Several technology firms are on the earnings calendar as Wall Street returns from the Thanksgiving holiday. In the security software group, Leaderboard stock Zscaler (ZS) and CrowdStrike (CRWD) are set to report.
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Meanwhile, several top-rated enterprise software firms are also on the earnings calendar, with results due from Workday (WDAY), Snowflake (SNOW), Salesforce.com (CRM), Nutanix (NTNX) and Samsara (IOT).
The stock market uptrend still looks fine with a lack of distribution days. The Nasdaq composite held up well Wednesday despite an early earnings sell-off for stock market leader Nvidia (NVDA). For Nvidia, it was a classic case of “sell the news” after a strong rally headed into the report. But buyers lifted NVDA off lows by the close.
Zscaler and CrowdStrike, two stocks that sell at a premium valuation, like NVDA, due to strong growth prospects, have also rallied sharply into earnings. But as Nvidia showed, a strong earnings report and bullish outlook sometimes isn’t enough.
Earnings Calendar Spotlight
In early September, cloud security firm Zscaler reported its fourth straight quarter of triple-digit earnings growth, with profit up 156% year over year to 64 cents a share. Revenue growth slowed from prior quarters, but was still impressive, up 43% to $45 million.
“We concluded our fiscal year with strong top-line growth and record operating profits. In less than two years, we doubled our annual recurring revenue, surpassing the $2 billion milestone as IT executives modernize their legacy network security,” Jay Chaudhry, CEO of Zscaler, said at the time.
Another quarter of strong growth is expected when Zscaler reports Monday after the close. The Zacks consensus estimate is for adjusted profit to rise 69% to 49 cents a share, with revenue up 33% to $473.4 million.
Results from industry peer CrowdStrike are due Tuesday after the close. CRWD stock gave a buy signal in late August when the company last reported earnings and gapped above its 50-day line. It gave another buy signal on Oct. 6 when it topped an alternate entry of 172.64.
Fiscal Q3 earnings are expected to jump 85% to 74 cents a share, with revenue up 34% to $777.1 million.
Watching Salesforce, Workday
Results from Dow Jones component Salesforce.com will be released Thursday after the close. After regaining its 50-day line, CRM stock is back near highs in a 19-week consolidation.
CRM stock gapped up Aug. 31 after the company reported a 78% surge in adjusted profit. Revenue increased 11% to $8.6 billion. But it was the guidance that sent shares higher.
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The company forecast adjusted profit of $2.05 to $2.06 a share on revenue of $8.7 billion to $8.72 billion. At the time, the Refinitiv consensus was $1.83 a share and $8.66 billion in revenue.
Salesforce also announced AI enhancements to its Sales Cloud and Service Cloud applications after launching AI Cloud in June.
Results for the October-ended quarter are expected to show adjusted profit up 47% to $2.06 a share, with revenue up 11% to $8.71 billion.
Workday is forming the right side of a cup base and less than 10% off its high with results due Tuesday after the close.
Options Trading Strategy
A basic options trading strategy around earnings — using call options — allows you to buy a stock at a predetermined price without taking a lot of risk. Here’s how the option trading strategy works and what a call option trade recently looked like for Salesforce.com, one of the more prominent names in the latest earnings calendar.
First, identify top-rated stocks with a bullish chart. Some might be setting up in sound early-stage bases. Others already might have broken out and are getting support at their 10-week lines for the first time. And a few might be trading tightly near highs and refusing to give up much ground. Avoid extended stocks that are too far past proper entry points.
A call option is a bullish bet on a stock. Put options are bearish bets. One call option contract gives the holder the right to buy 100 shares of a stock at a specified price, known as the strike price.
Once you’ve identified an earnings setup for a call option, check strike prices with your online trading platform, or at cboe.com. Make sure the option is liquid, with a relatively tight spread between the bid and ask.
Look for a strike price just above the underlying stock price — that’s out of the money — and check the premium. Ideally, the premium should not exceed 4% of the underlying stock price at the time. In some cases, an in-the-money strike price is OK as long as the premium isn’t too expensive.
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Choose an expiration date that fits your risk objective. But keep in mind that time is money in the options market. Near-term expiration dates will have cheaper premiums than those further out. Buying time in the options market comes at a higher cost.
Earnings Calendar Option Trade
Salesforce.com is a liquid name in the options trading market
When CRM stock traded around 224.50, a slightly out-of-the-money weekly call option with a 225 strike price and a Dec. 15 expiration came with a premium of around $7.75 per contract. That was 3.4% of the underlying stock price at the time.
Since option traders aren’t expecting a big move one way or the other for Salesforce, the reasonably priced Dec. 15 expiration gives the option trade more time to work.
One contract gave the holder the right to buy 100 shares of CRM stock at 225 per share. The most that could be lost was $775 — the amount paid for the 100-share contract. To break even, the stock would need to rise to 232.75, factoring in the premium paid.
Keep in mind this is not a trade for a smaller portfolio because buying 100 shares of Salesforce stock in this trade would cost $23,275.
Follow Ken Shreve on X/Twitter @IBD_KShreve for more stock market analysis and insight.
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