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Prime Earnings Report Ahead with Amazon

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April 26, 2016

Talk of the death of the shopping mall has its roots in the growth of e-commerce. How pervasive is shopping online? Results from two technology retailers, Amazon (AMZN) and eBay (EBAY), could open the doors to the lure of sitting in front of a computer and shopping till you drop. Also on tap are reports from AT&T (T) and Chipotle (CMG).

Will AMZN Make the Mark?

One of the world’s largest sellers of almost everything online reports results after market close Thursday. Will expenses for the Prime membership program and Amazon Web Services, its cloud service, eat away at AMZN’s bottom line?

Analysts reporting to Thomson Reuters are looking for revenues of $27.99 billion that will generate a per-share profit of $0.58. That’s substantially better than the year-ago period when AMZN lost $0.12 a share. But analysts say they are worried because AMZN’s earnings performance has been spotty in recent quarters, missing Wall Street’s expectations in four of the last eight quarters. The biggest miscue? The last quarter when it missed projections of $1.56 a share by $0.56.

Short-term options traders have priced in a potential 7% share price move in either direction around the earnings release, according to the Market Maker Move indicator on the thinkorswim® platform by TD Ameritrade.

Going into earnings, there’s a smattering of buyers at the 625-strike calls with defensive positions being taken by buyers of the 600-strike puts. The implied volatility is also relatively high for this earnings season at the 67th percentile. (Please remember past performance is no guarantee of future results.)

amzn earnings report

FIGURE 1: AMZN SHARES CLIMBING BACK.

After hitting an all-time high in late December, AMZN shares dropped 30% by early February. Since then AMZN has been clawing back. Chart source: thinkorswim® by TD Ameritrade. Data source: Standard & Poor’s. Not a recommendation. For illustrative purposes only. Past performance does not guarantee future results.

How Is eBay Driving Revenue?

With EBAY still in revenue-recovery mode since the July 2015 split of PayPal, analysts say they’re looking for numbers on active buyers, international sales, data capture, and social-media drivers among others. Will EBAY be able to deliver?

At Thomson Reuters, analysts are forecasting top-line sales of $2.1 billion, about flat with the year-ago quarter minus PayPal’s contribution. Earnings per share are expected to reach $0.45.

Short-term options traders have priced in a potential 7.5% share price move in either direction around the earnings release, according to the Market Maker Move indicator.

Going into earnings, there’s activity in the at-the-money calls at the 24-strike with the 24- and 25-strike call spread on the weeklys. The primary put interest is with some buyers at the 23.5-strike. The implied volatility is much higher than some other stocks for this earnings season at the 74th percentile.

ebay earnings report

FIGURE 2: EBAY’S JOURNEY ACROSS THE FLATLAND.

Before splitting PayPal off from the company, EBAY shares were trading around the high $60s range. But since then they have been bouncing in the $20s. Chart source: thinkorswim® by TD Ameritrade.  Data source: Standard & Poor’s. Not a recommendation. For illustrative purposes only. Past performance does not guarantee future results.

What Happened to T’s U-Verse?

When was the last time you saw a U-Verse commercial? Can’t remember? It’s because AT&T (T), which is reporting earnings late today, has been directing customers to the DirecTV satellite service it bought last year. Is that working? What about the over-the-top video service it’s been promising to roll out before the year is out? Is that still on track?

Analysts have high hopes for T’s earnings, which they project to rise to $0.69 a share from $0.63 a year ago on revenues of $40.53 billion compared with $32.58 billion last year. Remember, though, those sales didn’t include DirecTV sales.

Short-term options traders have priced in a potential 2.5% share price move in either direction around the earnings release, according to the Market Maker Move indicator.

Going into earnings, options are trading in a tight range with buyers at the 38.5- and 39-strike calls and at the 38-strike puts. The implied volatility is in the 23rd percentile.

att t earnings report

FIGURE 3: T SHARES CONSOLIDATING.

When other stocks were bottoming in mid-February, T shares barely blipped and have been moving upward ever since. Chart source: thinkorswim® by TD Ameritrade.  Data source: Standard & Poor’s. Not a recommendation. For illustrative purposes only. Past performance does not guarantee future results.

Did Burrito Freebies Lure Customers to CMG?

Slammed by a bout of E. coli and other health-related issues last year that kept customers away, Chipotle’s (CMG) earnings won’t be pretty, analysts warn. But did the burrito freebies and gratis chips with salsa or guacamole gimmicks work at luring customers back in?

We’ll get some insight when CMG releases results after the bell today. CMG executives have already alerted Wall Street that it’s on track to turn in its first quarterly loss as a public company amid a double-digit drop in February and March sales at restaurants open longer than a year, a key industry measure of growth. At Thomson Reuters, analysts are expecting a loss of $0.94 share, a white-knuckled 76% dive from the year-ago period. Revenues are projected to tumble 20% to $869 million.

Short-term options traders have priced in a potential 7% share price move in either direction around the earnings release, according to the Market Maker Move indicator.

Even with the beating the stock has taken in the aftermath of the health issues, it’s still a high-priced stock, which makes it tough to get a good read on options. There’s nothing of open interest showing up over the 500-strike calls and some buyers of the 420-strike puts. The implied volatility sits at the 62nd percentile.

cmg earnings report

FIGURE 4: WHAT’S HAPPENED TO CMG’S STOCK

Before E. coli and other health issues surfaced at CMG, its stock was trading near $700. It’s still trying to recoup the 40%-plus drop. Chart source: thinkorswim® by TD Ameritrade. Data source: Standard & Poor’s. Not a recommendation. For illustrative purposes only. Past performance does not guarantee future results.