Earnings Season Highlights

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A collection of noteworthy post-earnings reactions
Published on May 31, 2024 at 11:15 AM
  • Intraday Option Activity
  • Buzz Stocks

Shares of MongoDB Inc (NASDAQ:MDB) and Zscaler Inc (NASDAQ:ZS) are having vastly different post-earnings reactions. The former is down 22.6% to trade at $239.96 at last check, brushing off a first-quarter earnings and revenue win after issuing a dismal full-year forecast. Meanwhile, the latter was last seen up 12.9% at $176.88 after a fiscal third-quarter top- and bottom-line beat, as well as a strong fiscal fourth-quarter outlook.

No fewer than 17 analysts have slashed their price targets on MDB, including UBS, Mizuho, and Scotiabank to $250. The stock is now trading at its lowest level in nearly one year, after its latest rally ran into overhead pressure at the 60-day moving average. Shares are down 24.1% this year, and on track for their eighth-straight daily loss.

Zscaler stock is getting mixed reactions from the brokerage bunch, with six price-target cuts and four hikes doled out. The equity is on track for its first close above the 50-day trendline since February, and eyeing its best single-day percentage pop since May 2023. ZS is down 20.6% this year, though.

The options pits are in frenzy. MDB has 25,000 calls and 41,000 puts exchanged so far today -- 11 times the intraday average volume -- with positions being opened at the most popular weekly 5/31 220-strike put. For ZS, it's 27,000 calls and 19,000 traded, or 5 times the volume normally seen at this point, and positions opening at the leading 180-strike call in that aforementioned series.

Published on May 31, 2024 at 10:24 AM
  • Intraday Option Activity
  • Analyst Update

The retail sector is booming today, with the SPDR S&P Retail ETF (XRT) up 0.5% at last check. Driving the gains are sector stalwarts Gap Inc (NYSE:GPS) and Ulta Beauty Inc (NASDAQ:ULTA), both moving higher as investors use their earnings reports to gauge how U.S. consumers are spending amid higher-than-usual inflation.

Gap stock is up 20.5% to trade at $27.03, pacing for its third-straight win and best single-session gain since November. The apparel retailer's first-quarter report included earnings, revenue, and same-store sales that all bested analysts estimates. What's more, the company hiked its outlook for the fiscal year ending in February.

No less than 10 covering brokerages lifted their price targets on GPS, including Guggenheim's adjustment up to $35 from $25. Options volume is running at nine times the average intraday amount, with 26,000 calls and 5,055 puts across the tape so far. New positions are opening at the top three most popular contracts, led by the weekly 5/31 25.50-strike call.

Ulta Beauty stock was last seen 0.9% higher to trade at $389.22, and earlier traded as high as $421.21. The cosmetics retailer reported first-quarter earnings that beat estimates, though revenue missed the mark and the company lowered its sales outlook.

At least six analysts cut their price targets on ULTA after the event, though all still recommend objectives of more than $500 -- a 28.5% premium to the equity's current perch. So far, 11,000 calls and 5,035 puts have traded hands so far. The most activity is taking place at the weekly 5/31 410-strike call.

On the charts, Ulta Beauty stock bottomed at $376 last week, completing a 34.6% drawdown from its March 14 record high of $574.76. Now, the shares are testing their declining 20-day moving average, a trendline that halted a mid-month rally. Year to date, ULTA is down 19.8%.

Published on May 31, 2024 at 10:19 AM
  • Buzz Stocks

The shares of Summit Therapeutics Inc (NASDAQ:SMMT) appear to be headed for a minor correction after yesterday's skyrocket. The biotech stock added 272% last session, after the company said its experimental lung cancer drug outperformed Keytruda, Merck's (MRK) big-name treatment, in a late-stage trial. At last check, SMMT was down 15.2% at $9.26. 

Yesterday marked three-year highs for the Summit Therapeutics stock as it shot out of penny stock territory. On the short sell restricted (SSR) list today amid the volatility, the equity is up roughly 434% year over year. 

Options traders are targeting the stock straight out of the gate. So far, SMMT has seen eight times its intraday average options volume, with the most activity at the July 6 call, which is also the top open interest (OI) position. 

The two analysts covering SMMT both carry "strong buy" ratings, though the 12-month consensus price target of $7.50 is now a discount to current levels after the recent price action. It's also worth noting that short interest still represents 27.1% of the stock's available float, or over 10 days' worth of pent-up buying power. 

 

Published on May 31, 2024 at 9:17 AM
  • Opening View

Dow Jones Industrial Average (DJIA), Nasdaq-100 Index (NDX), and S&P 500 Index (SPX) futures are higher this morning, as the major indexes attempt to leave their recent losses behind. Today's tailwinds are linked to the core personal consumption expenditures (CPE) price index -- the Federal Reserve's preferred inflation gauge -- which rose 0.2% in April, matching estimates. While stocks are on track for weekly losses, it looks like monthly wins are in the bag.

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

Futures 0531

5 Things You Need to Know Today

  1. The Cboe Options Exchange (CBOE) saw 1.4 million call contracts and 1.2 million put contracts exchanged Thursday. The single-session equity put/call rose to 0.87, and the 21-day moving average stayed at 0.69.
  2. Dell Technologies Inc (NYSE:DELL) stock is down 15.9% in premarket trading, brushing off a first-quarter earnings and revenue beat after the tech company said its investments in the artificial intelligence (AI) space could impact its profit margins. DELL is up over 122% this year.
  3. MongoDB Inc (NASDAQ:MDB) reported a first-quarter earnings and revenue beat, but a dismal full-year forecast is overshadowing the positive results. MDB is 23.7% lower ahead of the open, and already carries a 24.2% year-to-date deficit.
  4. Nordstrom Inc (NYSE:JWN) stock is down 3.7% before the open, after the luxury retailer saw wider-than-expected losses for the first quarter, though revenue came in above expectations. The company also reaffirmed its full-year forecast. JWN is today on its way to trim its 14% year-to-date lead.
  5. June will kick off with another slew of economic data.

buzzmay31

Asian, European Markets Mixed on Inflation Data

Asian markets closed mixed on Friday, amid a flood of economic data. Japan’s industrial output fell 0.1% in April, compared to estimates of a 0.9% rise, while Tokyo’s core inflation rose 1.9% in May – matching expectations. South Korea’s industrial production rose a higher-than-expected 2.2% on a monthly basis in April, while China’s purchasing managers’ index (PMI) reading of 49.5 marked an unexpected contraction in May. Japan’s Nikkei led the gainers with a 1.1% rise, while the South Korean Kospi added 0.04%. Meanwhile, Hong Kong’s Hang Seng and China’s Shanghai Composite fell 0.8% and 0.2%, respectively.

Stocks are choppy in Europe as well, after the euro zone’s inflation reading came in at 2.6% in May, slightly above the predicted 2.5%. The European Central Bank’s (ECB) latest interest rate decision comes out next week, in which rate cuts are widely expected. Elsewhere, French consumer prices rose a higher-than-expected 2.7% in May. London’s FTSE 100 is up 0.6% at last glance, while the French CAC 40 sits flat, and the German DAX inches 0.09% lower. 

Published on May 30, 2024 at 4:25 PM
  • Market Recap

Wall Street's losses stretched into another day, with investor sentiment dinged by Salesforce's (CRM) revenue whiff and rising Treasury yields. The Dow slid 330 points for a third-straight loss, its worth losing streak since mid-April, while the Nasdaq also shed triple digits. Investors are also bracing for the release of the Federal Reserve's favorite inflation gauge, the personal consumption expenditures (PCE) price index, due out tomorrow and expected to show slow progress.

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

Summary 0530

NYSE Nasdaq 0530

5 Things to Know Today

  1. Fed President John Williams says inflation is still too high. (CNBC)
  2. Dollar General's price cuts aren't enticing customers. (MarketWatch)
  3. Unpacking Salesforce's earnings report.
  4. Behind this retail stock's dismal day.
  5. PayPal's Fastlane option excited analyst.

Earnings 0530

UVOL 530

Commodities Prices Scatter Ahead of Inflation Reading

Oil futures fell Thursday, pressured after a surprise rise in fuel inventories lead to a selloff of "risky" assets and equities. For the session, July-dated West Texas Intermediate (WTI) crude lost $1.32, or 1.7%, at $77.91 a barrel for the session.

Gold prices, meanwhile, managed to eke out a win. For the session, June-dated gold added 0.1% at $2,366.50 per ounce. 

Published on May 30, 2024 at 3:18 PM
  • The Week Ahead
          
Published on May 30, 2024 at 2:54 PM
  • Buzz Stocks

This week in Cheap Seats: Stocks Under $20 segment, we're taking a look at two stocks that are soaring today: Humacyte Inc (NYSE:HUMA) and American Semiconductor Corp (NASDAQ:AMSC)

Humacyte today announced that it would take part in the Jefferies Global Healthcare Conference. At last glance, HUMA was up 20.5% at $9.29, on track for its best day since August 2023 and trading at its highest levels since December 2021. Since the start of the year, the equity is up roughly 230%.

AMSC is up 14.6% at $18.10, earlier hitting a peak of $20.68, after the chip name's strong first-quarter results. Hitting its highest levels in three years, the security is up 61.7% since the start of 2024. 

Options traders are chiming in on the attractively priced stocks. So far today, HUMA has seen 4 times its average daily options volume, with the new positions opening at the most active June 10 call. Traders have targeted AMSC at 14 times its average daily options volume, with new positions opening at the most popular, June 20 call.  

It's also worth mentioning that both stocks have a bit of short squeeze potential. Short interest represents 5.2% of HUMA's available float, and 5.4% of AMSC's.

 
 
Published on May 30, 2024 at 2:32 PM
Updated on May 30, 2024 at 2:41 PM
  • Intraday Option Activity
  • Buzz Stocks

Despite the major indexes swimming in red ink today, the shares of C3.ai Inc (NYSE:AI) and HP Inc (NYSE:HPQ) are skyrocketing, after the two tech companies reported better-than-expected fiscal fourth- and second-quarter results, respectively.

C3.ai stock is 17.9% higher to trade at $28.19, on track for its best single-session gain since Feb. 29 and poised for its highest close since March 18. The artificial intelligence (AI) company's earnings beat also attracted an upgrade to "outperform" from "market perform at Northland Capital, as well as a price-target hike from Morgan Stanley to $23 from $21. AI's now 30% pop in May has the shares reclaiming -- for now -- their year-to-date breakeven level. 

Last seen up 18.9% to trade at $39.11, HPQ earlier hit a fresh two-year high of $39.52 and is heading for its best day since 2013. The stock drew seven price-target hikes, the highest coming from J.P. Morgan Securities to $38 from $34. So far this year, HP stock has already amassed a more than 29% lead.

Both securities are seeing unusual options activity today. For AI, 147,000 calls and 77,000 puts have been exchanged -- six times the intraday average volume -- with new positions being bought to open at the most popular weekly 5/31 28-strike call.

For HPQ, options volume is running at 16 times the volume typically seen at this point, with 132,000 calls and 46,000 puts traded so far. The June 40 call is getting the most attention, with new positions being bought to open.

Published on May 30, 2024 at 1:26 PM
  • Strategies and Concepts

As we continue to maneuver the second half of the calendar year, now is the perfect time for investors to refresh on important options strategies. One notable strategy worth focusing on is the synthetic long stock position, which utilizes options to mimic the risk vs. reward profile of a straightforward stock purchase. Below we will take a look into how traders can exercise this strategy to stretch their dollar even further.

Understanding the Synthetic Long Options Strategy

This strategy provides investors an opportunity to simulate the payoff of a long stock position at a reduced cost of entry. It's also cheaper than buying a single call, because the trade also involves selling a put. 

To execute a synthetic long options strategy, a trader buys near-the-money calls while simultaneously selling puts -- usually at the same strike price -- which helps fund the calls. Since both the calls and the puts share the same expiration date, the strategy becomes profitable when the underlying security tops breakeven -- the call strike plus the premium paid -- within the options' lifetime. As the security's value increases, the calls also increase in value and the sold puts move out of the money.

How a Trader Can Utilize the Approach

Say two traders, Trader A and Trader B, are both bullish on Stock XYZ. Trader A decides to buy 100 shares of Stock XYZ outright for $50 a share, investing a total of $5,000. Meanwhile, Trader B initiates a synthetic long with options expiring in about a six weeks. 

Specifically, he buys to open a 50-strike call for the ask price of $2, and sells to open a 50-strike put for the bid price of $1.50. Thus, after subtracting the credit of $1.50 from the debit of $2.00, it cost Trader B only 50 cents, or $50 (x 100 shares), to enter the trade. 

In order for Trader B to profit from the synthetic long, the equity would have to rally above $50.50 (strike plus net debit) before the options expire. Had he simply bought the 50-strike call for $2, his position wouldn't begin to profit until XYZ moved north of $52 (strike plus premium paid).

Winning vs. Losing With a Synthetic Long Strategy

Since both traders are bullish on the security, both expect Stock XYZ to rally above $50. Say Stock XYZ rallies to $55, making Trader A's 100 shares worth $5,500. Trader A would make $500, or 10% of the initial investment. 

Trader B's 50-strike calls would have $5, or $500, in intrinsic value, while the puts could be left to expire worthless. After subtracting the net debit (50 cents) from the intrinsic value ($5), Trader B would pocket $450 ($4.50 a share at 100 shares) -- similar to Trader A's dollar gains, but a healthy 900% of the initial $50 investment.

Switching gears, losses can add up quickly in a synthetic long options trade. If Stock XYZ tanks to $45, Trader A would lose $500, or 10% of the initial investment. Meanwhile, Trader B's calls would be deep out of the money, resulting in a loss of the initial investment of $50. Plus, Trader B would have to buy back the sold put -- if it's not assigned -- for at least $5 (intrinsic value). At 100 shares, this would cost $500. In all, Trader B would lose $550 -- similar to Trader A's dollar losses, but 11 times the initial investment.

While the potential returns of a synthetic long options strategy are theoretically unlimited, more risk is attached than that of simply buying a call outright, since the synthetic involves sold puts. Thus, a trader should be certain the stock will rally above the breakeven price before implementing a synthetic long options strategy. If an investor is less sure a security will rally, he or she is better off buying a straight call.

Published on May 30, 2024 at 12:36 PM
  • Intraday Option Activity
  • Earnings Preview
 
Published on May 30, 2024 at 11:53 AM
Updated on May 30, 2024 at 11:55 AM
  • Midday Market Check

The Dow Jones Industrial Average (DJI) is looking to extend yesterday's sharp losses, down 386 points midday. Salesforce stock's post-earnings slide is weighing on the blue-chip index, with the cloud name down 20.6% at last glance. The S&P 500 Index (SPX) and Nasdaq Composite (IXIC) are firmly lower as well, though the latter is still headed for its strongest month since November. 

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

  • Kohl's stock heading for largest single-day percentage drop ever. 
  • Mizuho praises PayPal's Fastlane option. 
  • Plus, options traders eye AI's surge; FL heads for best day since 2017; and CRM drags NOW. 

MMC May30

Options traders are targeting C3.ai Inc (NYSE:AI), as the artificial intelligence (AI) stock surges following a fiscal fourth-quarter revenue beat and subsequent bull notes. Northland Capital upgraded the stock to "outperform" from "market perform," while a handful of other analysts lifted their price targets. So far, 89,000 calls and 38,000 puts have been exchanged, which is already 2.5 times the average daily options volume. The weekly 5/31 27-strike call is the most popular, where new positions are opening. At last look, AI was up 13% at $27.03. 

Foot Locker Inc (NYSE:FL) stockis up 27.4% at $28.61 at last glance, after the retailer's strong first-quarter report. Headed for its best day since Nov. 2017, FL is soaring above its 80-day moving average, which kept a cap on gains in late March. Since the start of the year, the equity is still down 8.4%. 

FL May30

Meanwhile, cloud stock ServiceNow Inc (NYSE:NOW) is down 10% at $658.35 at last look, weighed down by Salesforce stock's post-earnings plummet. Trading at its lowest levels since November, NOW is down 6.8% year to date. 

Published on May 30, 2024 at 10:45 AM
  • Intraday Option Activity
  • Buzz Stocks

Kohl's Corp (NYSE:KSS) announced a surprise loss and revenue miss for the first quarter. The retailer also cut its annual sales forecast due to weaker demand, despite discounts and brand variety.

Kohl's stock was last seen down 26.4% at $20.08, trading at its lowest level since October as it paces for its worst single-day percentage drop on record. The shares are down more than 28% for 2024, and are trading below recent support stemming from the 20-day moving average.

Short sellers are already firmly in control. The 36.67 million shares sold short account for 33.6% of the stock's available float, or more than six days' worth of pent-up buying power.

In the options pits, 17,000 puts and 11,000 calls have been traded so far -- eight times the volume that's typically seen at this point. The weekly 5/31 18.50-strike put is by far the most popular contract, with positions currently being bought to open there.

This points to a shift in the options pits. Over at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Kohl's stock's 50-day call/put volume ratio of 1.34 stands higher than 99% of readings from the past 12 months, meaning options traders have favored long calls.

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