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Bidding on eBay Ahead of Earnings

|Includes: eBay Inc. (EBAY)

We go from the current slow earnings week to an embarrassment of riches next week, with all sorts of reports to choose from.  The hardest part is combing through all the reports to pick out the best tradable opportunities.  But that’s what we do for Winning edge subscribers.

One element of a bullish earnings play we look for is low expectations.  If we see put accumulation or high short interest or low analyst rankings ahead of an earnings report, chances are the company doesn’t have to do much to impress the Street.

Such is the case with eBay (NASDAQ:EBAY), which reports on Wednesday after the close.  Analysts expect 47 cents per share, a modest 7% more than last year.  The whisper number is the same, which is a good sign that traders aren’t inflating their outlooks.

EBAY has an outstanding track record, having last missed an earnings estimate six years ago.  And the stock has gone up sharply after five of the past seven reports, gaining an average of more than 8% in just the one day following these releases.

On the chart, the stock is bouncing off its 100-day moving average and is now dueling with its 20-day trendline.  After that , the path should be clear for a run up to the November high, a move of 10%.

 

Like we said above, expectations are muted for EBAY’s earnings.  The put/call ratio is on the rise, indicating a preference for puts.  And just 40% of covering analysts rate the stock a “buy,” leaving plenty of room for upgrades.

If the stock shakes free of the 20-day,  we like it for a  move back to the November highs on a quick post-earnings pop.