Earnings Snapshots for Week of August 20th, 2012
Dell (DELL) will report earnings 8/21/12 after the close with the Street expecting $0.45 EPS and $14.66B in Revenues.
Dell missed EPS estimates last report with $0.43 vs. $0.46, but had beaten the prior 6. Shares have closed lower 4 consecutive earnings reports and an average 6 quarter max move of right around 10%. The $21.46B Co. trades cheap at 6.1X earnings, 0.35X sales, 2.3X book and 5.06X cash flow, also with $12B+ in cash on its books, but for good reason, the PC market is giving way to tablets and DELL is no longer positioned for growth. Short Interest is only 3% of the float and has fallen to 44M shares as of 8/1 from 71.7M shares on 4/1/12. Dell is in transition and although it will likely reduce FY13 guidance it is seeing more contribution from its solutions and servers business, and may announce increased buybacks. July NPD data showed a 19% decline in PC units year/year and the 8th straight month of declines. UBS initiated coverage of DELL on 8-7 with a Neutral rating and $12.50 target, basically calling shares fairly valued with a lack of upside catalysts. On the chart DELL is showing signs of attempting to build a double bottom with the 2010 lows at $11.35, while resistance likely at $13.25, a key Fibonacci on the 5 year range and also near the prior large gap. DELL trades weekly options with IV at 74.65% comparing to September at 43.9% and November at
36%, and the September Skew slope is not too steep showing the view of limited downside due to valuation. DELL's
IV30 at 43.9% is in its 68th percentile and IV/HV 30 spread at 20.7 points and near one year highs for that spread, so
IV looks fairly rich into the report, the options pricing in a move of 8.5% on earnings for next week. Looking at the
September Open Interest there is 17,750+ at September 12 calls and 19,740 at September $13 calls, while September
$12 puts at 14,650+ and the OTM $10 puts with 31,800. The overall options flow bias has been mixed the last 15 days. On 8-2 the September $10 puts were bought 30,700X at $0.21 to $0.24 offers, while the following day traders sold September $9 and $8 puts to open and another trader bought 13,000 Jan. 2013 $10 puts at $0.52 tied to long stock, so a synthetic long call. ON 8-8 traders bought 3,200 September 12 puts, but on 8-9 2,000 February $14/$11 bull risk reversals traded. On 8-13 the September $13 calls traded 35,000X but against short stock and the next day a trader bought 4000 September 12/11 put spreads at $0.34.
Trade to Consider: Long the DELL Straddle Strangle Swap - Sell Aug. (W) $12 Straddle at $1.03 and Buy September
$13/$11 Strangle at $0.56 for Net $0.57 Credit

Intuit (INTU) will report earnings on 8/21/12 after the close and the Street is expecting EPS $0.06 and Revenues
$652.55M. Intuit has beaten EPS estimates 4 of its last 6 reports, and shares have closed higher on earnings 4 straight and 5 of its last 6 with an average 6 quarter max move of 6.5%. The $17.55B tax software Co. trades 17.8X earnings,
1.64 PEG, 4.23X sales and 18.7X cash flow, priced fairly expensive with 13% EPS growth seen for FY13. Only 2.5% of its float is short, and currently at 6.8M shares, down from 8.15M shares on 6/15. Barclays downgraded shares to Equal
Weight with a $65 target on 8-3-12, while Jefferies reiterated a Hold on 8-7 with a raised $59 target. Intuit also scheduled an investor day for September 18th, something to keep in mind. Intuit has been losing market share to HR
Block's (HRB) online unit, a concern. BofA rates shares a Buy with a $63 target into the report noting Intuit provides investors the rare combination of Cloud and Mobile opportunities and can benefit from HTML5 adoption long term, and also a shareholder friendly mindset with buybacks and dividends. On the chart INTU shares on the daily are in a tight channel up riding its 150 day SMA higher and 200 SMA below supporting the move, but on the weekly I see a large diamond topping pattern formed. The first Fibonacci Retracement level is $56.40 (also the 200 day SMA), but if this pattern breaks to the downside a move to $53.20 as the next Fibonacci and re-test of a 2012 breakout looks likely.
INTU's September IV at 26.16% compares to October at 25% and a fairly steep skew, although the Oct. 60 calls are notably "cheap." INTU's IV/HV 30 spread is at 5.4, the highest since early June, but below levels seen prior to earnings in past quarters. There is a lack of notable open interest in the options, although October $60 calls and $57.50 puts each have 2,300+ and mainly due to a 7-27-12 trade when 2,000 of those strangles were bought at $4.74 to open on the ARCA.
Trade to Consider: Long the INTU September $60 Straddle at $3.80 or Better

American Eagle (AEO) reports on 8/22 before the open and Street expecting $0.21 and $721.7M in Revenues, and these numbers recently raised after reporting same store sales, so no real surprises expected. AEO has beaten EPS estimates in 3 straight reports, and shares have closed higher 5 of its last 6 with an average 6 quarter max move of just above 7%. The $4.12B teen retailer is expecting to see a strong back to school shopping season and trades 14.1X forward earnings, 1.26X sales and 2.8X book with a 2.1% yield. Only 3.9% of its float is short, and has fallen to 6.65M shares from 11.24M in May. Janney Montgomery reiterated a Buy and $26 target on 8-10 while JP Morgan raised its target to $23 on 8-6-12. JP Morgan believes AEO may announce a special dividend or buyback with its building cash position of $1B and strong balance sheet. On the chart shares are approaching 5 year highs, while 10 year high resistance is up at $28, another 33% from here. Shares have been in a fairly narrow range the past few months and likely looking to breakout over $21.50 and target a run to $24, able to ride its 50 day SMA higher throughout the last few months, currently at $20.13 and considered major support for shares. AEO's September IV at 41.4% compares to
November at 38.25% with a normal IV Skew, and IV/HV 30 spread at 17.6, nearing a 1 year high for the spread with
IV30 at 41.4% in the 32nd percentile for the year. Looking at the Open Interest there are some very large positions sitting out there, most of which were large bullish plays, including the 27,000 November $22 calls that sit in OI and there are 6,050 September $22 calls and 11,900 of the September $23 calls. On 7-27 a trader bought 3,500 Sep. 23 calls at $0.45 offer, and on 8-7 6000 of the Nov. 22 calls bought to open, followed by another 12,000 bought the next day. The only notable OI on the put side in at the September $21 strike with 6,050 with 5,900 of those from 8-10-12 that were bought as strangles with the September $22 calls, and a trader that a non-directional trader may want to take into earnings as shares are likely heading to $24 or $18.
Trade to Consider: Long the AEO September $21/$24 Call Spread at $0.90

Aruba Networks (ARUN) will report results on 8/23/12 after the close and the Street looking for EPS $0.17 and
Revenues at $136.85M. Aruba shares have closed lower the last two reports and 3 of its last 5 with an average 6 quarter max move of 15%. The $1.96B networking Co. trades 34.22X trailing and 23X forward earnings, 1.77 PEG, 4X sales and 4.26X book with no debt and 20.65% EPS growth seen for FY13. ARUN has a notable short float of 21.5%, but at 22.5M shares short it has come down from 6 month highs in May at 26.5M shares. Stephens initiated coverage on 8-16 with an Overweight and $20 target and Goldman reiterated a Buy on 8-9-12. Aruba announced a $100M buyback back in June, and peers in networking have been reporting better results recently, so the worst may be behind the group. On the chart ARUN shares recently jumped past $15 resistance after basing at the $12.30 level. On the longer term view trend resistance is at $19 which aligns with the 50% Fibonacci of the 5 year range for shares, while currently trading right at the 23.6% Fibonacci of the 2011 high to recent low range. On weakness shares would likely find some support at $15, although longer term the trend is down, and a break of $12.30 targets $9.25. The 150 SMA at 18.50 and 200 SMA at 19 as well, so consider 19 major resistance and $14.50 as the 50 SMA likely support. ARUN's
September IV at 71.5% compares to October at 62.8%, and IV30 of 71.5% in the 45th percentile, a fairly steep IV
Skew but the Sep. 18 calls are bid-up. The IV30/HV30 spread at 4 is near the low-end of the 6 month range, and well below the spread seen into the prior 3 reports. Looking at the Open Interest the September $15 call OI at 5,930 far exceeds all other strikes and other months. On 8-7 3,900 of these calls traded with one block of 3,340 bought at $1.40 on the CBOE to open. On 8-16 another 1,780 Sep. 15 calls bought closer to $3. Overall the Open Interest in ARUN options is mostly bullish, also seeing some accumulation in October calls.
Trade to Consider: Sell the ARUN September $18/$17 Strangle at $2.55 Credit

Autodesk (ADSK) will report earnings 8/23/12 after the close with $0.49 EPS and $593.4M the consensus estimate.
ADSK met EPS expectations last report, and beaten the prior 5. Shares have closed lower 4 of its last 5 reports and an average max move of 9.5% over the last 6 reports. The $8B software Co's shares trades 27.75X trailing and 14.75X forward earnings, 1.76 PEG, 3.53X sales and 3.93X book with 17.3% EPS growth seen for FY13. Recent Architecture
Billings Index data has come in weak which typically impacts ADSK negatively. Only 2.5% of its float is short, but at
5.7M shares is well above the 3.27M shares on 5/15. ADSK has not had a lot of Analyst Coverage recently, with a UBS reiterating Buy and lowering target to $40 on 7-13 the latest. Goldman reiterated a Sell and $29 target on 6-20 noting currency and Macro headwinds. ADSK announced a $60M deal for Socialcam in July that impacts FY13 EPS by 6 cents negatively. Looking at the ADSK chart, the first notable pattern is a large head and shoulders formed with the head at
$42.50 and shoulders near $36, and that $36 level also happens to be the 61.8% Fibonacci of the 5 year range, while the neckline sits down at $30 and below that shares can see $27 quickly. The 200 SMA at $35.25 and 150 SMA at
$36.20 are also working as resistance, shares unable to breakout recently after filling its prior quarter's earnings gap.
ADSK September IV at 40% compares to October at 38% and IV30 of 40% is in the 32nd percentile with a very steep
IV Skew slope. The IV/HV 30 spread at 7.8 has been on the rise, and well below the 16.25 spread into last quarter.
ADSK lacks much notable OI in September, October, or January 2013 options, so no real flow bias into the report.
Trade to Consider: Long the ADSK September $34/$29 Put Spread at $1

Salesforce.com (CRM) will report earnings 8/23/12 after the close and the Street expecting $0.39 EPS and $728.25M in Revenues with the billings and forward guidance often more important than the results. Salesforce.com has beaten
EPS estimates 5 of its last 6 reports ( met expectations the other), and shares have closed higher following earnings 6 of the its last 8 reports with an average 6 quarter max move of just over 10%. The $20.3B cloud leader has actively been making strategic acquisitions and winning market share closing big deals this past quarter. Shares trade at a major premium of 74X forward earnings, 8.27X sales and 42.9X cash flow but sees 27.7% growth for the next 5 years out. CRM has a 10.4% short float at 13.2M shares, up modestly from 12.45M shares on 5/1. Analysts have been actively bullish in CRM ahead of the report, often a warning sign. Think Equity raised estimates on 8-16 with a $165 target, Wells Fargo a $180 target on 8-13, and Piper a $207 target on 8-10, while Bernstein the lone bear with an
Underperform and $97 target reiterated on 8-16-12. The trends remain strong for CRM and billings expected to grow
29% y/y, while Q4 will be a quarter where CRM faces tougher comps. CRM is seen as rich by those using PE metrics, but at EV/FCF over billings growth CRM is at 0.86, the low-end of its 3 year range of 0.8 to 1.3 and below Red Hat
(RHT) which is at 1.4. Looking at the long term chart Salesforce.com (CRM) has formed a large inverse H&S pattern that can be seen as a continuation pattern, and a break above $165 would measure to a 2 year target of $235. Shares recently based above $125 and on the weekly held the first Fibonacci Retracement of its 5 year range on every weekly close, a healthy signal. Shares are trading above all major moving averages into the report, and if there is weakness the $120 level is a buy as long term trend support. CRM does trade weekly options and the IV at 89.5% compares to
September at 52% and November at 45%, and IV30 52% is at the 32nd percentile. Options are pricing in just under a
10% move on earnings, fairly priced. The IV Skew has a fairly flat slope, so a slight bullish bias, and the IV/HV30 spread at 6.4 is well below where it was into prior quarters. Salesforce.com options saw notable positioning last week, including on Friday with more than $2.4M in call premium bought, a focus on September $155 calls as 3,500 of those were bought to open. ON 8-13-12 a trader sold 3,000 September $130 puts at $4.11 to open.
Trade to Consider: Long the CRM August (Weekly) $155/$165/$175 Call Fly at $1.50

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