2 FAANG Stocks at Record Highs Ahead of Earnings

AMZN and GOOGL are bucking the broader bearish bias on Wall Street today

Jan 29, 2018 at 10:22 AM
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The U.S. stock market is pacing for a down day, but not all of the action among individual equities is negative. In fact, FAANG stocks Alphabet Inc (NASDAQ:GOOGL) and Amazon.com, Inc. (NASDAQ:AMZN) hit record highs out of the gate, after analysts waxed optimistic ahead of the key quarterly earnings reports. Here's a closer look at the brokerage notes shares of GOOGL and AMZN are reacting to.

Alphabet Price Target Hiked Ahead of Thursday's 4Q Results

Alphabet stock saw its price target hiked to $1,400 from $1,225 at Deutsche Bank -- the highest on Wall Street -- with the brokerage firm saying it likes "Google into Q4 and for 2018," and expressing optimism for the company's fiscal fourth-quarter earnings, due after the market closes this Thursday, Feb. 1. Monness Crespi Hardt also raised its GOOGL price target, to $1,250 from $1,120.

In reaction, the security jumped to a new record high of $1,198 out of the gate, and was last seen trading up 0.5% at $1,193.97. Today's positive price action is just more of the same for the tech shares, which have surged roughly 30% since testing familiar support in the $920 region last August.

Against this backdrop, put options prices have imploded relative to their call counterparts, per GOOGL's 30-day implied volatility skew of negative 3.7% -- in the 1st annual percentile. However, with earnings on the horizon, short-term options are still pricing in elevated volatility expectations, with Schaeffer's Volatility Index (SVI) of 32% docked in the 100th percentile of its annual range.

Amazon Remains a 'Top Pick' at Citigroup

Amazon stock is fresh off a record high of $1,420.91, and was last seen trading up 0.9% at $1,413.31. Boosting the e-commerce giant is an upwardly revised price target to $1,600 from $1,400 at Citigroup, which reiterated that AMZN is its "top pick" due to unrealized ad revenue.

The security has added more than 21% in 2018 alone, and options traders are betting on even more upside after Amazon earnings are released after Thursday's close. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), AMZN's 10-day call/put volume ratio of 1.29 ranks in the 100th annual percentile, indicating calls have been bought to open over puts at a quicker-than-usual clip.

However, those purchasing premium on short-term options are pricier than usual. AMZN stock's SVI of 42% ranks in the 100th percentile of its annual range, meaning near-term options traders have rarely priced in higher volatility expectations.


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