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Investors Brace for Volatility After Earnings

Twitter (TWTR), Pandora (P) and Yelp (YELP) are out with results after the close today, and investors are anticipating some big post-earnings moves.

For Twitter, it’s the short-messaging service’s freshman earnings report following its November IPO. The Thomson Reuters estimate is for a loss of $0.02 per share on revenue of $217.82 million. TWTR is up more than 150% since going public. Pandora Media is expected to post EPS of $0.07 on revenue of $201.08 million. Shares of the Internet radio leader are up 201% y/y.  Finally, Wall Street is looking for Yelp to report a $0.02 per-share loss, with revenue at the consumer reviews Web site expected to rise 63% to $67.27 million. Shares are up 256% in the past year.

Based on today’s trading in these companies’ options, investors are anticipating sharp post-earnings moves in the underlying stocks:

Stock

Expected Next-Day Move (up or down)

Twitter (TWTR) 13.5%
Yelp (YELP) 13.5%
Pandora Media (P) 11.4%

While Yelp and Pandora saw only modest moves in reaction to the last earnings report (3Q 2013), there is a history of volatility. After the release of Q2 and Q1 results last year, Yelp shares surged 23% and 27% respectively the following day. As for Pandora, two of the last five quarterly earnings reports induced moves of more than 17% in the stock. It will be interesting to see whether or not the market has correctly priced the anticipated reactions this time around.