Earnings Roundup: JD.com Inc and Michael Kors Holdings Ltd

JD.com Inc (ADR) (JD) and Michael Kors Holdings Ltd (KORS) are on the move following earnings

by Alex Eppstein

Published on Aug 10, 2016 at 10:49 AM
Updated on Jun 24, 2020 at 10:16 AM

Another day, another round of sharp earnings reactions. Among the stocks moving sharply on earnings are e-commerce site JD.com Inc (ADR) (NASDAQ:JD) and accessories maker Michael Kors Holdings Ltd (NYSE:KORS). Whether or not these swings are good for options traders, we'll explore below.

JD has started fast out of the gate, up 5% at $23.49, despite a decidedly mixed earnings report. Of course, the stock remains a long-term laggard, losing roughly one-quarter of its value on a year-to-date basis. Also, today's gap higher petered out just below the shares' 160-day moving average.

Recent call buyers should be in good shape. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), JD has racked up a 50-day call/put volume ratio of 4.55 -- ranking in the high 72nd percentile of its annual range. In other words, traders have scooped up bullish bets over bearish at an accelerated clip in recent months.

In this case, though, appearances could be deceiving. With nearly 14% of JD.com Inc's float sold short -- or more than a week's worth of trading, based on the stock's average daily volume -- it's possible short sellers have been hedging their bets via protective calls.

KORS is following in the footsteps of this sector peer, struggling after earnings. At last check, the stock was slightly lower at $50.08, as a sharper-than-forecast drop in same-store sales and weak current-quarter revenue outlook outweigh an earnings beat. Nonetheless, KORS shares have performed quite well in 2016, assisted by recent bounces off the underfoot 40-week moving average.

Shifting gears, short-term options traders are tilted in a skeptical direction. The stock's Schaeffer's put/call open interest ratio (SOIR) of 1.20 ranks just 6 percentage points from an annual high, suggesting puts outweigh calls by a historically elevated margin, among options expiring in the next three months. There's a lot of doubt among analysts, too, with 11 of 15 shelling out "hold" ratings.

All of this data hints at a potential contrarian opportunity for bulls. If Michael Kors Holdings Ltd can take another sharp bounce off of the aforementioned trendline, an unwinding of the collective negativity on Wall Street could contribute to tailwinds.

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