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Event Foresight is an online platform that makes it easy for investors to track and analyze the financial and non-financial events important to the companies they own/follow. The author of all Event Foresight SeekingAlpha articles is the CEO, who has more than 5 years of professional equity... More
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  • HomeAway -- Key Events To Watch/Trade This Month 0 comments
    Nov 4, 2013 12:19 PM | about stocks: AWAY

    Key Points

    • HomeAway(NASDAQ:AWAY) reports Earnings on 11/6 (after-the-close); historical volatility implies a nearly 9% price change
    • Priceline(NASDAQ:PCLN) reports Earnings on 11/7 (after-the-close); Priceline earnings have historically caused a high degree of volatility in Homeaway shares--providing a second volatility event in the next week
    • UNIQUE INSIGHT 1: The 12 FHFA House Price Index Reports over the past year have driven a nearly +30% increase in HomeAway shares over the past year (an unappreciated event correlation and interesting trading opportunity)

    Details

    I recently dug into HomeAway's event profile and analyzed upcoming events for interesting trading opportunities. I analyzed five related companies events [TripAdivsor(NASDAQ:TRIP), Expedia(NASDAQ:EXPE), Orbitz(NYSE:OWW), Priceline(PCLN), and Travelzoo(NASDAQ:TZOO)], one trade show, and two economic events that are important to HomeAway -- and found a few very interesting insights.

    (picture data source: www.eventforesight.com)

    1) History Implies ~9% Change in HomeAway After Earnings. To state the obvious, every company has a volatile trading day after they report earnings. The challenges are trying to figure out direction and/or total change (for options trading strategies).

    HomeAway is in the midst of multiple business model transitions, which have made the stock incrementally more volatile during earnings. As detailed in the chart below, HomeAway shares have averaged an 8.75% change in stock price the day after reporting earnings in the past year, up more than double from average change of ~4% for earnings releases 12-24 months ago. If the volatility trend continues (considering the business is still in transition...), it presents an interesting options-trade, especially considering point #2 below.

    (click to enlarge)

    (picture data source: www.eventforesight.com)

    2) Priceline(PCLN) Earnings on 11/7 Could Amplify Volatility.Priceline is the largest online travel company by market cap -- providing a strong "read through" analysis of the travel market, which impacts HomeAway. This, coupled with the data detailed in the chart below (Priceline is the second-most volatile event for HomeAway shares,second only to HomeAway's own earnings), makes Priceline earnings an important event for HomeAway.

    On average, HomeAway shares change by ~3% the day-after Priceline reports earnings, more than double the average daily change of HomeAway on non-event days. The compounded event-volatility HomeAway earnings and Priceline earnings the next day creates an incrementally attractive options volatility trade.

    (picture data source: www.eventforesight.com)

    3) FHFA Housing Price Index Reports Are Driving Large Increases In HomeAway Shares. As detailed in the charts below, the 12 FHFA HPI reports over the past year have driven a cumulative increase in HomeAway shares of +28% -- and only 1 of the 12 generated a negative return (barely: -0.13%).

    The FHFA HPI provides insight into housing prices throughout the US, which in turn has a material impact on consumers vacation-home buying, selling, and traveling decisions. This is definitely an unappreciated indicator that HomeAway investors should be watching (and traders should consider trading!)

    (click to enlarge)

    (picture data source: www.eventforesight.com)

    (click to enlarge)

    (picture data source: www.eventforesight.com)

    What's The Trade?

    1) For HomeAway earnings + Priceline Earnings, the volatility currently implied in the HomeAway November options does not seem high enough to us; we recommend establishing a long straddle options position prior to HomeAway's earnings on 11/5

    2) The correlation between FHFA reporting dates and HomeAway shares appears to be an interesting 1-day asymmetric investment opportunity

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: AWAY
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