Uber is among a group of top-performing stocks set to report earnings in the coming week. Uber stock is near the top of a 20-week consolidation after a bullish move off lows, making it a candidate for a call option trade of Wednesday's earnings report before the open.

Semiconductor stocks have provided much of the fuel for the Nasdaq's latest rally, so keep an eye on chipmaker Onsemi, which reports Monday before the open. Onsemi specializes in sensing and power technologies with a focus on automotive and industrial end markets.

Other top chip stocks set to report in the coming week include Rambus, Axcelis Technologies, Leaderboard stock Impinj and Monolithic Power Systems.

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Also in the technology sector, Ceridian HCM reports Wednesday after the close. The provider of human capital management software jumped out of a bottoming base Wednesday and extended gains Thursday. Ceridian boasts big annual earnings estimates. For 2022, full-year profit is expected to jump 68%, with 40% growth expected in 2023.

Uber Stock Kicks Into Gear

Uber is still bleeding a lot of red ink, but over the past six quarters, revenue growth has ranged from 72% to 136%. For Q4, the Zacks consensus estimate is for an adjusted loss of 21 cents a share. Revenue is expected to rise 47% to $8.5 billion, a slowdown from 72% growth clocked in Q3.

Uber stock soared nearly 12% in early November despite reporting a wider-than-expected loss. Investors focused instead on a revenue beat and better than expected EBITDA, an alternate measurement of profitability. Adjusted EBITDA was $516 million, above expectations and prior guidance of $440 million to $470 million. For Q4, Uber forecast EBITDA of $600 million to $630 million, above the $568 million consensus.

Gross bookings totaled $29.1 billion, up 26%. Uber's mobility (ride-hailing) business did revenue of $3.8 billion, up 73%. Delivery revenue increased 24% to $2.77 billion.

Uber's nascent freight business did $1.75 billion in revenue, up sharply from $402 million in the year-ago quarter.

The stock topped the 31.30 buy point of a cup-with-handle base Wednesday and is extended from its 5% buy range.

Two Blue Chips Set To Report

Walt Disney and DuPont de Nemours are also on the week's earnings calendar.

Disney has been rallying in light volume, with earnings due late Wednesday. In November, Bob Iger took over as CEO again, replacing Bob Chapek, who took the reins from Iger in 2020. Iger previously held the CEO post at Disney for about 15 years, overseeing the acquisitions of Pixar, Marvel and "Star Wars" creator Lucasfilm as well as the launch of Disney's streaming service, Disney+, in November 2019.

Annual earnings estimates are solid for Disney. For its current fiscal year 2023, annual profit is expected to rise 17%, with growth accelerating in 2024, up 29%.

DuPont, meanwhile, has been moving sideways after a breakout from a base on Jan. 6, the same day the Nasdaq composite and S&P 500 confirmed a new uptrend with follow-through days.

Options Trading Strategy

A basic options trading strategy around earnings — using call options — allows you to buy a stock at a predetermined price without taking a lot of risk. Here's how the options trading strategy works and what a call option trade recently looked like for Uber stock.

First, identify top-rated stocks with a bullish chart. Some might be setting up in sound early-stage bases. Others might have already broken out and are getting support at their 10-week moving average for the first time. And a few might be trading tightly near highs and refusing to give up much ground. Avoid extended stocks that are too far past proper entry points.

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In options trading, a call option is a bullish bet on a stock. Put options are bearish bets. One call option contract gives the holder the right to buy 100 shares of a stock at a specified price, known as the strike price.

Put options are for weak performers with bearish charts. The only difference is that an out-of-the-money strike price is just below the underlying stock price. A put option gives the holder the right to sell 100 shares of a stock at a specified price.

You earn profits when the stock falls below the strike price with a put option.

Check Strike Prices

Once you've identified an earnings setup for a call option, check strike prices with your online trading platform, or at cboe.com. Make sure the option is liquid, with a relatively-tight spread between the bid and ask.

Look for a strike price just above the underlying stock price (out of the money) and check the premium. Ideally, the premium should not exceed 4% of the underlying stock price at the time. In some cases, an in-the-money strike price is OK as long as the premium isn't too expensive.

Choose an expiration date that fits your risk objective but keep in mind that time is money in the options market. Near-term expiration dates will have cheaper premiums than those further out. Buying time in the options market comes at a higher cost.

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This options trading strategy lets you capitalize on a bullish earnings report without taking too much risk. Risk is equal to the cost of the option. If the stock gaps down on earnings, the most you can lose is the amount paid for the contract.

Uber Stock Option Trade

Here's what a recent call option trade looked like for Uber.

When Uber stock traded around 33.25, a slightly out-of-the-money weekly call option with a 33.50 strike price (Feb. 17 expiration) came with a premium of around $1.85 per contract, or 5.5% of the underlying stock price at the time. It was a pricey trade, exceeding the 4% risk threshold, but the expiration is still a ways out.

One contract gave the holder the right to buy 100 shares of Uber stock at 33.50 per share. The most that could be lost was $185 — the amount paid for the 100-share contract.

When taking the premium paid into account, Uber would have to rally past 35.35 for the trade to start making money (33.50 strike price plus $1.85 premium per contract).

Follow Ken Shreve on Twitter @IBD_KShreve for more stock market analysis and insight

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