e.l.f. Beauty Options Market Prices in 12% Swing on Upcoming Earnings

The options market is pricing in a potential 12% move in either direction for shares of e.l.f. Beauty Inc. (ELF) following the company's upcoming earnings announcement. The cosmetics firm is scheduled to release its financial results on November 4 after the market closes.

Gauging Post-Earnings Volatility

This implied move is derived from options pricing and reflects traders' expectations for stock volatility surrounding the earnings event. According to data compiled by Bloomberg, this 12% benchmark provides a gauge for the magnitude of the share price reaction that the market anticipates.

Investors and traders often watch these figures closely as they can signal heightened event risk and potential for significant price swings. The size of the implied move is determined by the prices of call and put options expiring shortly after the earnings release.

Historical Performance vs. Expectations

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A review of e.l.f. Beauty's last eight earnings reports shows a mixed history of the stock's actual performance versus what the options market had priced in. The actual share price move exceeded the implied move in three of those eight instances.

Notably, these three occasions involved larger-than-expected declines:

• A 41.9% drop following a November 5 report, compared to an implied move of 12.6%.
• A 16.7% decline after an August 6 report, versus a 12.5% implied move.
• A 32.9% fall after a February 6 report, against a 12.6% options prediction.

In the other five recent earnings periods, the stock's movement was more muted than anticipated. For its most recent earnings on August 5, the stock gained 9.8% against a 12.8% implied move. Similarly, its May 20 report resulted in a 4.6% decline, well within the expected 13.1% swing.