Earnings Cheat Sheet: $SODA and $AOL

by Enis May 7, 2013 3:08 pm • Commentary

SODA and AOL are two volatile names that have seen some big moves on earnings the past couple years.  Their similarities basically end there, but I wanted to provide a quick summary of what the options market is pricing for earnings tomorrow morning, and some brief thoughts.  We have no positions in either name at the moment.

SODA:

Implied Move:  The options market is implying about a 11.5% move vs the 4 qtr avg move of ~9.25% and the 8 qtr avg move of ~14%.

Sentiment:  Wall Street analysts are generally bullish on the stock with 9 Buys, 2 Holds and 1 Sell, though the avg 12 month price target is only ~$58.50.  Short interest is at around 40% of the float, though it has not changed much in 6 months.

Options Volumes / Open Interest:  Open interest is slightly skewed towards the calls by a ratio of 1.25 to 1.  The 1 month average volume has also been skewed towards the calls by a ratio of 1.65 to 1.

Someone asked my opinion on the name in our Submit Your Question section, and this was my response:

SODA is an interesting name to me. I actually did a bullish trade on it earlier this year because the fundamental growth story seemed decent. What’s curious, though, is that the short interest has remained at 40%, despite the fact that SODA is a 25 P/E name slated to grow earnings 15-20% over the next few years (so reasonably priced). Maybe the shorts know something that I don’t, so I have little desire to trade earnings, but I’m probably more bullish on the name than bearish, all things considered. No clue on earnings though.

AOL:

Implied Move:  The options market is implying about a 9% move vs the 4 qtr avg move of ~10% and the 8 qtr avg move of ~11.5%.

Sentiment:  Wall Street analysts are somewhat bullish on the stock with 10 Buys, 6 Holds and 1 Sell, though again, a low avg 12 month price target of only ~$42, relative to the current stock price.  Short interest is at around 10% of the float, down from 15% in February.

Options Volumes / Open Interest:  Open interest is about even between calls and puts (call to put ratio is about 0.95 to 1).  The 1 month average volume has been skewed to the calls by a ratio of 1.25 to 1.

I haven’t traded AOL since the dotcom days of the late 90’s.  The stock is up from around $10 in 2011 to above $40 today.  It’s a messy name, since sales have been relatively stable, but operating margins have fluctuated wildly in the past few years.  Analyst earnings consensus for 2013 is around $2, and this quarter’s consensus is $0.46, but a lot of moving parts here.  $44 is the high from last year.