6 Monster Predictions For Earnings The Week of July 23
MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN SHARES OF GOOGL, V, MA,
It is going to be a busy week as earnings move into high gear. I will admit I did not have the greatest track record on my prediction during the first quarter.
But I thought for fun; we could try it again this quarter.
Alphabet, the parent of the search engine Google, kicks things off after the close of trading on Monday. Analysts estimates are looking for the company to report that earnings grew by nearly 9 percent over last year to $9.70, on revenue growth of 23.5 percent, bringing total revenue to $32.13 billion.
The options for expiration on August 17, heavily favor the calls at the $1,200 strike price by a ratio of nearly 5 to 1, with 2,000 open call contracts to only 400 open put contracts. The options are implying the stock rises or fall by about 6 percent from the $1,200 strike price, placing the stock in a trading range between $1,130 and $1,271. Some are betting the stock will rise to over $1,306. There are nearly 2,000 open contracts at the $1,300 strike, and the option cost $6 per contract. Meanwhile, the largest open put position appears to be at $1,100, and imply the stock falls to about $1,094, but by comparison, there are only 1,050 open contracts, and those contracts cost $6 per contract.
The stock did seem to breakout last week rising above $1,200, and the trend is most certainly higher.
Based on the options and the technical trend, it would not be surprising to see Alphabet trade higher after results.
Wednesday is a busy day, with Facebook, AMD, and Visa all reporting.
Facebook is forecast to see significant growth this quarter as well, with earnings expected to climb by almost 29 percent to $1.70 per share, while revenue is seen jumping by 43 percent to $13.4 billion.
The options for expiration on August 17 imply that the stock rises or fall by about 7 percent from the $210 strike price, placing the stock in a trading range of $196 to $225. The calls heavily outweigh the puts by nearly 5 to 1 with over 11,000 open call contracts to only 2,700 open put contracts. Some are betting shares rise by about 10 percent by the middle of August. The open interest at the $230 calls is nearly 22,000 contracts, and trade at a price of $1.25, meaning shares need to rise to $231.25 to break even.
The stock has traded in a pretty consistent uptrend recently and would suggest that shares could go to around $220 over the next two or so weeks.
Again, like Alphabet, Facebook appears to be set up to rise after results.
Check out the subscriber section, it comes with two-weeks for FREE and a 20% discount introductory rate.
AMD appears to be a slightly different story. AMD’s earnings are forecast to climb a ridiculous amount this quarter, rising to $0.13 versus $0.02 last year, on revenue growth of 41 percent to $1.724 billion.
The options for expiration on August 17 imply that stock will rise or fall by nearly 14 percent, placing the stock in a trading range between $14.65 and $19.35 from the $17 strike price. But the call and the puts are nearly even with only 20,000 open calls to 17,000 open puts. There is some bullish betting that AMD will rise to about $18.60. The $18 strike price calls trade at $0.60 per contract, and have an open interest of about 33,000 open contracts. The $16 strike price puts trade at $0.90, and imply a drop to about $15.10, but there are only 16,000 open contracts.
The stock has stalled out recently, and volume has fallen, which suggest at least that the buyers are thinning out. The relative strength index has also been falling indicating momentum is leaving the stock. The chart for the longer-term appears to be suggesting the stock has further to rise, but I think over the short-term we may first see shares fall to about $14.50.
Given the poor technical setup and the underwhelming number of calls to puts at the $17 strike price, I think AMD falls after results.
My predictions in the past on AMD are admittedly horrible, and since I’m terrible at picking AMD’s direction on earnings results, don’t be surprised to see it rise.
Visa is expected to see fiscal third-quarter earnings increased by roughly 26 percent to $1.09 per share. Meanwhile, revenue is forecast to climb by 11.5 percent to $5.09 billion
The options set to expire on August 17 imply shares rise or fall by roughly 5 percent placing the stock in a trading range between $134 and $147. The calls outnumber the puts by over 13 to 1, 13,400 open call contracts to only 800 open puts contracts. Some are betting the stock rise to about $151, by August 17, with nearly 13,000 open call contracts at the $150 strike price. Those call trade at $0.50 per contract. The put betting is fairly small with the largest found at the $130 strike price with roughly 6,000 open put contracts.
The technical chart continues to be bullish as well, and suggest the stock may rise to about $146.
Visa looks poised to rise after results as well.
MasterCard reports on Thursday’s morning; I’m not going to bore you with all the detail because honestly, it is that much different from Visa. MasterCard is seen rising or falling by about 5 percent from the $210 strike price, a range of $199 to $220.
It too looks set to rise, like Visa
Amazon is the big one for the week, Thursday afternoon. Revenue is seen increasing by about 41 percent to $53.4 billion. Earnings are seen rising by 535 percent to $2.54 per share. But I’m not sure those earnings estimates matter, because Amazon earnings are never predictable. It depends on how much they choose to spend or not spend during the quarter, and Wall Street has no care for the profits just revenue.
The options are implying shares rise or fall by about 7 percent from the August 17 $1810 strike price. It puts the stock in a massive range of $1675 to $1940. But the calls only outweigh the puts by about 2 to 1 with 360 open calls to just 175 puts. But remember these calls contracts cost $68 per contract, and that is no small bet at nearly $2.5 million.
The stock did hit some resistance at $1,840 which is the level we had predicted some time ago.
I’ll be honest, there is so much momentum behind this stock that is nearly impossible to bet against it. So I will cave and say it rise after results because betting against Amazon over the past year and a half has been flat-out stupid.
More predictions tomorrow.
Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future.