NEW YORK (Reuters) – Analysts may be optimistic about Amazon.com’s growth prospects, but with this week’s blowout earnings from Apple, and Amazon’s own lofty share price to live up to, some traders are starting to hedge their bets.
The options market is gearing up for Amazon (AMZN.O) shares to jump or fall 7 percent once the world’s largest Internet retailer reports quarterly earnings after the bell on Thursday, and the bias is shifting slightly toward expectations of a decline.
Wall Street expects Amazon to report earnings of 7 cents a share on revenue of $12.86 billion, according to Thomson Reuters I/B/E/S, but some traders say Apple Inc (AAPL.O)’s performance has raised the bar.
Shares of the iPad maker and tech titan surged about 9 percent on Wednesday after the company said first-quarter earnings leapt 94 percent to $11.6 billion, or $12.30 a share.
“Amazon expectations may be higher than normal on the back of Apple earnings,” TD Ameritrade chief derivatives strategist JJ Kinahan said.
“One statistic to keep in mind is that Amazon shares are up more than 10.5 percent since their last earnings release in late January,” he said. “So they may have to beat the expected 7 cents earnings per share in order to rally significantly.”
By midday Thursday, there was more activity in Amazon puts – options designed to defend against a falling share price – than Amazon calls, particularly in the weekly options that expire on Friday after the close.
Among the busiest puts were the weekly $170, $180 and $190 strikes, according to Joe Bell, senior equity analyst at options research firm Schaeffer’s Investment Research in Cincinnati.
Amazon shares were last changing hands at $194.56, up about 0.2 percent on the day.
A 7 percent move in Amazon shares would still be below the stock’s average move on earnings reports, which clocks in at plus or minus 8.03 percent, according to Bespoke Investment Group in Harrison, New York.
(Reporting by Angela Moon, Doris Frankel and Caroline Valetkevich, writing by Steven C. Johnson. Editing by Bernadette Baum)