MorningWord 11/01/12: Today’s AfterMarket Action May Trump the Day Session

by Dan November 1, 2012 9:17 am • Commentary

MorningWord 11/01/12:  Yesterday’s trading felt a bit like the day after Thanksgiving, or Christmas Eve, few participants, light volumes and whippy action (less the holiday cheer of course). If you missed it most of the major indicies in the U.S. closed flat, except for the Nasdaq (down 36 bps) as too of it’s largest components, AAPL and AMZN suffered losses of 1.44% and 2.24% respectively.  As Enis mentioned in his MacroWrap earlier this morning, there was a good bit of single stock volatility, which makes sense given the SPX’s almost 1% range, but masked by the index’s flat close.  Sandy or not, this might have been the course for the last 2 months of 2012 anyway, where investors happy to have gains for the year lock in profits in front of a next week’s election and then the next hurdle of tackling the “fiscal cliff”, not to mention subpar expected earnings growth for the S&P500 that was apparent in Q4 guidance over the last few weeks by what seemed to be a majority of those to report.

All of this leads me to rolling up our sleeves a bit and doing some work on the micro.  For instance LNKD reports this evening after the close (we will do a more detailed report later), the options market is implying about a 12% move vs the 9.46% avg over the last 5 qtrs since going public in 2011.  LNKD is a fairly interesting story given it’s 70% gains ytd, and its nearly 140% gains from its IPO price.   Since making a new all time high in Sept, the stock is down 14% in sympathy with other tech high-fliers like AMZN and AAPL, who have given Q3 results.  The street remains overwhelmingly positive on the stock with 17 Buys, 9 Holds and No Sells, with an avg 12 month price target of about $133.  Investors are decidedly less bearish on the stock than they were last year, with short interest down substantially to about 6% of the float.

SBUX is also reporting tonight, and this one could be interesting as the stock is essentially flat on the year after being up nearly 35% ytd in Apr after making a new all time high.   SBUX is Exhibit A for a past growth leader feeling the effects of slowing growth domestically and worries about the rate of international expansion.  The options market is implying about a 6% move vs the 4 qtr avg move of about 5.7%, which seems kind of fair given some of the volatility we have seen of late in other consumer discretionary stocks with similar exposure.

PCLN is also reporting this evening and this one is likely to be watched fairly closely after EXPE’s monster move last week on it’s results (up 15%).  The options market is implying about a 9% move vs the ~9.5% move over the last 4 qtrs and it’s massive 17% gap lower after last qtr’s disappointment.

So even in a slow market, there will be stuff to do, we will be taking a closer look at all 3 of these names and will post our findings a bit later.