Earnings Preview: Macy's, Inc. and Etsy Inc

Macy's, Inc. (NYSE:M) and Etsy Inc (NASDAQ:ETSY) have had a recent history of poor post-earnings performances

Josh Selway

Feb 22, 2016 at 3:17 PM

ETSY
M

Retailer Macy's, Inc. (NYSE:M) and e-tailer Etsy Inc (NASDAQ:ETSY) will report earnings tomorrow. Let's take a pre-earnings look at M and ETSY.

M is scheduled to report fourth-quarter results before the bell on Tuesday, and it's hoping this time goes better than its previous releases. For instance, the stock hasn't experienced a positive post-earnings session since November 2014. Despite this, call buying has been popular leading up to the event. The stock's 50-day call/put volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) comes in at 2.75, just 2 percentage points from an annual high. Meanwhile, the options market is pricing in a 12% post-earnings swing for M. For the sake of comparison, M has averaged a 5.2% move in the session subsequent to earnings, looking back over the past eight quarters.

On the charts, Macy's, Inc. has been sliding fast since its record high of $73.61 in July, with the shares last seen at $40.95, a more than 44% decline. If this trend continues, analyst downgrades -- on top of an unwinding of the bullish option trader sentiment -- could exacerbate the stock's losses. Of the 14 brokerage firms with coverage on M, three maintain a "strong buy" recommendation, while nine sit right on the fence with a "hold" rating. This morning, though, Sterne Agee CRT upped its price target to $43 from $42.

ETSY will announce its fourth-quarter results after the close tomorrow, marking the fourth time the company has stepped into the earnings booth since going public last April. After its first three earnings releases, the stock posted losses of 18.1%, 28.3%, and 9.6%, for an average post-earnings plunge of 18.7%. This time around, speculators are pricing in a 21.4% single-session post-earnings swing from the shares.

Similar to M, traders have taken a decidedly call-skewed approach to ETSY. Over the past 10 days at the ISE, CBOE, and PHLX, more than 1,300 calls have been bought to open, compared to just 57 puts. Technically speaking, Etsy Inc's plummeted 78% since its April 16 all-time peak of $35.74. Today, though, it's edged higher to trade at $7.95, despite a price-target cut to $10 from $11 at Goldman Sachs -- which also weighed in on Amazon.com, Inc. (NASDAQ:AMZN).

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