Is Yahoo! A New Market Leader?

With shares of Yahoo! (NASDAQ:YHOO) trading around $23, 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:

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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 that 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.

Head on over to the next page to explore the technical landscape of Yahoo’s stock…

T = Technicals on the Stock Chart are Strong

Yahoo stock saw a magnificent run during the technology bubble but was met with a decade of consolidation. The stock broke above a multi-year consolidation and may be headed towards price levels not seen since the mid-2000s. 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 above its rising key averages which signal bullish 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




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What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

April Options



May Options



As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bearish over the next two months. To summarize, investors are buying a good amount of call and put option contracts and are leaning neutral to bearish 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?

2012 Q4

2012 Q3

2012 Q2

2012 Q1

Earnings Growth (Y-O-Y)





Revenue Growth (Y-O-Y)





Earnings Reaction





Yahoo has seen mixed earnings and revenue growth rates over the last four quarters. From these figures, the markets have generally been satisfied with Yahoo’s last four earnings announcements.

P = Excellent Relative Performance Versus Peers and Sector

How has Yahoo stock done relative to its peers, AOL (NYSE:AOL), Google (NASDAQ:GOOG), Microsoft (NASDAQ:MSFT), and sector?






Year-to-Date Return






Yahoo has seen amazing gains this year and has been one of the relative performance leaders of its sector.

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Yahoo is an internet giant that offers a wide range of services to consumers around the world. The stock saw a euphoric rise during the technology boom and a disastrous decline in the years that followed. Yahoo stock is in a strong uptrend as investors have enjoyed most of the company’s earnings reports, although the numbers posted haven’t been great. Relative to its peers and sector, the stock has generated excellent returns and has been one of the leaders of its sector. Look for Yahoo to continue to OUTPERFORM.

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