Guidwire (GWRE) software reports tonight after the close. The options market is implying a one day move of about 7.5% which is a tad rich to the 5.5% average over the last 4 qtrs.
This enterprise software company had its shares caught up in the mania around CRM/SaaS stocks, and has made a new 52 week high and a 52 week low in a the last couple months alone, a fairly rare occurrence for a raging bull market:
GWRE shares were up more than 300% from the start of 2013, to the all time highs made in march of this year. The approximate 40% decline from the highs was inline with plenty of its high valuation tech peers like NOW, WDAY & YELP, yet very few (aside from FEYE) have gone from new highs to new lows. The only way to describe this price action would be horrendous.
The problem with GWRE is that earnings are actually declining year over year, not just decelerating, and sales growth is slowing meaningfully from 30% in fiscal 2013 to an expected 15% this year. The stock was priced for much higher growth coming into the year.
The stock is not an active trader on the options front with only 2k contracts of open interest coming into today, but the most active options today are the June 40 calls, with 977 trading (all in small lots, and many being bought), followed by 240 of the June 35 puts.
A beat and raise could see a short squeeze (6.5% short interest), likely up 10% with $40 serving as healthy resistance, while a mild guide lower prob sees an easy test of $35, while a miss and giuide down probably makes $35 healthy technical resistance going forward.
Vol is high, options are wide and illiquid, this is the sort of name that if you were to play for an event like earnings you have to get a lot of things right, like timing, direction and magnitude of the move just to break even. This would be the sort of situation that would interest me to possibly pick a bottom on an implosion to the $30 level.