Friday’s Vital Data: Microsoft Corporation (MSFT), Qualcomm, Inc. (QCOM) and Twitter Inc (TWTR)
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U.S. stock futures are headed broadly lower this morning, as earnings fatigue begins to settle in on Wall Street. Industrial heavyweights General Electric Company (NYSE:GE) and Honeywell International Inc. (NYSE:HON) are on the clock this morning, and investors appear worried that the market will head south following their results. Tech is also under pressure, despite Microsoft Corporation (NASDAQ:MSFT) reporting stronger-than-expected fourth-quarter results.
Heading into the open, futures on the Dow Jones Industrial Average have fallen 0.33%, S&P 500 futures have slipped 0.17% and Nasdaq-100 futures are down 0.3%.
On the options front, volume has picked up sharply in the past two session. Yesterday saw above average activity of about 17.4 million calls and 13.1 million puts crossing the tape. Turning to the CBOE, the single-session equity put/call volume ratio fell to 0.53, driving the 10-day moving average lower to a four week nadir of 0.61.
Taking a closer look at Thursday’s options activity, Microsoft drew heady call activity prior to the release of its fourth-quarter earnings report. Meanwhile, Qualcomm, Inc. (NASDAQ:QCOM) call options were also active, despite growing concerns over the impact of its legal spat with Apple Inc (NASDAQ:AAPL) on its bottom line. Finally, Twitter Inc (NYSE:TWTR) is seeing a bullish bid ahead of next week’s earnings, as video ads gain traction with advertisers.
Microsoft Corporation (MSFT)
After the close last night, Microsoft said it earnings grew 42% year-over-year to 98 cents per share in the fourth quarter, as revenue jumped 9% to $24.7 billion. Both figures topped Wall Street’s expectations. What’s more, cloud revenue, driven by Microsoft’s Azure, surged 97% year-over-year, accelerating from growth of 93% in the third quarter.
Ahead of the event, options traders pushed volume to a near-term high of more than 938,000 contracts for MSFT. What’s more, calls made up an above average 60% of the day’s take. Despite the optimism, Microsoft stock has risen only about half a percent in premarket activity, leaving the shares well shy of peak July 21 series open interest, which totals more than 67,000 contracts at the overhead $75 strike.
With downward pressure from the broader market weighing on MSFT this morning, the stock may have to wait until next week to make a serious run at resistance the $75 region.
Qualcomm, Inc. (QCOM)
Qualcomm’s war with Apple is having a very real impact on the company’s bottom line. That much was made apparent during the company’s quarterly report this week. Qualcomm said that earnings arrived at 58 cents per share on revenue of $5.371 billion. Sales topped expectations, but earnings were worse, and both figures were down considerably year-over-year.
Aggravating Qualcomm’s issues, Apple is not only withholding licensing payments amid its legal dispute, it has also asked vendors to do the same. Unfortunately for Qualcomm, a legal solution could still be months away.
QCOM options traders, meanwhile, have been heavily focused on calls amid the stock’s recent plunge. Volume topped 459,000 contracts on Thursday, with calls snapping up 74% of the day’s take. A closer look at this activity reveals a considerable degree of long-term call selling activity.
Specifically, Trade-Alert.com reports that both the January 2018 and June 2018 $70 calls saw several blocks of 10,000 contracts trade at the bid yesterday. The average bid price was about $1.01 for the June 2018 $70 calls and 31 cents for the January 2018 $70 calls. Most of the trades were marked “spread,” but the nature of those spreads was not immediately identifiable.
Twitter Inc (TWTR)
It wasn’t that long ago that many analysts, myself included, were writing Twitter off as a lost cause. But the company has successfully parlayed its online presence into video and live event streaming, and it’s paying off in spades. Wells Fargo waxed cautiously optimistic on Twitter’s prospects yesterday, noting that video advertising options are catching on with brands, indicating that the company’s video bet has room to grow.
That said, traditional ads remain a concern for Twitter, Wells Fargo added.
We could get a peek at Twitter’s video ad success next week when it reports second-quarter earnings. Expectations are for a profit of 5 cents per share on revenue of $536.65 million. EarningsWhispers.com puts the whisper number at earnings of 9 cents per share — so expectations may be on the high side.
As for options traders, it’s all about TWTR calls. Volume on Thursday topped out at 341,000 contracts — a near-term high for Twitter — with calls gobbling up 76% of the day’s take. What’s more, the July 28 put/call OI ratio has fallen to a reading of 0.41, with calls more than doubling puts among options most affected by Twitter’s quarterly report.
Finally, implieds are pricing in a post-earnings move of about 11% for TWTR stock, which places the upper bound at $22.75 and the lower bound at $18.25.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
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