Yingli Green Energy Hold. Co. Ltd. (ADR) (YGE) is slated release its third-quarter earnings report after the close of trading tomorrow, and anyone looking to trade YGE stock ahead of time will be dealing with one beaten-up stock.
Yingli shares are off more than 50% since March. That said, the company just announced an agreement to supply 120 MW of YGE 72 Cell solar panels for a project in France, which upon completion will be the largest solar power park in Europe. Look for this deal to have a potential impact on Yingli Green’s forward-looking statements.
Digging into the numbers, Wall Street expects Yingli Green to post a loss of 13 cents per share tomorrow night, with revenue coming in at $655.90 million. YGE also has missed the consensus estimate in each of the past four reporting periods.
On the sentiment front, we find analysts and traders quite bearish when it comes to YGE stock. For instance, Thomson/First Call reports that six of the eight analysts covering YGE stock rate it a “hold” or worse, compared to just two “buys.” Elsewhere, short interest currently totals about 20 million shares of YGE stock, accounting for roughly 16% of the YGE’s total float, or shares available for public trading.
Even options traders are jumping on the bearish bandwagon. Specifically, the December put/call open interest ratio for YGE stock arrives at a reading of 1.4, with put open interest easily outnumbering call open interest. This ratio declines when we pull back for a broader view, with the December/January 2015 put/call open interest ratio dipping to 0.8.
Click to Enlarge Overall, December implieds are pricing in a potential post-earnings move of about 17% for YGE stock. This places the upper bound near $3.52, while the lower bound lies at $2.48. A downside move would place YGE close it a fresh 52-week low, while a post-earnings rally could send the shares north of several short-term resistance levels, including the stock’s 50-day moving average.
Options Trade on YGE Stock
Trading YGE stock ahead of earnings is not for the faint of heart. Guidance will be the key, and the recent deal to provide solar panels in France could provide help on this front, especially with expectations already pretty low. As such, an upside move could spark a short-covering rally.
With this in mind, traders might want to consider a Dec $2.50/$3.50 bull call spread. At the close of trading on Monday, this spread was offered at 44 cents, or $44 per pair of contracts. Breakeven lies at $2.94, while a maximum profit of 56 cents, or $56 per pair of contracts, is possible if YGE closes at or above $3.50 when December options expire.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.