Options Corner: ADBE, NVDA, PANW

0:00This is Tom White, host of Fast Market here on Schwab Network is with us and we're taking a look at a few names. It's funny. Two of the names here. We're actually two picks that Sam Stovall just gave us. So let's start off here with Adobe. You're looking at real trades, real time. What's going on? Yeah. If you look at other recent earnings report in coal, they beat on EPS, they beat on revenue. Revenue grew 12% year over a year and that was just above expectations and then they raised guidance also, but the stock still sold off. This stock's been in the penalty box for the last couple of years. It's still down about 27% so far this year, off 36% over the last 12 months. Having a decent day today with the rebound that was seen in the equity markets so far this week, but there have been downgrades post earnings because that growth rate is supposed to continue to stagnate, not grow. And I think that's been the big problem for this company, even though we're at very low

1:04valuations on a historical basis, remaining performance obligations were at 22.2 billion last quarter, the current remaining performance obligations, the CRPOs, those were up pretty significantly also. So good news on the report, but it didn't seem to help the stock. Well, we did see some bullish activity in here and this is in the March 20th monthly options that expire in just three days here. We saw a trader buy over 20,000 of the March 260 strike calls, paid an average debit of about $2.5 for those so that break even of 262.50 over the next three days. That's about 3% above the current share price. On a percentage basis, you don't need that big of a move, but at the same time, it's really a short-term position. And there was a lot of open interest built up on this strike, so either adding to that or a new trader getting into a position where we could see some more gains in Adobe. It might be overdue for some more gains because it was a pretty good report that the company

2:06gave, but I still think that there's that overhang that AI is going to take a lot of their growth away. All right. And next up, should we get to Nvidia, I mean, as we started to hear about the trillion dollars in chip sales for Blackwall and such, to 2020 through 2027, that really gave an immediate boost to the stock, but it's down to 183 again, sort of where it was after the bell. When we were talking about it, it jumped and then pulled back. What are your thoughts on a trade here that you came across? Yeah. You know, this reaction to the keynote from Jensen Wong, the CEO, kind of reflective of what we saw post earnings, right? It was a great earnings point. They re-accelerated growth above the 70% level as far as revenue and EPS. And now you get all this stuff coming out of GTC conference, you know, adding a trillion dollars in potential revenue growth. And that's just on the AI data infrastructure build out portion of their business.

3:09That doesn't even include some of the other portions that all the partnerships that they announced, whether it was Uber, Yule of Packard, Adobe, others during the conference, didn't seem to help the stock in the long term. And we saw that same reaction post earnings also. You mentioned the trillion dollars through 2027, then it was initially 500 billion dollars, but that was only through 2026. So they added a year and they say that the accelerations continuing to grow for this company. So it's kind of a head scratcher because the valuations have come in so much. The stock kind of stutters and stops out at about $190 level over the past maybe a few months here. And the stock's been basically stagnant for the past eight or nine months here also. So this has been a real head scratcher for a lot of investors because all you do is hear good news Nicole, but it doesn't seem to be reflective in the stock. But remember, this is the most valuable company out there, $4 trillion in market cap.

4:10It's hard to move this stock. And that's probably part of the problem also in this one. But I did see some unusual option activity in here also out in the April 10th weekly cycle. So 24 days to expiration, I mentioned that 190 level that the stock continues to fail at. Well, a trader sold over 40,000 of the April 10th weekly options, the 190 strike calls collected an average credit of about four and a half bucks on these calls that they sold. So the break even where this trader starts to lose money is above $194.50 over the next three and a half weeks. That's about 6% above the current share price. So this could be somebody that's speculating that we're going to continue to fail at that 190 level and they just want to collect some option premium or it might be a big shareholder that says, Hey, I got to turn my position into a covered call where I'm going to sell some out of the money calls to the upside to create some yield on this position that's been stagnant for the last nine months.

5:12So yeah, big call seller here in the April 10th weekly options series for in video. It's funny because you're right. It hasn't really been budging. It's been sort of in this range, but folks will take it because it's only 13% off the high and still has had such an incredible run. So let's see what happens next last but not least, Pello, Alton Networks. Yeah, so I haven't a decent day today as the market's up, but it's still up about 13% this month, but still in bear market territory. We're off more than 23% from those all time highs from October. So bear market territory for this one. On the 11th of this month, they announced an additional $1 billion sharey purchase program, revenue last quarter on their earnings grew 15%. And if you looked at what they're doing as far as M&A activity, I think that might be the thorn in the side of this company. That along with it got a little bit of a pull back from that SaaS apocalypse that we talked

6:14about a lot of software names got dragged down pretty significantly. Well, that went over into the cybersecurity stocks like Palo Alto and Crowdspace too. So maybe that's putting some pressure. But they've been on a buying spree as far as M&A activity. They've seen over 20 acquisitions over the past seven or eight years, and they're outlaying a bunch of capital to kind of keep up with competitors and broaden their footprint as far as what they offer to all their subscribers and their customers at this point. So maybe that's created a little bit ahead when as they're outlaying all this capital. But we did see some bullish activity in here also. This was out in the April monthly options. So 31 days expiration, the trader bought over 3,000 of the April 180 strike calls, paid an average debit of about $3.10 for these calls. So the break even where this trader starts to profit above $183 and $183.10 over the

7:15next month, that's about 8% above the current share price in there. So maybe trying to take advantage of this bear market pullback that we've seen in Palo Alto. But I think the key is they've given themselves plenty of duration. You've got basically a month in this position for the stock to recover some more. All right, Tom. Why thank you so much. Really appreciate a good look there at options going on real trades. Tom comes through and finds them for this Palo Alto Nvidia and also Adobe.