Stocks from Carvana to Reddit are expected to have the wildest moves on earnings this week

This week's earnings season is poised for significant volatility among several technology stocks, as options markets are signaling substantial post-report price swings despite a generally positive reporting period thus far. Carvana is projected for a 14.6% move after its Wednesday earnings, with an estimated EPS of $1.25, following strong year-to-date performance. Meta Platforms could see a 6.2% swing post-Wednesday earnings, with an estimated EPS of $6.68, as it continues heavy investments in AI. Reddit, benefiting from advertising and AI partnerships, is anticipated to move 13.8% after its Thursday report, with an estimated EPS of $0.50, indicating considerable potential for price action across these names.

Analysis

The current earnings season has seen over 80% of companies beat revenue or EPS forecasts, indicating a generally positive reporting environment. However, options trading signals significant volatility for several technology stocks reporting this week, with implied price swings ranging from 6.2% to 14.6% post-earnings. This suggests a speculative tone in the market for these specific names, despite broader positive trends.

Carvana (CVNA) faces an implied 14.6% swing, with analysts expecting $1.25 EPS for Q3, slightly below Q2. The stock has seen a 75% year-to-date surge, driven by strong used car sales. Reddit (RDDT) is projected for a 13.8% move, with an estimated Q3 EPS of $0.50, nearly tripling Q1 results, fueled by robust advertising sales and AI partnerships, contributing to a 169% increase over the past 12 months. Both exhibit strong positive per-ticker sentiment (0.5 for CVNA, 0.7 for RDDT).

Meta Platforms (META) has a comparatively lower implied swing of 6.2%, with Q3 EPS estimated at $6.68. Despite a 28% year-to-date gain, Meta's stock has lagged Magnificent 7 peers, rising only 5% over the past three months, due to substantial investments in database infrastructure and AI talent acquisition. The per-ticker sentiment for Meta is negative (-0.3), reflecting investor concerns about these ongoing capital expenditures.

Key Decisions for Investors

• Given the high implied volatility and strong recent performance for Carvana and Reddit, investors should prepare for significant post-earnings price movements and evaluate positions based on actual results relative to high expectations.
• For Meta Platforms, closely monitor earnings for insights into the return on its substantial AI and infrastructure investments, as these expenditures are impacting its relative performance and contributing to negative sentiment.
• Consider utilizing options strategies to capitalize on or hedge against the anticipated volatility in these specific technology names, recognizing the mixed sentiment and speculative market tone surrounding their reports.