Looking Ahead To Apple, Amazon, Microsoft, Facebook, and AMD Results
Earnings take center stage this coming week, and there is no shortage of big companies reporting. In this commentary, we shall focus on AMD, Facebook, Microsoft, Apple, and Amazon.
AMD will report on Tuesday after the close, and analysts are looking for the company to say fourth-quarter revenue grew by almost 27 percent to $1.401 billion, while earnings were flat vs. last year at $0.05. Earningswhisper.com is looking for the company to beat by a penny, reporting $0.06.
The table below shows how AMD is reasonably consistent and can regularly beat revenue estimates.
The long straddle options strategy is calling for a rise or fall of about 12 percent following AMD’s results. That is because to buy one put and one call set for expiration on February 2 cost about $1.45, using the $13 strike price. But the calls have nearly 8,500 contracts of open interest, vs. only 1,100 puts. Suggesting that more traders are betting on shares of AMD to rise following results.
AMD stock is sitting at a critical resistance level at $12.95, with a rise above it taking the shares to about $14.25, refilling nearly a four-month-old gap, created when the company last reported results in October. The relative strength index (RSI) is only around 65 and suggests that the stock is not overbought, and could continue to rise.
The next big company to report will be Facebook on Wednesday after the close. Share recently came under pressure, after Mark Zuckerberg noted coming changes to the News Feed, but shares have recouped all of these losses in the past week. Analysts are looking for revenue to have risen by about 43 percent to $12.55 billion, and earnings to have climbed by about 40 percent to $1.97. Earningswhisper.com is looking for Facebook to beat estimates and report $2.05.
Historically, Facebook has beaten its earnings estimates, every quarter going back to fourth quarter of 2015.
The options market is looking for only a 6 percent rise or fall after the company reports results. That is because the long straddle options strategy for the $190 strike price cost about $11.10 to buy one put and one call, and that means the stock could trade in a range of about $179 to $201, using the options set to expire on February 2. The open interest heavily favors the calls, with roughly 15,000 contracts compared to puts of only 1,800. It suggests more bets are being placed on shares rising.
The chart is also suggesting shares continue to rise. The stock has recently broken out, with shares rising above resistance around $180. The RSI is also reasonably low only around 60 and suggests shares could continue to increase as well. Additionally, the chart shows there is firm support for the stock just below $180.
Microsoft is also set to report on Wednesday after the close and expectations are for the company to report fiscal second-quarter revenue growth of nearly 10 percent to $28.41 billion, while earnings grew by about 3 percent to $0.86. Earningswhisper.com for the company to report earnings of $0.90.
The $95 option set for expiration on February 2, are implying a move of about 5 percent, with the cost to buy one put and one call being $4.65. That puts the stock in a trading range of roughly $90.50 to $99.70. The number of open puts and calls is insignificant for this expiration date, which suggests the market is not looking for a much of surprise when Microsoft reports.
Microsoft’s chart suggests shares may be overbought at current levels, based on an RSI reading of about 80. Additionally, the RSI has been trending lower, versus the rising stock price, creating a divergent bearish indication. In fact, the RSI peaked back at the end of October, the last time Microsoft reported results, creating a significant gap in the chart.
The first level of support comes around $86. But should $86 fail, the next support region begins at $79, which also fills the gap.
Apple is the headliner for the week, reporting results on Thursday after the close. It is anyone’s guess to how Apple will report results, and more importantly guide the forward quarter. To this point, there has been so much back and forth in the analyst community that it is nearly impossible to tell which side is right. The bear camp believes there is a risk to forward guidance, while the bull’s do not see the same level of concern.
While I do not have the same level of access to the supply chain as the analysts, it seems hard to believe the data can be so contrasting from the two sides. But we do know that in the middle of December Jabil and Broadcom issued strong results and substantial forward guidance, while semi-equipment companies ASML and Lam Research, have reported strong results more recently.
Given how big Apple is in the handset market, it seems hard to believe that Apple will miss badly when it reports forward guidance. Also given Apple’s history of embarrassing those that bet against it, it is not something I would want to do.
Analysts are looking for earnings to have risen by about 14 percent in the fiscal first quarter to $3.82, while expectations are for revenue to have increased by 11 percent to $87 billion. But more importantly will be guidance, which is expected at $2.89, on revenue of $67.20 billion.
Meanwhile, as I wrote about for Investopedia this past week, there are plenty of bullish bets being placed in the options market.
Amazon is also reporting on Thursday, and what will happen there is the big mystery. The street is looking for earnings of $1.83, and unless it is a colossal beat or big miss, profits do not matter, because everyone knows Amazon just plays with investors when it comes to the bottom line. Nobody embarrasses Wall Street like Amazon can. The past two quarters are perfect examples.
But that revenue number does matter a great deal, and analysts are looking for that to have grown by astounding 37 percent to $59.85 billion. The stock is already up 20 percent in 2018, and the options market is implying a rise or fall of about 7 percent using the $1,400 strike price options set to expire on February 2, putting the stock in a range of roughly $1305 to $1495.
The huge run-up in the stock means expectations going into this print are massive, the only question that remains is if Amazon can pull off a Netflix like move, and crush even those expectations.
That is it for today back tomorrow with more for the week ahead.
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