Comeback kid, mobile communications outfit Sprint Corp (NYSE: S ) reports earnings Tuesday morning. The question is, will the event be a 'home run' or 'strike three' situation for investors?
Source: Mike Mozart via Flickr
Let's take a look at recent announcements for Sprint stock, the price chart and what, if anything, the options market is suggesting for bulls, bears and less directionally motivated traders.
Sprint Stock Earnings Picture
Ahead of Sprint's Q3 report Tuesday morning, analysts are forecasting a loss of 8 cents per share. That compares favorably to last year's, third quarter loss of 21 cents, but slips sequentially from Q2's loss of 4 cents.
Range estimates for earnings show Sprint could lose as much as 16 cents or come in as high as a penny loss. Whisper views are less certain, with an estimated loss of 10 cents in Sprint stock and two cents lighter than formal Street views.
The lack of optimism among investors, along with an analyst community sporting just three buys, 16 hold recommendations and seven sells, could work in Sprint stock's favor.
Another potentially bullish catalyst is Sprint stock's high short interest of 22.5%. Bears continue to bet against Sprint's turnaround and aggressive business strategies such as last year's partnership with DraftKings .
Revenues are estimated to grow by 2.5% to $8.3 billion compared to 20156s sales of $8.1 billion. Sequentially, Sprint stock is forecast to grow sales by a modest 1.2%.
S Stock Short-Term Trading Record
Shares of S have established a bullish lean in beating Street earnings views by a 2-to-1 margin or 66% of the time, over the last couple years. Investor reaction has been on par with that result in showing gains two-thirds of the time in the immediate aftermath.
The trading edge in Sprint stock has proven even more favorable for bullish investors if we look at the size of those moves.
Working backwards, shares of S have moved -6.07%, 27.71%, 5.16%, 18.65%, -7.01% and 4.49% on a close-to-close basis. The net reaction has produced an average gain of 7.15% in the first full session of trading.
Variability of 13.72% based on a one standard deviation reading yields a fairly volatile historical estimated range of -6.57% to 20.87%.
Sprint stock's seven-day stock performance has shown similar price behavior. The average gain has been 7.39%. Slightly larger variability of 18.5% results in an estimated range of -11.10% to 25.89%.
Sprint Stock Weekly Chart
Looking at the weekly view of Sprint stock and shares have come a long way off their low near $2 a share just over one year ago. In fact, the rally amounts to a move in excess of 320%. What's more, there's little to suggest shares of S won't see continued strength in 2017.
In recent weeks, shares of S have managed to push above the 62% retracement level from the 2013 high. The bullish move through resistance points to a challenge of the December 2013 high of $11.47 as the next formidable technical test.
Admittedly, gains may not be as easy to come by in 2017. Nonetheless, Sprint stock continues to demonstrate leadership on its price chart, as well as a supportive-looking uptrend from a bullish saucer or cup-like base which isn't showing any overt or extreme signs of technical exhaustion.
Sprint Stock Options Pricing
Behind the scenes, Sprint implied and underlying volatility continue to see a bit of spread in their readings. 30-day premiums remain about 20% in the low 50's and above Sprint stock's statistical movement which is flirting with 52-week lows in the mid 30's.
Reflecting Friday's closing prices, the at-the-money 3 Feb $9 straddle market points to a 68% chance Sprint stock will remain within an approximate price range of $8.30 to $10.20 into this Friday's expiration.
The math behind this calculation is based on implied volatility of 74% in Sprint with seven calendar days into the expiration of the Weeklys contract.
The Weeklys contract is the purest play on the earnings event. Even during quiet underlying conditions like today's situation in Sprint stock, premiums reflect what traders collectively expect from shares in the immediate aftermath of the quarterly announcement.
The dollar move up or down works out to wiggle room of about 10.25% in Sprint stock by Friday's close. Given recent past reactions, it appears options traders are appreciative of continued volatile, but mostly normal price action in Sprint stock in front of Q3's corporate confessional.
Investment accounts under Christopher Tyler's management do not currently own positions in any of the securities or their derivatives mentioned in this article. The information offered is based upon Christopher Tyler's observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT .
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