Earnings Snapshots for Week of June 1st, 2015

Overview

Ambarella (AMBA) will post earnings 6/2 after the close and the Street view at $0.58 EPS and $67M in Revenues, and FY16/FY17 projections at $2.28/$284.55M and $2.86/$349.82M. AMBA shares have closed higher 6 of its 8 earnings reports, a 6 quarter average max move of 6.65% and average closing move of 3.4%. The $2.83B maker of chips for high-definition video capture that is a play on the wearable Tech theme trades 32.5X Earnings and grew EPS 84.7% in 2015, and projects 20%+ forward growth. Launches of new action cameras by Xiaomi in China with AMBAs chips have kept the stock on a strong run. AMBA has more than 26.6M shares short, 26.6% of its float, but trending down since peaking on 1/15/15 at 39M shares. On 5-29 Stifel raised its target on AMBA to $99, noting strength in end markets like Sports, Security and Automotive, while emerging markets like wearable and drones may add significant revenues. AMBA only has institutional ownership of 51%, but rose 3.76% in Q1, notable top buyers Coatue Mgmt. and Eminence Capital. AMBA shares are +77.85% YTD, so expectations are high into the quarter, but as a core long term thematic growth stock, it is a buy on any dips. On the chart AMBA shares are quite overbought, first support $87.50 and then a large volume pocket down to the $77 level where shares broke out in May. AMBA options are pricing in a 7.15% move on earnings, the cheapest in 6 quarters, but also fairly priced considering the recent closing moves, straddle sellers have made money every quarter in AMBA. On 5-27 June $83 puts bought 2,000X to open at $2.15.

Ambarella (AMBA)

Earnings Date IV1 IV2

IV1/IV2

Ratio

Straddle

Price

Implied

Move

IV30/HV30

Ratio

Actual Max

Move

Closing

Move Put/Call

2-Jun 77.40% 54.80% 1.41 $6.45 7.15% 1.38

3-Mar 66.20% 59.50% 1.11 $7.55 11.97% 1.25 8.64% 7.04% 0.44

4-Dec 81.25% 63.90% 1.27 $7.20 12.94% 1.28 -6.52% -1.68% 0.83

4-Sep 59.30% 52.10% 1.14 $3.35 9.37% 1.63 9.44% 3.15% 0.70

3-Jun 65.85% 56.70% 1.16 $2.75 11.16% 1.40 4.13% 0.89% 0.89

6-Mar 81.20% 65.60% 1.24 $4.40 12.94% 1.31 -10.07% -7.43% 0.51

Trade to Consider: Sell the AMBA June 5th (W) $95/$100 Call Spread and $80/$75 Put Spread for $1.50 Credit

Ciena (CIEN) will report results 6/4 before the market opens and the Street is at $0.23 EPS and $604.4M in Revenues, FY15/FY16 projections of $1.11/$2.42B and $1.50/$2.65B. CIEN shares have closed higher on earnings 3 of its last 4 reports, a 6 quarter average max move of just over 10% and average closing move of 7.5%. The $2.83B networking equipment Company trades 16.25X Earnings, 1.24X Sales and 26.8X FCF, returning to profitability in 2015. CIEN was recently noted as a potential acquisition target for Ericsson (ERIC) to compete with the Nokia/Lucent deal. CIEN also has 17.75% of its float short, but down sharply from 30% last year at this time. On 5-26 RBC raised its target on CIEN to $28 and with better margins can see a $40 stock. CIEN is just 60% institutionally owned, rising more than 6.8% in Q1. On the chart CIEN shares have been on a strong run to the highest level since 2013, now running into some resistance at the Fibonacci $24.60. The $22.50 and $21 levels are now support and resistance up near the top from 2013 at $27. CIEN options are pricing in a 7.05% move on earnings, cheapest in 2 years and IV Skew showing a bullish bias. On 5-28 traders bought 2,500 July $25 calls $0.79 and also targeted OTM October calls. On Friday the January 2016 $24/$20 ratio put spread traded 2,500X5,000, while 3,500 June $24.5/$22.5 strangles were sold to open.

CIEN

Earnings Date IV1 IV2

IV1/IV2

Ratio

Straddle

Price

Implied

Move

IV30/HV30

Ratio

Actual

Max Move

Closing

Move Put/Call

4-Jun 66.40% 41.90% 1.58 $1.70 7.05% 1.68

5-Mar 75.90% 45.90% 1.65 $1.70 8.13% 1.66 -3.49% 0.19% 0.42

11-Dec 86.70% 56.73% 1.53 $1.75 10.37% 1.48 11.73% 6.95% 0.30

4-Sep 55.90% 20.69% 2.70 $1.80 8.70% 1.83 -10.26% -9.53% 0.53

5-Jun 57.36% 49.14% 1.17 $1.45 7.47% 1.60 19.79% 18.37% 0.36

6-Mar 59.00% 47.30% 1.25 $2.16 8.79% 1.33 7.09% -3.54% 0.18

12-Dec 75.85% 53.50% 1.42 $2.50 10.64% 1.70 -8.70% -7.00% 0.67

4-Sep 73.65% 57.90% 1.27 $1.60 7.82% 1.79 14.41% 13.82% 0.61

6-Jun 66.15% 52.80% 1.25 $1.88 11.53% 1.78 17.65% 17.41% 0.31

7-Mar 80.80% 55.85% 1.45 $1.57 10.51% 1.86 18.80% 17.33% 0.47

13-Dec 79.70% 55.10% 1.45 $1.59 10.21% 1.34 5.52% 1.47% 1.09

Trade to Consider: Long the CIEN June/July $25/$23 Double Calendar Spread at $0.50 Debit

VeriFone (PAY) will announce earnings 6/4 after the close with the Street estimate at $0.42 EPS and $488.8M in Revenues, FY15/FY16 projections of $1.83/$2B and $2.24/$2.18B. PAY shares have closed higher each of its last 5 earnings reports, a 6 quarter average max move of over 8.5% and average closing move of 4.2%. The $4.34B maker of electronic payment solutions trades 17X Earnings, 2.26X Sales and 34.87X FCF. PAY has just 4.29% of its float short. On 5-22 Imperial Capital put out an Outperform and $44 target on PAY, noting positive changes under new management. On 4-7 Stifel raised PAY to Buy with a $42 target, seeing market share gains in the key SMB vertical and EMV terminal tailwinds. PAY has 96% institutional ownership, down 1.87% in Q1. On the chart PAY shares started to break above key resistance near the $38 level, out of a sideways channel that measures a move target to $45. On weakness I would expect $36-$36.5 zone to be supportive for a recovery. PAY options are pricing in around a 5.5% move on earnings, skew showing a fairly steep profile despite a lot of upside options activity. In the near-term June $39 calls have been a hot contract, more than 19,000 now in OI, starting with 5,000 back on 5/1. On Friday 1,200 Jan. 2016 $41 calls bought at $2.50 to open and 5,000 Jan. 2017 $50 calls bought at $2.60 and look to add to 5,000 that were formerly bought, long term bullish view. Trade to Consider: Sell the PAY June $38 Straddle at $2.50 Credit

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