'Fast Money' Recap: Earnings Season Volatility

NEW YORK (TheStreet) -- Investors are getting into the thick of earnings season and volatility is heating up as a result. The S&P 500 initially sold off on Thursday morning but finished higher by 0.17%.

Amazon (AMZN), Microsoft (MSFT) and Starbucks (SBUX) reported earnings after the close. 

On CNBC's "Fast Money" TV show, Pete Najarian, co-founder of optionmonster.com and trademonster.com, questioned Amazon's high levels of spending. He added that at some point the company needs to start earning a profit. 

Steve Grasso, director of institutional sales at Stuart Frankel, said shares of Amazon will do fine so long as the overall market doesn't sell off. 

Dan Nathan, co-founder and editor of riskreversal.com, completely disagreed, saying he thinks shares of Amazon are headed lower.  

Guy Adami, managing director of stockmonster.com, said the company's operating margins were "lousy." He suggested taking profits for those investors who listened to his buy recommendation several weeks ago. 

Aaron Kessler, senior vice president of equity research at Raymond James, has a buy rating on Amazon with a $443 price target. He said Amazon reported impressive revenue figures. He admitted the company's expenses were high, mainly because it's still in "investment mode." He suggested that operating margins can increase over the long term.

Microsoft is a buy following its earnings report, according to Adami. He added that the company's operating margins were much better than analysts had expected. Najarian said there seems to be a new "swag factor" for shares of Microsoft. He likes it on the long side. 

Grasso suggested taking some profits in Microsoft, partly because of increased competition in the cloud, which will result in lower margins. 

Nathan critiqued Microsoft's Surface tablet and said the company lacks growth. 

Daniel Ives, an analyst at FBR Capital Market, has a buy rating on Microsoft with a $40 price target. He said the company's biggest headwind is its mobile handsets acquisition from Nokia (NOK). It will be a "challenge" to integrate it into the current Microsoft business, he said, but it's a necessary feat if Microsoft wants to be successful in the mobile business. The stock is still relatively cheap at current levels, he concluded. 

Starbucks moved higher in the after-hours trading session following its second-quarter earnings report. Nathan said the stock has no momentum and investors who are long should use $70 as their stop-loss.

Najarian likes Starbucks, saying it has plans to open 1,500 more stores and has a lot of potential growth in the tea business. Adami said Starbucks should be trading higher than it is, given its recent earnings results. He was a buyer at current levels. 

Grasso pointed out that 1,883 has continued to act as resistance for the S&P 500. 

Najarian said the broader market is currently near the top of its current trading range, suggesting that a pullback could be in the cards. 

Adami said investors should wait to see if the S&P 500 can hold 1,834. 

Najarian said investors should hold off on buying Pandora (P) for now. 

Adami said Visa (V) could be headed towards $195 after a disappointing earnings result. 

Grasso said Las Vegas Sands (LVS) has decent growth but Wynn Resorts (WYNN) is Wall Street's "favorite" casino stock. 

Nathan said investors should use a $140 stop-loss on shares of Baidu (BIDU). 

Najarian bought Under Armour (UA) on Thursday. He said the stock could return to the $55 to $60 price range. Nathan argued that Under Armour is overvalued at current levels. 

Micron (MU) hit a new 52-week high on Thursday. Najarian pointed out some bullish options activity after 25,000 May $28 call options and 25,000 July $30 call options were purchased. 

Grasso said Micron may be headed lower because DRAM prices appear to be "rolling over" to the downside. 

Aetna (AET) was the first stock on the show's "Pops & Drops" segment after jumping 6%. Grasso was not a buyer. 

United Continental Holdings (UAL) fell 10%. Adami was a buyer, if $40 acts as support for the stock. 

D.R. Horton (DHI) popped 8%. Najarian said he would sell into the stock's strong price action. 

Nathan found some bullish options activity in shares of Anadarko Petroleum (APC): 50,000 January 2015 $120/$135 bull call spreads traded for $1.61. The breakeven point for the trade is at $121.61. 

Grasso was a buyer of Deckers Outdoor (DECK) on a pullback. Najarian agreed, calling the stock cheap. 

Tom Werner, chairman, president and CEO of SunPower (SPWR), said his company's partnership with Google (GOOG) and Bank of America (BAC) will help the company rapidly scale its residential solar business. He was bullish on residential solar because consumers now see that it's "risk free." They can generate clean energy and save money. He reminded investors that SunPower has already raised its fiscal year guidance. 

Adami said investors should not short-sell SPWR because of the high short interest. Instead, he said the stock could climb to $35.  

For their final trades, Najarian was a buyer of Chesapeake Energy (CHK) and Adami was a buyer of Qualcomm (QCOM). Nathan was short the iShares MSCI Germany ETF (EWG) via put options and Grasso was a buyer of Amazon so long as the S&P 500 stays above 1,856. 

-- Written by Bret Kenwell in Petoskey, Mich.

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Bret Kenwell currently writes, blogs and also contributes to Robert Weinstein's Weekly Options Newsletter.

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