Schaeffer's Market Blog Highlights Amazon's foray into Movie Business and UPS Earnings Disappointment

Strategic Insights -

Schaeffer's Market Blog, featured on the July 25 edition of the website, provided insights into Amazon's entry into the movie business and United Parcel Service's earnings disappointment. This article summarizes the key takeaways and statistics from the Market Blog, which featured Amazon.com (NASDAQ:AMZN), Bristol-Myers Squibb (NYSE:BMY), Nicor (NYSE:GAS), United Parcel Service (NYSE:UPS), and FedEx (NYSE:FDX) as its top stocks.

The Market Blog, written by Schaeffer's financial analysts and traders, offers quick insights into the day's most notable market activity from an options perspective. On July 25, 2006, the blog highlighted Amazon's move to sell television shows and full-length feature films over the Internet, marking a significant competition with Apple's iTunes service. The blog also addressed United Parcel Service's earnings disappointment, which caused the stock to plummet over 15 percent.

Key Takeaways:

  • Amazon's entry into the movie business is expected to be a significant competition for Apple's iTunes service.
  • Amazon.com is scheduled to launch its digital video service next month, offering a subscription fee for a flat rate of viewing movies and a pay-per-view basis.
  • United Parcel Service's earnings disappointment caused the stock to plummet over 15 percent, below its 10-month and 20-month moving averages.
  • FedEx shares are sliding lower in sympathy, dropping nearly four percent but clinging precariously to their 10-month moving average.
  • Options players have descended upon United Parcel Service's short-term calls, particularly at the now out-of-the-money August 70 and 75 strikes.
  • Put action is lively as well, with nearly 11,000 contracts trading hands at the January 2007 65 strike.
  • Schaeffer's Premium Equity Scorecard rating for Amazon.com is 2.0, and short interest represents 11.7 percent of the stock's float.
  • Bristol-Myers Squibb, Nicor, and Avista are among the stocks that achieved new annual highs today and have an extreme Schaeffer's Equity Scorecard rating of 8.0.

Statistics:

  • Amazon.com shares tacked on more than three percent, finishing above its 10-day moving average for the first time since July 3.
  • United Parcel Service trimmed its earnings growth outlook, expecting third-quarter results of 87 cents to 91 cents per share, below the consensus view of 97 cents.
  • The company also said 2006 earnings growth would be toward the lower end of its original 11-to-16 percent outlook.
  • United Parcel Service shares are off more than 15 percent, taking the stock below its 10-month and 20-month moving averages.
  • Short interest represents 11.7 percent of Amazon.com's float, amounting to a short-interest ratio of 5.6 days to cover.
  • Options players have descended upon United Parcel Service's short-term calls, particularly at the now out-of-the-money August 70 and 75 strikes.

Sources:

  • Schaeffer's Market Blog for July 25, 2006: http://www.schaeffersresearch.com/redirect.aspx?CODE=PROB1C&PAGE=1
  • Schaeffer's Investment Research (www.SchaeffersResearch.com)
  • Advertising Age (cited in Schaeffer's Market Blog for July 25, 2006)