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Cash Out of YHOO Unless You Can Stomach the Extra Risk

Continue holding only if you're comfortable with the uncertainty of future earnings and volatile nature of the stock


Yahoo (YHOO) — This information technology company is one of the world’s largest providers of content and services. It was included on our Top Stocks to Buy for May list at just over $24 with a six-month target of $30. At that time, I mentioned that its investment in Asian companies could add to future earnings.

Following the close on Tuesday, the company reported Q2 earnings of $0.35 per share versus analysts’ consensus estimate of $0.30. However, management surprised The Street by lowering revenue and earnings forecasts. Expected Q3 revenue was adjusted to $1.06 billion to $1.1 billion versus $1.12 billion previously.

On Wednesday, the stock popped more than 10% to $29.66 as analysts touted the company’s investment in Chinese e-commerce giant Alibaba, which contributed significantly to the recent earnings gain. But some analysts pointed out the uncertainty of future earnings and the volatile nature of the stock.

Traders who bought near $24 or under should take this opportunity to book a profit at $30. Long-term buyers could still hold YHOO for greater gains as long as they are comfortable with the increased risk.

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