With shares of Yahoo (NASDAQ:YHOO) trading around $36, is YHOO an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
T = Trends for a Stock’s Movement
Yahoo is a technology company that provides search, content, and communication tools on the Web and on mobile devices worldwide. It operates Yahoo.com, which offers Yahoo Search, Yahoo News, Yahoo Sports, Yahoo Finance, Yahoo Entertainment and Lifestyles, and Yahoo Video. Being such a large content provider, Yahoo is able to reach a significant amount of consumers across the globe. As the Internet attracts an increasing number of participants, look for Yahoo to continue to be a major player.
Yahoo announced Wednesday that the company is releasing a new mobile app for iPhone and iPad users in a post on its official Tumblr blog. While it’s not unusual for a company to update its mobile apps every once in a while to add bug fixes or new content, this new Apple (NASDAQ:AAPL) version contains features not present in the current Android version available on Google (NASDAQ:GOOG) (NASDAQ:GOOGL) Play. The new Version 3.0 in the App Store has News and Yahoo Today features in the update to the Yahoo Mail app released yesterday and are, as of Wednesday, exclusive to Apple devices that are capable of downloading the mobile app. The question is whether the new app is the first in a piece of exclusive content is one possible concept.
Yahoo and Apple have a good business relationship. The iPhone and iPad’s native weather and stocks apps are both Yahoo-based products. Yahoo has also been looking to worm its way further into the iPhone in its attempts to convince Apple to make Yahoo Search the default search engine on iPhone’s mobile web application Safari. Both companies also have a rival in another Silicon Valley tech giant, Google. Google is Yahoo’s rival in many areas, including search, mail services, and Yahoo does not release any software that directly competes with iOS in the way that Google’s Android operating system does.
T = Technicals on the Stock Chart Are Mixed
Yahoo stock has been pulling back over the last couple of quarters. However, the stock is currently surging higher and looks poised to continiue. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Yahoo is trading between its rising key averages which signal neutral price action in the near-term.
(Source: Thinkorswim)
Taking a look at the implied volatility (red) and implied volatility skew levels of Yahoo options may help determine if investors are bullish, neutral, or bearish.
|
Implied Volatility (IV) |
30-Day IV Percentile |
90-Day IV Percentile |
|
| Yahoo options |
38.50% |
43% |
40% |
What does this mean? This means that investors or traders are buying a significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.
|
Put IV Skew |
Call IV Skew |
|
| June Options |
Average |
Average |
| July Options |
Average |
Average |
As of today, there is an average demand from call and put buyers or sellers, all neutral over the next two months. To summarize, investors are buying a significant amount of call and put option contracts and are leaning neutral over the next two months.
On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.
E = Earnings Are Mixed Quarter-Over-Quarter
Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Yahoo’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Yahoo look like and more importantly, how did the markets like these numbers?
|
2014 Q1 |
2013 Q4 |
2013 Q3 |
2013 Q2 |
|
| Earnings Growth (Y-O-Y) |
-17.14% |
31.43% |
-6.67% |
66.67% |
| Revenue Growth (Y-O-Y) |
-0.61% |
-5.94% |
0.33% |
-6.78% |
| Earnings Reaction |
6.25% |
-8.71% |
-0.86% |
10.34% |
Yahoo has seen mixed earnings and decreasing revenue figures over the last four quarters. From these numbers, the markets have been pleased with Yahoo’s recent earnings announcements.
P = Average Relative Performance Versus Peers and Sector
How has Yahoo stock done relative to its peers, Google (NASDAQ:GOOG), AOL (NYSE:AOL), Microsoft (NASDAQ:MSFT), and sector?
|
Yahoo |
|
AOL |
Microsoft |
Sector |
|
| Year-to-Date Return |
-9.08% |
-5.25% |
-11.50% |
11.77% |
-2.51% |
Yahoo has been an average performer, year-to-date.
Conclusion
Yahoo is an Internet bellwether that provides a multitude of services to consumers and companies worldwide. The company announced Wednesday that the company is releasing a new mobile app for iPhone and iPad users. The stock has been pulling back over the last couple of quarters, but is currently surging higher. Over the last four quarters, earnings have been mixed and revenues have been decreasing, which has left investors pleased about recent earnings announcements. Relative to its peers and sector, Yahoo has been an average year-to-date performer. WAIT AND SEE what Yahoo does next.
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More From Wall St. Cheat Sheet:
- Look Out, Google: Yahoo Is Coming for iOS
- Yahoo Outperforms Expectations in Q1
- Yahoo Surges After Strong Q1: Has Mayer Righted the Ship?