Snowflake Inc (NYSE:SNOW)
The uptrend on the stock market has picked up some steam, particularly on the Nasdaq, where a number of highly rated growth stocks have been performing exceptionally well. Include the Snowflake stock in that count.
Along with Snowflake (NYSE:SNOW), Nvidia (NASDAQ:NVDA), ELF Beauty (NYSE:ELF), Workday (NASDAQ:WDAY), and Palo Alto Networks (NASDAQ:PANW), this is a relatively quiet but high-profile week for earnings reports. Snowflake (NYSE:SNOW) leads the pack.
After the market closes on Tuesday, New Relic, which is followed in the same industry group as Snowflake, reports its results. On Wednesday, the stock price increased after it was reported in the Wall Street Journal that two private equity firms are getting ready to make a $5 billion offer for the database software company.
Snowflake Stock Jumps
The news that database software provider Snowflake is in advanced talks to acquire AI search startup Neeva, which was founded by a former Google ad executive named Sridhar Ramaswamy, helped push up the price of Snowflake along with other technology stocks on Thursday. As a result of the news, Snowflake stock was able to surge past its previous high of 178.70 on February 2.
If the transaction goes through, Snowflake may be able to provide customers with AI-powered search capabilities that will assist them in searching for information contained within internal documents and large data sets.
Snowflake is a company that markets data analytics and management tools. These tools are designed to operate on cloud-computing platforms such as Amazon Web Services.
At the beginning of March, Snowflake announced that each share had lost 64 cents. Even though the rate of revenue growth slowed even further, it was still an impressive 53% increase to $589 million. That was a very slight increase over the $575.9 million that was generally anticipated. But Snowflake predicted that product revenue would grow by between $568 million and $573 million, which was lower than the analysts’ consensus estimate of $575.9 million at the time.
WDAY stock has been making a comeback recently despite the fact that trading volume has been relatively low. Recent quarters have shown choppy growth in earnings, but the company has delivered six consecutive quarters of revenue growth of 20% or more.
On Thursday, after the polls have closed, the results will be posted. It is anticipated that the quarterly adjusted profit will come in at $1.10 per share for the current period, representing a 32.5% increase from the same period last year. It is anticipated that sales will increase by 16% to reach $1.67 billion.
Nvidia and ELF Beauty, both of which have seen their share prices rise significantly recently, will release their earnings reports on Wednesday after the market has closed.
Wall Street anticipates ELF Beauty will post strong earnings and revenue growth for the upcoming quarter based on the company’s recent trend of accelerating growth in recent quarters. It is anticipated that quarterly profit will increase by 54% to 20 cents per share, while revenue will increase by 49% to $156.8 million.
NVDA was added to the IBD Leaderboard in February after the company’s stock had a significant increase after reporting earnings. Both profit and revenue fell when compared to the previous year. However, revenue from data centers increased by 11%, reaching $3.62 billion. Nvidia projected revenue of $6.5 billion for the quarter that ended in April, which was slightly higher than the general consensus estimate of $6.33 billion at the time.
After breaking above its 50-day moving average earlier in the month, Palo Alto Networks has been experiencing increased selling pressure as a result of this breakout. As PANW continues to trail the S&P 500, the relative strength line for the stock has begun to slope downward.
Despite its high valuation, Palo Alto continues to present a growth story that is compelling. Profit growth over the course of the most recent four quarters has ranged from 30% to 81%. During this same period, the growth of revenue has ranged anywhere from 25% to 29%.
Options Trading Strategy
Using call options as part of a fundamental options trading strategy centered on earnings gives you the ability to buy a stock at a predetermined price without taking on a significant amount of risk. Here is how the options trading strategy is implemented, as well as an example of what a recent call option trade for Snowflake stock might have looked like.
First, a list of top-rated stocks that have a positive chart should be compiled. It’s possible that some are establishing themselves in solid early-stage bases. There is a possibility that others have already broken out and are, for the first time, finding support at their 10-week moving averages. And it’s possible that some investors are trading aggressively near the highs of the day and refusing to give up much ground. Steer clear of extended stock positions that have moved too far past their appropriate entry points.
A call option is a bullish bet on a stock that is placed within the context of the options trading market. Bearish bets are known as put options. The holder of one call option contract has the right to buy one hundred shares of a particular stock at a predetermined price, which is referred to as the strike price.
Put options are for investors who have poor performance and bearish chart patterns. The only distinction is that the strike price of an out-of-the-money option is slightly lower than the price of the underlying stock. The holder of a put option is granted the right to sell 100 shares of a particular stock at a predetermined price.
When you buy a put option, you stand to make money if the underlying stock falls below the strike price.
Snowflake Stock Option Trade
Here is an example of how a recent call option trade for Snowflake, a name that is actively traded in the options market, played out.
At the time that Snowflake stock was trading around 182.25, a slightly out-of-the-money weekly call option with a 182.50 strike price and an expiration date of May 26 carried a premium of approximately $8.85 per contract. This represented 4.8% of the value of the underlying stock at that time.
The holder of one contract had the right to purchase 100 shares of Snowflake stock at an average price of $182.50 per share. The maximum amount of money that could be lost was $885, which was the cost of purchasing the 100-share contract.
If one were to factor in the premium that was paid, it would be necessary for the price of Snowflake stock to surge above 191.35 before the trade would begin to generate a profit (182.50 strike price plus $8.85 premium per contract).
The cost of executing a trade for a call option on Workday was acceptable. A call option that was in the money and had a strike price of 195 with an expiration date of May 26 offered a premium of $6.50, which is equivalent to 3.3% of the stock price when WDAY was trading around 195.
Featured Image: Megapixl
