Tuesday’s Vital Data: Apple Inc. (AAPL), Netflix, Inc. (NFLX) and Tesla Inc (TSLA)

Joseph Hargett

Updated Tue, Jul 18, 2017, 7:24 AM

InvestorPlace - Stock Market News, Stock Advice & Trading Tips

U.S. stock futures are trading flat to lower this morning, indicating a mixed open for Wall Street. What’s more, Netflix, Inc.’s (NASDAQ:NFLX) blowout second-quarter earnings report doesn’t appear to be helping sentiment at all, as traders continue to keep a close watch on banking sector earnings following Bank of America Corp’s (NYSE:BAC) poorly received report.

Tuesday’s Vital Data: Apple Inc. (AAPL), Netflix, Inc. (NFLX) and Tesla Inc (TSLA)

Heading into the open, futures on the Dow Jones Industrial Average have lost 0.19%, S&P 500 futures are down 0.2% and Nasdaq-100 futures are off 0.25%.

On the options front, volume was tepid on Monday, with only about 12.8 million calls and 12.9 million puts crossing the tape. Turning to the CBOE, the single-session equity put/call volume ratio rebounded to 0.63 from Friday’s one-month low of 0.53. The 10-day moving average held at a one-week low of 0.62.

Taking a closer look at Monday’s options activity, Apple Inc. (NASDAQ:AAPL) saw heavy call volume following a mixed note to clients from Deutsche Bank. Elsewhere, Netflix saw heavy put volume ahead of last night’s report on impressive subscriber growth. Finally, Tesla Inc’s (NASDAQ:TSLA) CEO Elon Musk picked about the worst time possible to pan TSLA stock’s valuation.

Apple Inc. (AAPL)

Deutsche Bank yesterday reiterated its “hold” rating on AAPL stock and lifted its price target from $130 to $132. This seemingly neutral-to-bullish issuance was then undermined by the accompanying statement, in which Deutsche Bank said expectations for Apple’s iPhone sales growth were too high.

The 10 Safest Blue-Chip Dividends on Wall Street

Additionally, Deutsche Bank said that investors were “ignoring the fundamental challenges Apple faces in the smartphone market,” including market saturation, declining market share, increased Chinese competition and a growing secondary market.

AAPL options traders, however, apparently only saw the price target increase, as the stock was flooded with calls on Monday. Volume topped 977,000 contracts, with calls snapping up an above average 72% of the day’s take. AAPL calls typically only make up about 62% of average daily volume.

That said, this apparent optimism doesn’t appear to be directed at Apple’s looming quarterly earnings report, slated for Aug. 1. Specifically, the 4 Aug put/call open interest ratio has ballooned to a reading of 1.33, with puts dominating calls among those options most affected by Apple’s report. Peak put OI, for example, totals more than 14,000 contracts at the 4 Aug $140 strike, and is just close enough to the stock’s current perch to represent bets that AAPL stock will fall — instead of put selling activity, that is.

Netflix, Inc. (NFLX)

NFLX bears are in for a spot of pain later this morning, as the stock is set to open nearly 10% higher following last night’s blowout second-quarter earnings report. Earnings came in at 15 cents per share, missing expectations by a penny, and revenue arrived at $2.79 billion versus the Street’s target for $2.76 billion. But subscriber growth was the real story, with Netflix adding 5.2 million subscribers in the second quarter — representing 5% growth in a single quarter. Additionally, international subscribers now outnumber U.S. subs.

NFLX options traders were caught flat footed by the report. Volume arrived at more than 664,000 contracts on Monday, with puts accounting for 55% of the day’s take. Furthermore, the 21 Jul put/call OI ratio rested at a bearish reading of 1.08 heading into the report, indicating that a majority of NFLX options traders were favoring puts over calls prior to the event. The question now is whether NFLX traders will capitulate to today’s rally or fade the results and look for a pullback in the shares.

Tesla Inc (TSLA)

Tesla CEO Elon Musk has bad timing. Just when TSLA stock was beginning to pull out of its recent funk, Musk stepped in over the weekend to note that, “our stock price is higher than we have any right to deserve.” The comments dovetailed with a report that the company’s autodrive feature may (or may not) have contributed to an accident over the weekend.

Is Blue Apron Holdings Inc (APRN) Stock Battered Enough to Buy?

And if that wasn’t enough, investors were hit with a report that Tesla is exploring its own music streaming service to bundle with Tesla vehicles — instead of cutting costs by selecting one of the multitude already on the market.

The combination was too much for TSLA options traders to bear, and call volume plummeted alongside the stock, accounting for only 54% of the more than 418,000 contracts traded yesterday. Meanwhile, pessimism remains elevated in the front-month August options series, with the put/call OI ratio now resting at 1.38. With earnings just over the horizon, this rising negativity could create drag on the shares.

As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.