Schaeffer's Midday Options Update Features Microsoft, Amazon.com, DoubleClick, Coca-Cola, Countrywide Financial

Business Wire, July 23, 2004

CINCINNATI -- Today's Schaeffer's Midday Options Update Features Microsoft (NASDAQ:MSFT), Amazon.com (NASDAQ:AMZN), DoubleClick (NASDAQ:DCLK), Coca-Cola (NYSE:KO), and Countrywide Financial (NYSE:CFC). The Midday Options Update contains a brief commentary on the day's most notable activity and a table listing the most active calls and puts for the day. The Midday Options Update is published every day at www.SchaeffersResearch.com - the home of Bernie Schaeffer and Schaeffer's Investment Research. For additional information about this report or to have it delivered to you free via email every day click on the following link. http://www.schaeffersresearch.com/redirect.aspx?CODE=PROB1M&PAGE=1

Schaeffer's Midday Options Update: Puts Active on Countrywide Financial

The market has been hammered this afternoon, dragging the major market indexes below some key levels. And the culprit: weak earnings numbers. Topping our list of lackluster performers is software giant Microsoft (NASDAQ: MSFT). The company reported earnings last night of $2.7 billion, or 25 cents per share. Excluding items, the firm raked in 28 cents per share while analysts had expected a gain of 29 cents per share. Sales for the quarter soared to $9.3 billion, outstripping the Street forecast of $9 billion.

Digging deeper in the tech sector, Amazon.com (NASDAQ: AMZN) is currently down more than 12 percent after missing the consensus earnings estimate. The Internet retailer earned $76 million, or 18 cents per share, compared to its 11-cent loss for the same period a year ago. Meanwhile, analysts had forecast a profit of 19 cents per share. Sales for the quarter rose 26 percent to $1.36 billion.

Another Internet company to disappoint was DoubleClick (NASDAQ: DCLK). The firm reported second-quarter earnings of $3.9 million, or three cents per share. Earnings for the period fell shy of the Street estimate by a penny per share. Sales for the quarter came in at $69.2 million, falling well short of the consensus estimate of $72 million.

Turning back to blue chips, Coca-Cola (NYSE: KO) is down more than eight percent despite the fact that it reported strong earnings. The beverage behemoth eared $1.6 billion, or 65 cents per share, edging out the Street estimate by two cents per share. Revenue rose five percent to $5.97 billion. However, the company sees weakness in countries such as Germany and Mexico.

At 2:52 p.m. eastern time, the Dow Jones Industrial Average (DJIA - 9960.2) is down 0.90 percent and the S&P 500 Index (SPX - 1086.06) is lower by 0.98 percent. The Nasdaq Composite (COMP - 1851.1) is down 1.97 percent. At 2:54 p.m. in the options pits, 1,622,212 calls and 1,7231,834 puts traded for a composite put/call ratio across all five exchanges of 0.75. The CBOE put/call ratio for equity options weighed in at 0.62.

Countrywide Financial (NYSE: CFC) has seen some heavy put trading this afternoon. The equity's August 65 put has seen more than 600 contracts change hands at its August 65 put. Meanwhile, its August 70 put has had more than 2,622 contracts cross the tape. With open interest outweighing the current volume, we shall have to wait until Monday to see if these contracts translate into new positions.

Overall, the stock has seen rising signs of optimism. CFC's Schaeffer's put/call open interest ratio plunged overnight from 1.69 (in the 91st percentile) to 1.36 (in the 48th percentile). What's more, the number of CFC shares sold short plunged by four percent over the most recent reporting period to 10.9 million. At the stock's average daily trading volume, it would take almost four days to cover these bearish bets. An unwinding of these positions could provide the security with some short-covering support. Wall Street is thoroughly enamored of the financial firm. According to Zacks, 13 of the 17 analysts following CFC rate it a "buy" or better.

Technically speaking, the shares managed to bounce back yesterday after reporting second-quarter earnings. The company posted a profit of $2.24 per share, missing the Street estimate of $2.33 per share. However, the firm went on to boost its quarterly dividend to 20 cents per share and raised its outlook for the full year to $7.50-$8.50 per share. CFC had previous expected a profit of $7.00 - $8.25 per share for the year. The stock is currently down, but is clinging to support at its short-term moving averages.

From a longer-term perspective, the stock has rallied along its 10-week and 20-week trendlines since late December 2002. During this time period, the equity has suffered only a handful of weekly closes below both of these trendlines. The stock has also enjoyed the support of its 10-month moving average since March 2002. Not surprisingly, CFC has outperformed the SPX since December 1999. If the shares can continue to hold support at its longer-term trendlines, CFC may still have further room to climb as short sellers unload their bearish bets.

Click the following link to see the Weekly Chart of CFC since December 2002 with 10-Week and 20-Week Moving Averages: http://www.schaeffersresearch.com/wire?ID=10662.