Tesla (TSLA) and Netflix (NFLX) are front and center on the earnings calendar in the coming week, along with semiconductor firms ASML (ASML), Lam Research (LRCX) and Taiwan Semiconductor (TSM).
X
IBD’s Chip-Equipment industry group was one of the top performers Thursday, rising around 1%, even when the Nasdaq composite suffered a distribution day, falling 0.6% in higher volume.
ASML continued to rally off lows and is up more than 4% so far this week, but the stock’s 10-week and 40-moving average lines are still potential resistance levels to watch.
Results from ASML are due early Wednesday. The Zacks consensus estimate is for adjusted profit of $5.09 a share, up 18% from the year-earlier quarter. Revenue is seen rising 29% to $7.49 billion.
Lam Research, which reports Wednesday after the close, powered above its 50-day line early Thursday but closed off highs. LRCX is still inside an 11-week consolidation, about 10% off its high.
Last month, Reuters reported that Taiwan Semi told major suppliers to delay the delivery of high-end chipmaking equipment due to soft demand. Results from TSMC are due early Thursday.
Earnings Calendar Highlights
Tesla has been holding above all of its moving averages as it forms a cup-with-handle base. It’s not an ideal base by any means as part of the handle formed below the 50-day moving average.
Analysts have been cutting third-quarter earnings estimates for Tesla after the company reported disappointing delivery data for the period earlier this month. Ahead of the Oct. 2 delivery report, estimates had dropped to 456,000 from 473,000 at the end of July. Tesla delivered 435,059 vehicles, down 6% from the second quarter.
For the current quarter, analysts expect adjusted profit of 73 cents a share, down 30%, with revenue up 14% to $24.38 billion.
Netflix is another key report on the earnings calendar with the stock under heavy distribution and more than 25% off its high. NFLX stock tried to firm up at its 40-week moving average last week, but support gave way this week.
Shares gapped down sharply on July 20 when the company reported second-quarter results. The good news was that Netflix added 6 million subscribers during the period, well above expectations. The growth was attributed to a crackdown in password sharing as well as the introduction of a cheaper subscription tier. But revenue only rose 3% in the quarter to nearly $8.2 billion, below estimates, and Netflix issued a soft revenue outlook.
Netflix on Thursday said it would cut jobs at Netflix Animation and shut down two films in preproduction. The news came one day after Piper Sandler maintained a neutral rating on NFLX stock but lowered Netflix’s price target to 400 from 440, citing margin concerns.
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In mid-September, Chief Financial Officer Spencer Neumann warned that operating margins will increase at a slower-than-expected pace. Neumann also said the company will not see a near-term sales and earnings lift from its advertising-supported service levels.
Third-quarter profit is seen rising 12% to $3.47 a share, with revenue up 8% to $8.53 billion.
Shares fell early Friday after Wolfe Research cut NFLX to peer perform from outperform.
SLB Set To Report
Oil prices have been volatile amid the start of the Iran-Hamas war. After hitting of 83.29 in late September, the U.S. Oil Fund (USO) fell sharply below its 50-day line on Oct. 4 and gapped above the line on Oct. 9. Now it’s back below the line.
SLB tried to reclaim its 50-day line Thursday, but shares reversed lower.
Growth prospects are bright for SLB, with full-year earnings expected to rise 36% this year and 24% in 2024. Over the past five quarters, revenue growth has ranged from 20% to 30%. Earnings growth over the same time has ranged from 44% to 85%.
For the current quarter, adjusted profit is expected to increase 22% to 77 cents a share, with revenue up 11% to $8.33 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 SLB, 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 might have already 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
SLB is a liquid name in the options trading market as the oilfield services firm battles near its 50-day moving average.
When SLB stock traded around 58.85, a slightly out-of-the-money weekly call option with a 59 strike price (Oct. 27 expiration) came with a premium of around $1.65 per contract, or 2.8% of the underlying stock price at the time.
One contract gave the holder the right to buy 100 shares of SLB stock at 59 per share. The most that could be lost was $165 — the amount paid for the 100-share contract.
When taking the premium paid into account, SLB would have to rally past 60.65 for the trade to start making money (59 strike price plus $1.65 premium per contract).
Follow Ken Shreve on X/Twitter @IBD_KShreve for more stock market analysis and insight.
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