU has taken a 58.3% haircut in the last three months, and is now down 58.9% year-to-date.

Analysts are leaning bearish today, as seven of the 12 covering firms sport a tepid "hold" or worse rating. Furthermore, the current target price of $15.25 is a  90% premium to current levels.

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