Earnings Season Highlights

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A collection of noteworthy post-earnings reactions
Published on Feb 1, 2023 at 12:52 PM
  • Quantitative Analysis

Urban Outfitters, Inc. (NASDAQ:URBN) is down roughly 7.4% in the last 12 months, with two rally attempts over the last few months cut short just above the $29 area. The shares boast a 14.3% lead already in 2023, but they could surpass more than 52-week highs, if history is any indicator. 

More specifically, Urban Outfitters stock just pulled back to within one standard deviation of its 60-day moving average, after a short stint above it. Over the past three years, there have been five prior instances of URBN pulling back to its this trendline, and each instance has resulted in an average one-month return of 13.4% for URBN, per Schaeffer's Senior Quantitative Analyst White. Based on its current perch at $27.26, another move of this magnitude would put Urban Outfitters stock at $30.91 by this time next month -- its highest level since December 2021. 

URBN Chart February 12023

There is reason to believe the stock could have even more room to run. For starters, the equity is ripe for a short squeeze. Short interest fell 8% in the most recent reporting period, yet the shares sold short still represent a hefty 12% of URBN's total available float, and nearly four days' worth of pent-up buying power, at the equity's average daily trading volume.  

Short-term options traders are much more put-heavy than usual right now. Urban Outfitters stock sports a Schaeffer's put/call open interest ratio (SOIR) of 4.82, indicating that puts outnumber calls among options expiring within three months. This ratio is in the elevated 98th percentile of its annual range, which means near-term traders are more put-biased than usual. Should the equity embark on another leg higher over the next month, an unwinding of pessimism in the options pits could add fuel to the stock's fire.

Those wanting to bet on a bullish repeat of history for URBN may want to consider a call-buying strategy, considering short-term options on the retail stock are pricing in remarkably low volatility expectations. This is per the security's Schaeffer's Volatility Index (SVI) is 41%, which stands in the low 5th percentile of its annual range.

Published on Feb 1, 2023 at 12:08 PM
Updated on Feb 1, 2023 at 12:14 PM
  • Midday Market Check
 
Published on Feb 1, 2023 at 11:07 AM
  • Intraday Option Activity
  • Buzz Stocks
Overall options volume is running at four times the usual intraday volume, with 245,000 calls and 135,000 puts exchanged so far today. Most popular is the weekly 2/3 80-strike call, followed by the 82-strike call in that series, wit new positions being opened at both. 
Published on Feb 1, 2023 at 10:32 AM
  • Intraday Option Activity
  • Analyst Update
  • Buzz Stocks

Options traders are bombarding social media giant Snap Inc (NYSE:SNAP), after the company's fourth-quarter earnings report led the shares 13.9% lower out of the gate today.

The Snapchat parent posted its third-straight quarterly decline, announcing earnings of 14 cents per share on revenue of $1.30 billion, with the latter figure slightly missing estimates. The company chalked the "challenging year" up to "macroeconomic headwinds, platform policy changes, and increased competition."

Within the first hour of trading, 160,000 calls and 115,000 puts have already been exchanged, which is eight times the intraday average volume. New positions are being opened at the most popular contract, the weekly 2/3 10.50-strike call. 

Analysts are chiming in, too, with no less than 10 price-target cuts following the results. In addition, UBS downgraded Snap stock to "neutral" from "buy." while Benchmark adjusted its rating to "hold." Coming into today, 27 of 32 covering brokerages rated SNAP a "hold" or worse, while the average 12-month target price of $11.34 is a 13.1% premium to its current perch.

Facing pressure from the $12 level since early September, the shares of the social media company have shed more than 7% in the last 12 months. In the relatively young year, however, Snap stock is roughly 11.7% higher.

Published on Feb 1, 2023 at 10:30 AM
  • Analyst Update

Foot Locker Inc (NYSE:FL) stock is up 2.7% to trade at $44.68 at last glance, after Credit Suisse upgraded the stock to "outperform" from "neutral," with a price-target hike to $62 from $38. The analyst in coverage noted that sentiment remains "overly bearish" toward FL, and that Nike's (NKE) pullback from the company will be far less damaging than expected, with evidence of an improving relationship between the two. 

Today's pop has FL trading at a nearly one-year high. Since the start of 2023, Foot Locker stock sports an 18% lead. 

A look at the brokerage bunch paints a very bearish picture indeed. Of the 22 analysts in coverage, 20 carry a "hold" or worse rating on FL, while the 12-month consensus price target of $40.17 sits at a 10% discount to current levels. 

The options pits, on the other hand, have been much more optimistic than usual. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security's 10-day call/put volume ratio of 4.69 ranks higher than 95% of readings from the past year, showing long calls being picked up at a much faster-than-usual rate. 

FL is seeing well-priced premiums at the moment, too. The stock's Schaeffer's Volatility Index (SVI) of 39% stands higher than just 5% of all other readings in its annual range, implying that options players are pricing in low volatility expectations at the moment. 

Published on Feb 1, 2023 at 9:19 AM
Updated on Feb 1, 2023 at 9:26 AM
  • Opening View

Stock futures are pointed lower this morning, as traders brace for today's interest rate decision, which will be followed by comments from Federal Reserve Chairman Jerome Powell. The Dow Jones Industrial Average (DJIA) is bearing the brunt of premarket losses, last seen down 147 points. Wall Street is unpacking the ADP employment report, which showed private payrolls rose by 106,000 in January as opposed to the expected 190,000.

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

  • Will January tailwinds continue to blow in 2023?
  • China-based e-commerce stock flashes bullish signal.
  • Plus, 3 of today's top quarterly earnings reports.

OV 0201

5 Things You Need to Know Today

  1. The Cboe Options Exchange (CBOE) saw more than 1.2 million call contracts and 822,034 contracts traded on Tuesday. The single-session equity put/call ratio rose to 0.66 and the 21-day moving average stayed at 0.81.
  2. Online dating name Match Group Inc (NASDAQ:MTCH) is down 9.2% before the bell, after the Tinder parent posted a fourth-quarter earnings and revenue miss, and shared a disappointing current-quarter revenue forecast. Year-over-year, MTCH is down 52%. 
  3. Snap Inc (NYSE:SNAP) is also sharply lower, last seen down 14.9% ahead of the open. While the social media giant's fourth-quarter revenue was in line with estimates, it projected current-quarter revenue to decline up to 10% amid weak advertising demand. The security has attracted at least six price-target cuts already, and has shed 64.5% in the last 12 months.
  4. The shares of Advanced Micro Devices, Inc. (NASDAQ:AMD) are up 2.9% in electronic trading, following the chipmaker's better-than-expected fourth-quarter results. No fewer than five analysts hiked their price targets in response. Over the last three months, AMD added 26%.
  5. Today will bring job openings and quits, the S&P manufacturing purchasing managers' index (PMI), the Institute for Supply Management (ISM) manufacturing index, construction spending data, motor vehicle sales, and both the Federal funds rate and projection.

buzzfeb1

Asian, European Markets Higher on Slew of Economic Data

Markets in Asia rose on Wednesday, as investors unpacked a host of economic data from the region while looking forward to the conclusion of the Fed meeting stateside. Japan’s Nikkei inched 0.07% higher, even after the country’s factory activity contracted for the third consecutive month in January. China’s manufacturing purchasing managers’ index (PMI) for January came in at a lower-than-expected 49.2, which is slightly higher than December’s reading of 49. In South Korea, export numbers fell 16.6% year-over-year, and the country’s 2022 trade deficit of $47.5 billion marked its worst recorded reading. China’s Shanghai Composite rose 0.9%, while Hong Kong’s Hang Seng and the South Korean Kospi added 1.1% and 1%, respectively.

European markets are higher at midday, while the bourses await interest rate decisions from the U.S., Bank of England (BoE), and European Central Bank (ECB) this week. Preliminary data out today showed inflation in the euro zone came in at 8.5% in January, down from the previous month’s 9.2%, as energy costs continue their sharp drop. London’s FTSE 100 and the French CAC 40 are both up 0.2% at last glance, while the German DAX sits with a 0.3% lead.

Published on Feb 1, 2023 at 8:13 AM
  • Indicator of the Week
 
Published on Feb 1, 2023 at 8:00 AM
Updated on Feb 1, 2023 at 8:00 AM
  • Editor's Pick
  • Trader Content

Below is an excerpt from this yesterday's episode of Schaeffer's Playbook of the Week, featuring Schaeffer's Senior Market Strategist Matthew Timpane. Below, Matthew makes a bullish case for oil & gas stock Cisco Systems Inc (NASDAQ:CSCO).

"We’re going to remain bullish heading into the Fed week. We'll see if that changes next week, but for now, we have to maintain that stance as long as indexes are above their 200-day moving averages.

Cisco is in a flag pattern, and has a volume point of control (VPOC) support level you can see in the chart below. The 200-day moving average is down there as well. The 50- and 55-strike calls are sold to open above, so dealers are long calls.

Analysts are on the fence, so some outperformance could trigger upgrades. Of the 20 brokerages covering CSCO, 12 rate the stock a "hold" or "strong sell."

PLBK CSCO

 

Join Schaeffer's Playbook of the Week now and tune in every Monday morning at 8:30 a.m. to get ready for the trading week with me. Click here for more information to get started.

Schaeffer's Playbook of the Week

Published on Jan 31, 2023 at 4:31 PM
  • Market Recap

Stocks rallied into the end of month, with the Dow adding 368 points. All three major benchmarks jumpstarted 2023 with solid January wins, with the S&P 500 and Nasdaq seeing their best monthly starts to the year since 2019 and 2001, respectively.

Investors unpacked a slightly cooler-than-expected employment cost index today, with compensation increasing only 1% for the fourth quarter. This inflation reading came as the Federal Reserve kicked off its policy meeting, which could bring a 25 basis point interest rate hike at its conclusion tomorrow.

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

  • Homebuilding stock enjoyed post-earnings tailwinds.
  • Goldman Sachs stock could be good for options bulls.
  • Plus, unpacking quarterly results from McDonald's; record revenue fails to boost PFE; and buy this China-based stock on the dip.

Closing Index Summary January 312023

 NYSE and Nasdaq Stats January 312023

5 Things to Know Today 

  1. General Motors (GM) doesn't expect production increases of electric vehicles (EVs) until the second half of 2023, due to battery cell production challenges(CNBC)
  2. PayPal (PYPL) announced plans to lay off about 7% of its staff, or roughly 2,000 workers, as the digital payments company continues to cut costs. (MarketWatch
  3. McDonald's stock brushed off a quarterly earnings and revenue win.
  4. Dismal sales outlook cast a shadow on Pfizer's record revenue.
  5. Buy this China-based stock in time for its next rally attempt.

Earnings January 312023

Unusual Options Activity January 312023

Gold Prices Extend Monthly Win Streak

Oil prices edged higher on Tuesday, but still shed 2.7% on a monthly basis to mark a  third-straight month in the red. Investors remained worried about the incoming interest rate decision and a Organization of the Petroleum Exporting Countries and their allies (OPEC+) committee meeting. March-dated crude rose 97 cents, or roughly 1.3%, to settle at $78.87 per barrel on the day.

Meanwhile, gold prices settled higher to notch a third-straight monthly win. Economic data that pointed to a cooling labor market and a weak economic outlook boosted the yellow metal. April-dated gold, which is now the most active contract, added $6.10, or 0.3%, to settle at $1,945.30 per ounce for the day. For the month, gold rose over 6%.

Published on Jan 31, 2023 at 3:10 PM
  • Intraday Option Activity
 
Published on Jan 31, 2023 at 3:09 PM
  • Quantitative Analysis

 

 
Published on Jan 31, 2023 at 3:03 PM
  • Buzz Stocks

Pharmaceutical company Merck & Co (NYSE:MRK) is one of the many big names set to announce its quarterly report this week, with earnings scheduled before the open on Thursday, Feb. 2. Wall Street anticipates profits of $1.54 per share, and UBS today raised its price target by $3 to $108 ahead of the event. 

A look at its post-earnings history shows Merck stock finishing just three of its last eight next-day sessions higher, including a 1.4% pop after its most recent report. Over the past two years, the Dow member has averaged a 3.2% swing, regardless of direction. This time around, the options pits are pricing in a slightly wider 3.9% move. 

On the charts, Merck stock has been slipping since its Jan. 6 record high of $115.49, though there's support in place at its 100-day moving average. Year-to-date, the shares are down 4%, but still sport a 30.7% year-over-year lead.

MRK Jan31

Put traders are growing bolder, per MRK's Schaeffer's put/call open interest ratio (SOIR) of 0.89, which sits in the 84th percentile of its annual range. In other words, speculative players are more put-heavy than usual among options set to expire in three months or less.

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