kungfuguo

AAPL Earning: Analysis using Citigroup's study

BATS:AAPL   APPLE INC
420 2 1
Expectation of AAPL's earning based on Citigroup's study...
kungfuguo
3 years ago
I thought to test out this thesis on above model.
The top is the ER data with Street's estimates and 1 week gain (week of the ER)
The middle of the weekly chart. The purple box is the 4 week gain before the ER; followed by green box, the 3-4 week stock movement following the ER (until the monthly OpEx).

At the bottom, 2 arrows with each ER. First arrow is the direction of movement 4 weeks leading to ER, the 2nd arrow is the direction of stock movement following the ER.

Result:
- Based on last 7 earning cycles, there is good correlation (exception is 2013 Q2 ER).
- Movement after the ER tends to be greater in magnitude comparing to month leading to ER (exception is 2013 Q2 ER)
- This would suggest that Monthly option play might be more profitable and less risky than the weeklies. The direction of stock 1 month leading to ER does seem be predictive.
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kungfuguo
3 years ago
The study is out of (i.e. this is modeled on) Citigroup's Quantitative Research Group, which showed that one of the best predictors of an earnings beat is a stock's one-month performance going into the ER. I used the 4 weeks performance prior to the ER for analysis. This was compared to 3 or 4 weeks stock price after the ER (based on the monthly OpEx).
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