Earnings: Can GM Power Its Way into the Self-Driving Business?

There’s a variety of earnings reports coming out the next couple of days that might give some insight into how different segments of the economy are performing. Investors will be looking at results after the session ends today from semiconductor giant Intel Corporation INTC and online sales site eBay Inc. EBAY, and then auto manufacturer General Motors Company GM before the bell on Thursday.

INTC Inside the Cloud
INTC broke news ahead of Q1 that it was moving into a restructuring that would step up its evolution from a PC company to cloud-based powerhouse. The company is refocusing on the billions of connected, smart devices and the Internet of Things. INTC said it expected to take a one-time restructuring charge of $1.2 billion in Q2.

Analysts say they want to know what the next chapter in the restructuring might look like and how well INTC’s efforts to stem the declines in PC sales through innovation in other segments like gaming and set-top boxes. Recently, INTC unveiled its Core i7 processor Extreme Edition, what analysts called its “most powerful desktop processor ever, designed for the needs of today’s mega-tasking gamers and content creators.”

Analysts reporting to Thomson Reuters are forecasting a per-share profit of $0.53, off $0.02 from the year-ago period. Revenues are projected to edge up to $13.5 billion from $13.2 billion.

Short-term options traders have priced in a potential 3% share price move in either direction around the earnings release, according to the Market Maker Move™ indicator on the thinkorswim® platform by TD Ameritrade.

Ahead of earnings, options traders were active in the 35- and 34-strike puts and 35-strike calls. The implied volatility is at the 17th percentile. (Please remember past performance is no guarantee of future results.)

Note: Call options represent the right, but not the obligation, to buy the underlying security at a predetermined price over a set period of time. Put options represent the right, but not the obligation, to sell the underlying security at a predetermined price over a set period of time.

EBAY to Watch Consumers Buy
EBAY, still stretching after its split from PayPal Holdings Inc. PYPL, is on track to deliver results that are half of what they were a year ago when PYPL was contributing to top and bottom lines. At the same time, analysts point out the company is facing growing competition in the online sales space and is looking to grab a spot in the online marketplace rather than as an auction site of second-hand goods.

It’s struggled with sales results, as reported by Channel Advisor. In the three-month period ending this month, analysts are projecting a decline in sales at a time when ecommerce sales at rivals are growing.

Analysts also say they are looking for more information on the recently acquired SalesPredict, the Israel-based analytics company. SalesPredict uses technology to decipher consumer buying behavior and sales conversions, a tool EBAY says it can use to step up sales and better compete against ecommerce rivals Amazon.com, Inc. AMZN and Alphabet Inc. GOOGL.

For the quarter, Thomson Reuters analysts are forecasting a per-share profit of $0.42 a share, a 44% drop below the year-ago profit of $0.76 a share. Revenues are forecast to tumble 50% to $2.174 billion from $4.4 billion a year ago.

Short-term options traders have priced in a potential share-price move of 6% in either direction around the earnings release, according to the Market Maker Move indicator.

EBAY options are typically not the most active, but there was som

e trading at the 26.5-strike puts and the 27-strike calls. The implied volatility is at the 39th percentile, notably higher than what we’ve seen in some other technology stocks this earnings season.

GM Slips into Cruise Control

Investors and analysts are eager to learn of GM’s operating results, particularly its China ventures, which account for about 50% of total sales. Analysts say China is back on track and Europe is showing signs of recovery.

But a Motley Fool analyst says investors may be more drawn to news about GM’s March announcement that it bought Cruise, a small startup that’s got self-driving technology that could power GM into the self-driving auto business.

“It's believed that Cruise's technology will allow GM to make a significant leap in its ongoing development of self-driving technology, possibly allowing it to take a lead over much of the industry,” according to the Motley Fool.

“GM's purchase of Cruise was completed in May, and the company wasted no time getting to work: Self-driving versions of GM"s upcoming electric car, the Chevrolet Bolt, have been spotted on San Francisco streets, and at least one with Cruise co-founder Kyle Vogt in the driver's seat.”

Analysts reporting to Thomson Reuters are forecasting a per-share profit of $1.29, up from $1.08 in the year ago period. Revenues are projected to edge up to $38.6 billion from $38.2 billion last year.

Short-term options traders have priced in a potential 3% share price move in either direction around the earnings release, according to the Market Maker Move indicator.

Ahead of earnings, options traders were active at the 32- and 31-strike puts and there was activity at the 31-strike calls. The implied volatility is at the 7th percentile.

TD Ameritrade and all third parties mentioned are separate and unaffiliated companies, and are not responsible for each other’s policies or services.

Inclusion of specific security names in this commentary does not constitute a recommendation from TD Ameritrade to buy, sell, or hold.

Market volatility, volume, and system availability may delay account access and trade executions.

Past performance of a security or strategy does not guarantee future results or success.

Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.

Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.

The information is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy, and is for illustrative purposes only. Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.

TD Ameritrade, Inc., member FINRA/SIPC. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2016 TD Ameritrade IP Company, Inc. All rights reserved. Used with permission.