Monday’s Vital Data: Netflix, Inc. (NFLX), Amazon.com, Inc. (AMZN) and Costco Wholesale Corporation (COST)

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U.S. stock futures are trading broadly higher this morning, sending the major market indices further into all-time-high territory. Today’s session is slated to be a relatively quiet one, as there are no Federal Reserve speeches and no major U.S. economic reports on the docket due to the Columbus Day government holiday.

Monday’s Vital Data: Netflix, Inc. (NFLX), Amazon.com, Inc. (AMZN) and Costco Wholesale Corporation (COST)Heading into the open, futures on the Dow Jones Industrial Average have gained 0.21%, S&P 500 futures are higher by 0.19% and Nasdaq-100 futures have rallied 0.25%.

In the options pits, volume was average on Friday with about 14.8 million calls and 14.3 million puts crossing the tape. On the CBOE, the single-session equity put/call volume ratio rose to 0.70, while the 10-day moving average ticked lower to 0.63.

Drilling down on Friday’s volume, Netflix, Inc. (NASDAQ:NFLX) call options saw renewed activity as the company’s price hike attracted bullish analyst commentary. Elsewhere, Amazon.com, Inc. (NASDAQ:AMZN) rallied call option traders following speculation the company was looking to enter the prescription drug market. Finally, Costco Wholesale Corporation (NASDAQ:COST) saw put options rise as the stock plunged on fourth-quarter earnings.

Monday’s Vital Options Data: Netflix, Inc. (NFLX), Amazon.com, Inc. (AMZN) and Costco Wholesale Corporation (COST)

Netflix, Inc. (NFLX)

On Thursday, Netflix announced it was hiking prices for all its streaming services, save its lowest tier. Analyst praised the move on Friday, with UBS remarking that the timing of the hike was perfect given Netflix’s strong fourth-quarter lineup, which includes “Stranger Things,” its original movie “Bright” starring Will Smith, “Marvel’s The Punisher” and Emmy winning “Queer Eye.”

Even historically bearish analysts at Wedbush had positive commentary for Netflix. Wedbush sees a revenue bump at Netflix due to the price hike, and lifted its price target to $88 from $82 — still a 55% discount to NFLX’s current trading range.

Options traders extended their run on NFLX calls on Friday, with volume rising to 292,000 contracts and calls making up 63% of the day’s take. Short-term NFLX options traders are really making the most of the stock’s run, as the October put/call open interest ratio plunged for a third straight session, arriving at 1.10 today, down from 1.15 on Friday and 1.25 on Thursday.

The most active call on Friday was the October $200 strike, where more than 1,300 contracts were added. Following last week’s rally, the $200 level lies just overhead, though taking out this psychological level this week would be a major bullish feat.

Amazon.com, Inc. (AMZN)

According to analysts at Leerink Partners, it’s not a matter of if, but when Amazon will enter the prescription drug market. Leerink is targeting Amazon’s debut in prescription drugs by 2019, which will present a major challenge to current brick-and-mortar stores.

Leerink also asserts that Amazon is already “in active discussions” with mid-size pharmacy benefit managers and, potentially, even larger players like Prime Therapeutics.

AMZN rose nearly 1% following the report, and options traders were biased toward bullish calls on Friday as a result. Volume topped 209,000 contracts, nearly doubling the stock’s daily average. What’s more, calls made up a sizeable 61% of the day’s take — well above average for AMZN.

Despite the bullish resurgence, short-term AMZN options traders remain reluctant to chase the stock too much higher. Specifically, the October put/call open interest ratio comes in at an even 1.00, with calls and puts in parity. This reading is down from mid-September readings north of 1.10, but it still reflects a health degree of pessimism from the speculative options crowd.

Costco Wholesale Corporation (COST)

Costco Wholesale reported strong fourth-quarter earnings on Thursday evening, but concerns about Amazon and pressure on margins prompted panic selling on Friday. For all intents and purposes, Costco’s report was a bullish blowout.

The company earned $2.08 per share on revenue of $42.3 billion, compared to expectations for $2.03 per share on $41.8 billion in sales. Same-store sales rose 6.1% for the quarter.

However, gross margin as a percentage of net sales contracted 15 basis points to 11.3%. Analysts were concerned that Costco would need to keep spending at this level to keep up with Amazon. Ironically, Amazon has also started spending much more heavily, though analysts don’t seem to extend those same concerns to AMZN that they have to COST.

Friday’s option volume on COST was a mixed bag. More than 161,000 contracts traded, with calls making up only about 52% of the day’s take. With COST down nearly 6% following the report, this is to be expected.

If you got in on the Oct $165/$170 bull call spread I recommended last week, my apologies. You can either get out now, or hold for a better exit point, but I don’t expect this trade to rebound before October options expire.

However, if you sold the Oct $158 put — the alternate trade — and are assigned COST stock, hold these shares for now. COST will inevitably come back, and you could make a considerable profit on the longer-term rally.

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


Article printed from InvestorPlace Media, https://investorplace.com/2017/10/monday-vital-data-netflix-inc-nflx-amazon-com-inc-amzn-costco-wholesale-corporation-cost/.

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