Goldman recommends some options trades to profit from weak earnings from two notable companies

Published Wed, Jul 13 202211:01 AM EDT

Jesse Pound @/in/jesse-pound @jesserpound

Earnings season is ramping up quickly the corner, and there are a few companies that investors should bet on disappointing, according to Goldman Sachs. The investment firm's derivatives research team, led by Vishal Vivek, said in a note to clients last week that investors should consider buying put options on Intel and Boston Beer Company ahead of their upcoming earnings reports. Put options are contracts that make money when a stock falls below a pre-determined strike price. The maximum downside for the trader buying a put option is the upfront cost needed to purchase the contract. Intel's shares have already fallen more than 28% year to date, and Goldman analyst Toshiya Hari has a sell rating on the stock. "Toshiya's recent industry checks point to a weakening PC demand environment, particularly in the low-end consumer and educational segments. This, coupled with his team's work on supply chain inventory, leads Toshiya to expect revenue downside in 2H22 and potentially beyond," the note said. Goldman recommended the Aug. 5 weekly puts with a $37 strike price. Intel, which is scheduled to report results on July 28, closed at $37.21 per share on Tuesday. Intel's shares fell below the $37 mark during Wednesday's session, which would raise the price of the option contract. Investors who want to bet on further downside may want to look at other contracts with lower strike prices. For Boston Beer, analyst Bonnie Herzog downgraded the stock to sell last month , highlighting the declining popularity of Truly hard seltzer. Boston Beer and other beverages made big bets on seltzer in recent years, but are now looking for new product innovations as the fad appears to have waned. "Bonnie believes the growth in Twisted Tea (or other innovations) is unlikely to offset Truly's declines in FY22 and FY23, adding to her bearish view on SAM. She forecasts gross margins of 43.5% for FY22 (vs. 45%-48% guidance)," the note said. Shares of the Samuel Adams parent have dropped more than 37% year to date, and the performance is even worse over a longer time horizon. The stock, which closed at $314.29 per share on Tuesday, briefly traded above $1,300 per share in April 2021. For the trade, Goldman recommended the August put contracts with a $300 strike price. Boston Beer is scheduled to report its earnings on July 21. — CNBC's Michael Bloom contributed to this report.

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