Goldman Sachs analysts urged investors to "Buy Options for July Preannouncement Season," highlighting the potential for significant stock price movements around these unscheduled events in a note to clients on Wednesday.
They analyzed historical data, noting that preannouncements have happened roughly 600 times year-to-date, with the average stock price moving +/- 6.7% in the two days surrounding the announcement.
Interestingly, analysts found that preannouncements have led to positive stock moves 57% of the time this year.
The report emphasizes that certain sectors, particularly Technology, Healthcare, and Consumer Discretionary, tend to dominate preannouncements in July. "Given the mostly unscheduled nature of these events, we believe investors underestimate their associated volatility," the analysts note.
To capitalize on this potential volatility, analysts identified several stocks with a history of preannouncing earnings in July. They specifically highlight the upcoming Semicon West event (July 9-11) as a potential catalyst for Semiconductor stocks, including Applied Materials (NASDAQ:AMAT) and AMD (NASDAQ:AMD).
Beyond this industry-wide trend, the report also details four specific "catalyst-based idiosyncratic trades":
Starbucks (NASDAQ:SBUX): The bank suggests buying calls ahead of July 30th earnings. Analysts at the bank see an opportunity due to SBUX's underperformance and expected growth momentum in coming quarters.
Chipotle Mexican Grill (NYSE:CMG): Goldman says investors should buy straddles ahead of July 24th earnings. They acknowledge near-term sentiment concerns but believe CMG can achieve strong long-term results.
Wells Fargo (NYSE:WFC): Goldman says to buy calls ahead of Wells Fargo's July 12th earnings. They see a potential upside to WFC's 2024 guidance due to loan/deposit growth and potential regulatory changes.
Cintas Corporation (NASDAQ:CTAS): Finally, the bank says investors should look at buying straddles ahead of July 11th earnings. They anticipate near-term growth pressure but also potential volatility as CTAS provides FY25 guidance.