VMWare Inc. (VMW) is scheduled to report earnings after Tuesday’s closing bell. Headquartered in Palo Alto, CA, this company specializes in cloud and software virtualization services.
VMW Share are down slightly over 2% in 2014, but are off nearly 21% from their April 1 high of $111.83. The stock has traded in a 52-week range of $76.51-$112.89.
Analysts are calling $1.5 billion in revenue with EPS of $0.83 per share. In their last report in July, VMWare beat out analyst estimates but the stock still fell. Historically, VMW shares have moved an average of 7.9% on earnings over the past 8 quarters. The stock has fallen 3 of the past 4 quarters, and 6 of the past 8.
Despite increasing data concerns around data security, growth in cloud-based services should continue. Stocks like VMW may also benefit from the capital outflows from IBM following Monday’s downward revision in guidance.
The VMW Oct Weekly 88 Straddle, expiring this Friday, is implying a move of about $6.25 or 7.3%.
As those of you follow me know, I tend to be rather bullish on tech. With market correction we’ve seen over the course of the last few weeks seemingly on hold, I would only look to play VMW to the long side.
My Trade
Buy the VMW Oct weekly 90-93 Call Spread for $1.00
Risk: $100 per 1 Lot
Reward: up to $200 per 1 Lot
Break-even: $91.00 (at expiration)
