Tuesday’s Vital Data: General Electric Company (GE), Comcast Corporation (CMCSA) and Netflix, Inc. (NFLX)

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U.S. stock futures are mixed this morning, as traders digest the latest wave of corporate earnings reports. Netflix, Inc. (NASDAQ:NFLX), yesterday’s highlight, is up after adding 5.3 million subscribers last quarter. However, most of Wall Street is focused on reports from financial giants Morgan Stanley (NYSE:MS) and and Goldman Sachs Group Inc (NYSE:GS). Meanwhile, International Business Machines Corp. (NYSE:IBM) reports after the close today.

Tuesday’s Vital Data: General Electric Company (GE), Comcast Corporation (CMCSA) and Netflix, Inc. (NFLX)Heading into the open, futures on the Dow Jones Industrial Average are up 0.06%, while S&P 500 futures are down 0.05% and Nasdaq-100 futures have shed 0.09%.

Despite the advent of earnings season, options activity remained rather subdued on Monday. Overall, only about 13. million calls and 12.6 million puts crossed the tape yesterday — well below average, especially for earnings season. On the CBOE, the single-session equity put/call volume ratio rebounded to 0.70, while the 10-day moving average ticked higher to 0.66 — a six week high.

Taking a closer look at Monday’s volume, General Electric Company (NYSE:GE) saw an influx of put volume ahead of this Friday’s quarterly earnings report. Meanwhile, Comcast Corporation (NASDAQ:CMCSA) is attracting call option volume a week ahead of it’s own quarterly earnings report, despite mounting cordcutting concerns. Finally, Netflix knocked it out of the park with earnings last night, adding a greater-than-expected 5.3 million subscribers on the quarter.

Tuesday’s Vital Options Data: General Electric Company (GE), Comcast Corporation (CMCSA) and Netflix, Inc. (NFLX)

General Electric Company (GE)

GE stock is struggling. The company is in flux, and investors are worried about the recent and rapid change in leadership at the blue-chip conglomerate. As such, GE stock is trading just above multiyear lows.

What’s more, the company is slated to report earnings this Friday. Wall Street is looking for a profit of 50 cents per share on revenue of $32.59 billion, though EarningsWhispers.com places the whisper number at 52 cents per share.

While hitting the whisper would be a bonus, GE’s post earnings move will be all about guidance amid its current restructuring. And GE options traders are worried that guidance will come up short.

Volume on Monday rose to 183,000 contracts, well above the norm for GE. Puts made up 56% of the day’s take, signaling a rising pessimism among the speculative group. This skepticism ahead of earnings is reflected in GE’s October put/call open interest ratio of 1.05.

However, as I pointed out last week, this heavy handed pessimism could work in GE’s favor, allowing any positive news to prompt bargain hunting, thus sending the shares higher.

Comcast Corporation (CMCSA)

While Comcast’s cordcutting problem isn’t as big as AT&T Inc.’s (NYSE:T) due to its ownership of NBC, it is still considerable. Last week, AT&T said it expected to lose 390,000 traditional subscribers while adding 300,000 lower-value customers on its DirecTV Now service — a net loss of 90,000 subs.

Analysts expect the industry as a whole to shed some 1 million subs on the quarter. With Comcast already forecasting a loss of 150,000 subscribers due to this season’s hurricanes, all eyes will be on next week’s quarterly report.

CMCSA options traders don’t appear worried, however. Volume on Monday rose to 125,000 contracts, more than quadrupling Comcast’s average and hitting a near-term high. Calls made up the bulk of that activity, accounting for  85% of the day’s take.

However, there is a hefty degree of pessimism heading into Comcast’s quarterly report. The weekly Oct. 27 put/call OI ratio currently rests at 1.70, meaning that puts are nearly twice as popular as calls among options most affected by next week’s report. And this is after yesterday’s boom in call volume.

Netflix, Inc. (NFLX)

Netflix continued to grow at a faster than expected clip in the third quarter. The online streaming giant added 5.3 million subscribers on the quarter and guided above expectations for the fourth quarter at 6.3 million subs. The company also said it was bumping spending on new content from $7 billion to $8 billion next year, a move that put some analysts on edge.

As a result, NFLX stock is up less than 1% heading into the open despite its solid quarter.

NFLX options traders favored calls ahead of the report, but just barely. Volume rose to 315,000 contracts, nearly tripling Netflix’s daily average, while calls made up 57% of the day’s take. Still, the October put/call OI ratio slipped from 1.09 on Friday to 1.08 today, indicating that some traders were expecting a post-earnings rally.

With NFLX breakout above $200, and the shares digesting a solid quarter and increased spending, the stock should hold its current position through today and eventually head higher.

Traders who got in on the Oct $200/$210 bull call spread I recommended on Friday should hit breakeven (near $203.03) today. With the uncertainty created by Netflix’s added spending, I’d recommend setting your stop-losses now, if you haven’t already done so, due to the short time frame of this trade.

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/tuesday-vital-data-general-electric-company-ge-comcast-corporation-cmcsa-netflix-inc-nflx-stock/.

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