Take-Two Interactive Software, Inc. (TTWO) is scheduled to announce its latest earnings figures today, after the market closes.
Shares are just below their 50-day moving average, which has flattened out and is showing a slight sign of rolling over. The 100- and 200-day moving averages are still in an uptrend, and they should provide support for the stock.
Resistance is at $37 per share on better-than-expected results. There is also support at $30 on a potential earnings miss.
Wall Street is expecting earnings of 50 cents a share on revenue north of $452 million. The high estimate is at 55 cents a share on sales above $506 million. The low forecast has the company earning 43 cents a share on revenue of $425 million.
Take-Two topped analysts’ expectations by 15 cents last quarter, but it missed by 5 cents in the previous quarter. This follows two other earnings beats of 22 cents and 35 cents, respectively.
Given the earnings history, I’m expecting another wide beat or miss.
TTWO Stock Trade
Although I have been slightly bullish on TTWO over the years, I’m a little hesitant to take a directional call option trade. The TTWO February $35 calls (TTWO160219C00035000, $0.80, down $0.55) look tempting at current levels, but they expire in less than three weeks. These options would double if TTWO trades to $36.60 after the announcement or over the next few weeks.
I also don’t like betting against a company that has the potential to blow out estimates, which is why I don’t feel too cozy using put options either. The TTWO February $33 puts (TTWO160219P00033000, $1.10, up $0.20) could be targeted by bearish traders expecting a breakdown to Chinatown, as they would double if shares trade to $30.80, technically, by Feb. 19.
Both aforementioned options purchased together would cost just under $2 to create a “strangle” option trade. The breakeven points would be near $37 and $31. Double-digit profits could be made with a move above or below these levels. A triple-digit profit would occur if TTWO shares are pushing $39 or testing $29, technically, by Feb. 19.
I will likely sit on the sidelines ahead of the company’s earnings announcement on Wednesday, but the action will be exciting to watch.
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