MEMC Electronic Materials, Inc. (NYSE: WFR, Stock Forum) is expected to step into the earnings spotlight on Thursday, July 29.
Historically speaking, the wafer manufacturer has been less than impressive on the earnings stage, falling short of analysts' per-share profit predictions in three of the last four quarters, according to Thomson Reuters.
The company's dismal earnings history may be why options speculators are flocking to the bears’ lair in droves. During the past couple of weeks on the International Securities Exchange (ISE), the stock has racked up a put/call volume ratio of 0.77 – in the 91st annual percentile. In other words, speculators on the ISE have bought to open WFR puts over calls at a faster pace only 9% of the time during the past year.
Perhaps better reflecting the mounting pessimism in the options pits is the equity’s Schaeffer’s put/call open interest ratio (SOIR), which measures options with less than three months to expiration. Currently, the security’s SOIR of 0.72 sits only eight percentage points shy of a 52-week peak, implying that short-term speculators have been more skeptically skewed toward WFR only 8% of the time during the past 12 months.
Elsewhere, the options crowd isn’t alone in its bearish bias toward WFR. According to Zacks, 13 out of 23 analysts consider the stock a “hold” or worse. Meanwhile, short interest accounts for almost 11% of the security’s total available float, and would take nearly a week to unwind, at WFR’s average pace of trading.
At last check, the shares of WFR are hovering just south of the $12 level. From a longer-term perspective, the stock is battling double-barreled resistance at its 10-month and 20-month moving averages. This duo of trendlines has contained all of the equity’s monthly closes since March 2008, and could continue to stifle any rally attempts.
In conclusion, should WFR snap its losing streak in the earnings spotlight on Thursday, the Street’s widespread skepticism could work in the stock’s favor. A stronger-than-expected quarterly report could shake loose some of the bears – meaning an unwinding of pessimism in the options pits, a round of upbeat analyst attention, or a short-covering situation could help the shares in their quest to surmount trendline resistance.
Disclosure: Andrea Kramer has no financial interest in any of the equities or products mentioned in this column.