SINA Corp.: 2 Trades for a SINA Stock Earnings Selloff

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Chinese online digital media firm SINA Corp (NASDAQ:SINA) is slated to slip into the earnings confessional after the close of trading tomorrow night, with Wall Street expecting a pretty sizable dip in earnings.

SINA Corp.: 2 Trades for a SINA Stock Earnings SelloffSpecifically, the consensus has forecast a profit of 15 cents per share for SINA, down 61% from the same quarter last year. Revenue, meanwhile, is seen arriving 5% higher than year-ago levels at $407.6 million.

Despite the year-over-year weakness, analysts remain rather bullish on SINA’s prospects. In fact, EarningsWhisper.com reports a fourth-quarter whisper number of 21 cents per share for the company.

From a longer-term perspective, Thomson/First Call reports that SINA stock has attracted 15 “buy” ratings, versus eight “holds” and no “sell” ratings. Furthermore, the consensus 12-month price target of $54.80 for SINA stock represents an impressive premium of 48% to the stock’s current perch at $36.91.

Options traders are also leaning toward the bullish camp. SINA’s March/April put/call open interest ratio arrives at 0.59, with calls outnumbering puts among near-term options.

That said, short-term traders are not quite as sure, with SINA’s weekly Mar 13 series put/call open interest ratio rising to 0.77.

Overall, weekly March options are pricing in a potential post-earnings move of about 6.7%. This places the upper bound near $39.49, while the lower bound lies at $34.51. A post-earnings rally would leave SINA short of overhead resistance at $40 and its 200-day moving average (near $42). On the other hand, a selloff would send the stock to a fresh 52-week low, breaching key support near $35.

2 Trades for SINA Stock

3-9-2015 SINA
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 Put Spread: With excessive bullish sentiment and poor price action, it is hard to get excited about SINA’s prospects. In fact, if the company falls short of these elevated expectation, SINA stock could be in for a wealth of downgrades or bearish notes as analysts readjust their opinions.

For traders looking to take a chance at a contrarian play, an April $35/$37.50 bear put spread might fit the bill. At last check, this trade was offered at $1.27, or $127 per pair of contracts. Breakeven lies at $36.27, while a maximum profit of $1.23, or $123 per pair of contracts, is possible if SINA closes at or below $35 when April options expire.

Call Sell: Alternately, if you own SINA stock, or if you are reluctant to bet on such a sharp decline for the shares, then a weekly Mar 13 series $41.50 call sell position might be what you are looking for. If you already own SINA stock, this trade will allow you to offset some of your portfolio losses in the event of a selloff, but also allow you exposure to any upside up until the stock trades at or above $41.50.

At last check, this option was bid at 29 cents, or $29 per contract. A sold call allows you keep the premium as long as SINA stock closes below $41.50 when weekly March options expire this Friday. On the downside, if SINA rallies above $41.50 prior to expiration, you could be forced to provide 100 shares for each call sold, which could be quite costly if you do not have enough SINA stock on hand to cover the call.

As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/03/sina-corp-2-trades-sina-stock-earnings-selloff/.

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