$GOOG Q4 Earnings Preview

Event?

GOOGreportsitsQ4earningstodayaftertheclose?

Theoptionsmarketisimplyingabouta6%onedaymove,whichisessentiallyinlinewiththe4quarteraverageof6。

35%,andthe8quarteraverageofabout6。

15%。

Sentiment?

WallStreetanalystsareverypositiveonGOOG,with39buys,12holds,andnosells?

Theaverage12monthpricetargetisaround1227?

GOOGhasbeenoneofthebest-performinglarge-captechstocksoverthepastyear,returning47%inthatperiod?

Despiteweakstartforthebroadermarketin2014,GOOGisactuallyupontheyearwiththismorningspre-marketmove(closed2013at1120)?

Shortinterestisnegligibleat1。

4%ofthefloat。

OptionsOpenInterest?

Thetotalcalltoputopeninterestratioisonlyaround1。

2forGOOG,relativelylowforalarge-captechstockthathashadsuchstrongperformancerecently?

Even1monthaveragevolumesarenottooskewed,atabout1。

25to1infavorofcallsoverputs?

Oftheweeklyoptions,theweekly1100putsandtheweekly1140callshavethemostopeninterest?

TheFeb7th1200callshaveover2500ofopeninterest,theMarch1200callshaveover5kofopeninterest,andtheJan151200callsalsohaveover5kofopeninterest。

PriceAction/Technicals?

GOOGhasonlyhad2downmonthssinceOctober2012,makingnewall-timehighsmonthaftermonthintheprocess?

Onthedailychart,theimportantpsychologicalsupportisthe$1000level,wherethestockgappedstraighttoafterthelastearningsreport:

GOOGdailychart,50dayinpink,200dayinyellow,CourtesyofBloomberg

Overthepastweek,therising50daymovingaverage,currentlyaround1097,hasactedassupport?

Therising200daymovingaverage,whichhasnotbeenbreachedsinceJuly2012,doesnotcomeintoplayuntil$947。

Ontheupside,thestockhasnorealresistanceasidefromlastweekslowat$1167。

Volatility?

Impliedvolatilityisnear2yearhighsinGOOGaheadofthisevent,asoptionstradershikeupexpectationsforabigmoveafterlastquarters14%ripperaftertheearningsrelease:

30dayimpliedvolatilityinGOOG,CourtesyofLiveVolPro

GOOGisoneofthefewlargecapstocksthathashigherimpliedvolatilitythisquartercomparedtomostofthepastcoupleyears?

Sofar,AAPLandFBhavebeenbigmoversonearningsthisweek,sotradersaretakingthatintoaccountaswell。

OurView?

DandetailedourthoughtsintheNameThatTradepostfromFriday:

Iwouldmakeanotherfairlyimportantpoint,analystsexpectthecompanytore-accelerateearningsthisyearto19%growth,after2consecutiveyearsof11%growthyearoveryear,atatimewheresaleshaveseenmassivedeceleration,from37%in2012,to20%lastyear,aratethatanalyststoexpecttostayconstantin2014?

Thisseemstometobeafairlyhighhurdle,andwiththestocktradingatabout21。

5xthisyearsexpectedearningsgrowthitisnotexactlycheap。

Iknow,Iknow,thatisfabulousgrowthforacompanythesizeofGOOG,andAAPLasrecentlyas2012wasgrowingsalesinearningsatafasterpaceonalargerscale,butweallknowhowthatended…thecompanyhaditsfirstyearoveryearearningsdeclineinmorethanadecadein2013andsawsalesgrowthgotfrom40%plustohighsingledigits。

Again,Ihavenoaxetogrind,thecompanyhasbeenfiringonallcylinders,andhasbeenadequatelyrewarded。

Ijustthinkitisaverycrowdedtradeandpricedtoperfection,andaswelearnedinAAPLoverthelast2years,justasmassivecultstockslikeAAPLcanovershootontheupsidetheywillmostlikelydothesameonthedownside。

Obviouslyariskynameonearnings,withsomebigmovesinbothdirectionsinthepast2years?


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