EBAY Options Pop Off Ahead of Earnings Report

A CNBC report sent the shares to a new high earlier

Ahead of earnings tonight, online retailer eBay Inc (NASDAQ:EBAY) has reversed course after hitting 15-month highs, now down 1% at $39.54. The equity was initially surging on a CNBC report that the firm is in the early stages of selling its ticket-exchange business StubHub. However, no confirmed buyers were named.

Looking at past earnings reactions, EBAY stock moved higher the day after its last three earnings reports, including a 5% rally in April. A year ago, however, the stock swung to a 10.1% loss after earnings. Over the past two years, EBAY has averaged a one-day post-earnings swing of 5.6%, regardless of direction, but this time around the options market is pricing in a slightly bigger move at 7.8%.

Options are flying off the shelves today, too, with 26,000 calls and 19,000 puts across the tape so far -- three times what's typically seen at this point. The most popular option is the July 40 put, with a large chunk of contracts being bought to open. New buyers of the put expect EBAY to retreat beneath $40 by the close on Friday, when the options expire.

Looking at the charts, EBAY has had an impressive year, up 40.6% year-to-date. In recent weeks, however, the stock has consolidated its gains, with pressure in the $40-$40.50 area keeping the equity relatively range-bound.

Despite this positive price action, analysts are split, with 12 calling EBAY a "buy" or better, while 12 say "hold." Should the company report strong earnings tonight, a round of upgrades could propel the stock to new heights. Likewise, the door is wide open for some price-target hikes on an earnings beat, with the consensus 12-month price target of $40.04 a discount to today's new high of $41.11.