The earnings calendar has delivered some gold mines and land mines in recent weeks, where double-digit percentage gainers and losers have been commonplace.
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In the latest week, huge earnings winners included Constellation Energy (CEG), Axon (AXON), Okta (OKTA) and Duolingo (DUOL), but sellers hit Snowflake (SNOW) and DoubleVerify (DV) and Elastic (ESTC) hard.
The Nasdaq composite stopped just short of its all-time of 16,212 Thursday, but it did mark an all-time closing high, along with the S&P 500. Indeed, the confirmed uptrend continues to show signs of strength, helped by the outperformance of growth stocks.
The earnings calendar in the coming week is busy once again in the technology sector, as investors await earnings from GitLab (GTLB), CrowdStrike (CRWD), Broadcom (AVGO), MongoDB (MDB) and Samsara (IOT).
Earnings Calendar Spotlight
Earnings in the security software group have been a mixed bag. Palo Alto Networks (PANW) plunged 28% on Feb. 21 after the company reported decelerating earnings and revenue growth and also gave weak guidance. But Okta soared Thursday after the company reported strong results and gave an upbeat outlook.
Results from CrowdStrike are due Tuesday after the close. Analysts polled by Zacks Investment Research expect adjusted profit of 82 cents a share, up 74% year over year, with revenue up 32% to $839.1 million.
Like many other stocks in the security software group, CrowdStrike gets a premium valuation. As of Thursday’s close, it was selling at 123 times trailing earnings and 86 times forward earnings. That means it will take great results, not just very good, to fuel more gains.
The stock gapped up Nov. 29 after the company reported a 105% surge in quarterly profit. Revenue jumped 35% to $786 million, about $9 million above expectations. Annual recurring revenue (ARR), a key financial metric tied to subscription services growth, increased 35% to $3.15 billion, just ahead of the $3.14 billion consensus estimate.
On Thursday, IBD’s Options column featured a diagonal put spread for CrowdStrike.
Tech Stocks To Watch
Results from GitLab, a top performer in the tech services group, are due Monday after the close. It’s a candidate for a call-option trade as the stock holds support at its 10-week moving average after a breakout from a 20-week consolidation Dec. 5.
So is Samsara (IOT), which is back above its 10-week line in an 11-week consolidation, although the pattern is marred by several erratic weekly price swings, known as wide-and-loose trading.
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Results are due Thursday after the close. The company is expected to report adjusted profit of 3 cents a share. Look for revenue to be up 39% to $258.6 million.
Samsara, known for its connect operations platform for tracking fleets of vehicles and other equipment, gapped up sharply on Dec. 1 as Wall Street cheered a 40% jump in revenue to $237.5 million.
“We achieved an important milestone this quarter as we surpassed $1 billion in annual recurring revenue in just our eighth year of selling,” said Sanjit Biswas, CEO and co-founder of Samsara.
GitLab, meantime, is expected to report adjusted profit of 8 cents a share, which would reverse a year-ago loss of 3 cents. Revenue is forecast to rise 28% to $157.7 million.
In the database software group, MongoDB reports Thursday after the close. The stock is retesting a prior buy area as it holds support at its 10-week line. But it erased a 15% gain from its 442.84 buy point, which is a sell signal.
MDB is another software name with a tremendous track record of growth. The company shows several quarters in a row of huge earnings growth. Over the past eight quarters, revenue growth has ranged from 29% to 57%.
The earnings calendar is also filled with stocks in the retail sector, with results due from strong price performers like First Watch Restaurant Group (FWRG), Ross Stores (ROST), Burlington Stores (BURL), American Eagle Outfitters (AEO), Abercrombie & Fitch (ANF) and Costco (COST).
Options Trading Strategy
A basic options trading strategy around earnings — using call options — allows you to buy a stock at a predetermined price without taking a lot of risk. Here’s how the option trading strategy works and what a call option trade recently looked like for GitLab.
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First, identify top-rated stocks with a bullish chart. Some might be setting up in sound early-stage bases. Others already might have broken out and are getting support at their 10-week lines for the first time. And a few might be trading tightly near highs and refusing to give up much ground. Avoid extended stocks that are too far past proper entry points.
A call option is a bullish bet on a stock. Put options are bearish bets. One call option contract gives the holder the right to buy 100 shares of a stock at a specified price, known as the strike price.
Once you’ve identified a bullish setup in the earnings calendar, check strike prices with your online trading platform, or at cboe.com. Make sure the option is liquid, with a relatively tight spread between the bid and ask.
Look for a strike price just above the underlying stock price — that’s out of the money — and check the premium. Ideally, the premium should not exceed 4% of the underlying stock price at the time. In some cases, an in-the-money strike price is OK as long as the premium isn’t too expensive.
Choose an expiration date that fits your risk objective. But keep in mind that time is money in the options market. Near-term expiration dates will have cheaper premiums than those further out. Buying time in the options market comes at a higher cost.
Earnings Calendar Option Trade
GitLab and Samsara are candidates for call-option trades, but they were pricey trades as of Friday.
When GitLab shares traded around 71.60, a slightly out-of-the-money weekly call option with a 72 strike price and a March 8 expiration came with a premium of around $5.60 per contract. That was 7.9% of the underlying stock price at the time. The expected move for GitLab is about 12 points up or down.
One contract gave the holder the right to buy 100 shares of GitLab at 72 per share. The most that could be lost was $560 — the amount paid for the 100-share contract. To break even, the stock would need to rise to 77.60, factoring in the premium paid.
A call-option trade for Samsara was also pricey. When Samsara shares traded around 33.50, a slightly out-of-the-money weekly call option with a 34 strike price and a March 8 expiration came with a premium of around $3 per contract. That was nearly 9% of the underlying stock price at the time. The expected move for Samsara is about 6 points up or down.
Follow Ken Shreve on X/Twitter @IBD_KShreve for more stock market analysis and insight.
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