GoDaddy (GDDY) Earnings on Deck/ Profit Alert (TSEM)

1:10pm (EST)

Shares of GoDaddy (GDDY, $36.74, up $0.40) will be on the move in extended trading as the company is set to announce earnings after today’s closing bell. The chart looks bullish as all of the major moving averages are in solid uptrends. The 50-day moving average is especially showing a nice curl and represents near-term support at $36-$35.50. Resistance is at $36.75-$37.

The company is expected to earn $0.09 a share on revenue of $485 million. The high estimate is pegged at a whopping 10 cents higher for a profit of $0.19 a share. The low estimate has GoDaddy earning $0.03 a share. This equates to a possible headline of a 10 cent beat or a 6 cent miss.

GoDaddy has topped estimates in three of the past four quarter by two and three cents, twice, sandwiched with a miss by four cents.

The option market is pricing in a possible 7%-10% move with the near-term February call and put options. The GDDY February 37 calls (GDDY170217C00037000, $1.20, up $0.20) and the GDDY February 36 puts (GDDY170217P00036000, $1.00, down $0.15) are going for $2.20, together, and expire this Friday.

If shares trade above $39.40, or below $34, by Friday’s close, the aforementioned options would double from current levels, depending on direction and if you bought the calls or puts. As a strangle option trade, you could offset the risk of being on the wrong side of the trade by buying both options. However, shares would need to trade past $41.40, or fall below $31.60, technically, for the trade to make a triple-digit return.

I’m more bullish than bearish on GoDaddy and have the GDDY March 38 calls (GDDY170317C00038000, $1.15, up $0.10) on my Watch List. These call options would give the trade an extra month to play out and would double from current levels if shares clear $40.30 by mid-March.

The 52-week peak for shares of GoDaddy is at $37.40 and why a run past $40 could easily be in the books on a beat-and-raise quarter. Of course, an earnings miss, or lowered guidance going forward, could send shares tumbling 5%-10% to the downside.

I’m still on the fence because I don’t like the risk involved around trading an earnings announcement although the profits can be powerful. Additionally, there has been heavy buying in the GDDY February 35 puts (GDDY170217P00035000, $0.65, down $0.10) as nearly 2,000 contracts have traded. This might be “smart money”, or dumb money, being wagered on a drop below $35 by Friday’s close.

The portfolio has gotten off to a sweet start at 12-2, and while I could be more aggressive, I still want to do a little more research on GDDY. If I take action today, I will certainly send out a Trade Alert.

Turning our attention to the market, the bulls continue their roll with momentum still strong as fresh highs are in play once again. The Dow is up 83 points to 20,587 while the S&P 500 is gaining 6 points to 2,343. The Nasdaq is surging 19 points to 5,801 and the Russell 2000 is flat at 1,396.

I have updated our current trades, along with a Profit Alert for TSEM, so let’s go check the tape.


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