PreMarket Prep Stock Of The Day: Williams-Sonoma

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

High-priced stocks are difficult to trade because of the large spreads and small amount of shares offered up by the market-makers at the bid and ask. Trading high-priced issues after the company reports earnings can be even more difficult.

The above scenario applies to Williams-Sonoma WSM, which is the PreMarket Prep Stock Of The Day.

Street Leaning Long Into The Report: After being range-bound for all of July and most of August, Williams-Sonoma had a solid two-day run ahead of its earnings print. The issue ended Monday’s session at $162.11 and added $7 on Tuesday to close at $169.56.

Buyers got a bit carried away on Wednesday as the issue raced to $176.60, but retreated to end the session at $170.74. Added up, the issue gained $8.63 in the two days ahead of the report, which closed at its highest level since June 2.

Q2 Beat: After the close on Wednesday, the company reported quarterly earnings of $3.24 per share, which beat the analyst consensus estimate of $2.60 by 24.6%. The company reported quarterly sales of $1.95 billion, which beat the analyst consensus estimate of $1.81 billion by 7.6%.

The company announced a $1.25 billion buyback and raised its dividend from $0.59 to $0.71 per share.

PreMarket Prep Take: When the issue was being covered on the show it was trading at the $194 area, with the after-hours high standing at $199. Co-host Dennis Dick wasn't surprised at the oversized move to the upside: “It makes sense that the company blew it away. Consumers are in the mood to spend money and fix up their homes.”

The author of this article noted the all-time high ($194.69) as a potential resistance point. In addition, in the event the issue took out the premarket high and made it over $200, it may attract some profit-takers.

Price Action: Following a sharply higher open, the issue raced to $204.4 in the first few minutes of the session and profit-takers engulfed the issue. Once it breached the opening price ($199.64), the pace of the decline accelerated.

The issue found support well above the top of Wednesday's range ($176.80) at $184.09 and closed nearly $16 (9.3%) higher at $186.68.