Sun. Jun 16th, 2024

The earnings calendar is home to plenty of high-profile reports in the coming week with the stock market uptrend under pressure. In the wake of strong results from Netflix (NFLX) — but a decidedly weak report from Tesla (TSLA) — the earnings calendar is loaded with institutional-quality names in the technology sector like Microsoft (MSFT), Facebook-parent Meta Platforms (META), Amazon.com (AMZN) and Google parent Alphabet (GOOGL).




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Other tech names on the earnings calendar include Cadence Design Systems (CDNS), one of the leaders in electronic systems design. It has a strong presence in fast-growing markets like hyperscale computing, 5G communications and automotive circuitry.

Cadence, an IBD Long-Term Leader along with group peer Synopsys (SNPS), remains a pillar of strength in the stock market with a relative strength line near highs as it tests support at the 10-day moving average.

Results from Cadence are due Monday after the close. The Zacks consensus estimate is for adjusted profit of $1.21 a share, up 14% year over year. Revenue is seen rising 11% to $1 billion.

Rosenblatt on Thursday maintained a buy rating on CDNS stock and bumped up its price target up to 265 from 250.

Earnings Calendar Highlights

Results from Microsoft are due Tuesday after the close. MSFT stock has rallied nicely off lows and is back above all its moving averages. But the stock could still face some overhead supply issues as it works its way higher. At one point Thursday, MSFT remained more than 8% off its high.

Earlier this week, the company inked a $1 billion, five-year pact with Amazon where the e-commerce giant will use Microsoft’s 365 cloud productivity tools.

Meanwhile, Microsoft’s $69 billion acquisition of video game publisher Activision Blizzard closed on Oct. 13 after receiving final regulatory clearance from the U.K. In Microsoft’s latest fiscal year, gaming revenue totaled $15.5 billion, making up slightly more than 7% of total sales.

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Analysts predict adjusted profit of $2.65 a share, up 13%, with revenue up 9% to $54.42 billion. Microsoft is another IBD Long-Term Leader, helped by a steady long-term record of earnings growth and strong price performance.

Microsoft gapped down on July 26 even though fiscal fourth-quarter earnings and revenue growth accelerated from the prior period. But the midpoint of Microsoft’s fiscal first-quarter revenue outlook of $53.8 billion to $54.8 billion fell short of the Refinitiv estimate at the time of $54.94 billion.

MSFT’s Intelligent Cloud segment was the top performer in the quarter, with revenue up 15% year over year to $24 billion. The unit includes server products and cloud services like Azure. Revenue at the company’s More Personal Computing unit, which includes Windows PC software, Xbox video games and Surface computers, dipped 4% to $13.9 billion.

Meta, Amazon Set To Report

Meta Platforms gapped up but closed near session lows in late July after reporting stronger-than-expected results for the second quarter. Its Q3 revenue outlook also was bullish.

Facebook daily active users rose to 2.06 billion from 2.04 billion. In the U.S., 202 million people used Facebook on a daily basis, up from 200 million in the first quarter.

“We had a good quarter,” Meta Chief Executive Mark Zuckerberg said in the Q2 earnings release. “We continue to see strong engagement across our apps and we have the most exciting road map I’ve seen in a while with Llama 2, Threads, Reels, new AI products in the pipeline, and the launch of Quest 3 this fall.”

Third-quarter adjusted profit is expected to surge 118% to $3.57 a share, helped by large layoffs and other cost-cutting measures, with revenue up 21% to $33.43 billion. Results are due Wednesday after the close.

Amazon, meanwhile, has languished below its 50-day moving average, with results due Thursday after the close. The stock’s relative strength line has started to bend lower after some signs of institutional selling that started to show in mid-September.

Earnings at Amazon, a major cloud player along with Microsoft, are expected to more than double to 58 cents a share, with revenue up 11% to $141.61 billion.

Options Trading Strategy

A basic options trading strategy around earnings — using call options — allows you to buy a stock at a predetermined price without taking a lot of risk. Here’s how the options trading strategy works and what a call option trade recently looked like for Meta, a noteworthy report in the current earnings calendar.

First, identify top-rated stocks with a bullish chart. Some might be setting up in sound early-stage bases. Others already might have broken out and are getting support at their 10-week lines for the first time. And a few might be trading tightly near highs and refusing to give up much ground. Avoid extended stocks that are too far past proper entry points.

A call option is a bullish bet on a stock. Put options are bearish bets. One call option contract gives the holder the right to buy 100 shares of a stock at a specified price, known as the strike price.

Once you’ve identified an earnings setup for a call option, check strike prices with your online trading platform, or at cboe.com. Make sure the option is liquid, with a relatively tight spread between the bid and ask.

Look for a strike price just above the underlying stock price — that’s out of the money — and check the premium. Ideally, the premium should not exceed 4% of the underlying stock price at the time. In some cases, an in-the-money strike price is OK as long as the premium isn’t too expensive.

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Choose an expiration date that fits your risk objective. But keep in mind that time is money in the options market. Near-term expiration dates will have cheaper premiums than those further out. Buying time in the options market comes at a higher cost.

Earnings Calendar Option Trade

Meta is a liquid name in the options trading market as shares hold near highs.

When Meta stock traded around 314, a slightly out-of-the-money weekly call option with a 315 strike price and an Oct. 27 expiration came with a premium of around $14.50 per contract. That’s 4.6% of the underlying stock price at the time.

One contract gave the holder the right to buy 100 shares of Meta stock at 315 per share. The most that could be lost was $1,250 — the amount paid for the 100-share contract. Going out one more week to the Nov. 3 expiration, the premium grew to $15.80, or 5% of the stock price.

Using the earlier expiration, Meta would have to rally past 329.50 for the trade to start making money (315 strike price plus $14.50 premium per contract).

Keep in mind this is not a trade for a small portfolio. If the option is exercised, buying 100 shares of Meta would cost $31,500.

Follow Ken Shreve on X/Twitter @IBD_KShreve for more stock market analysis and insight.

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