Superficial Pop Gives Yahoo Shareholders a Good Out

by Sam Collins | September 25, 2013 1:49 am

Yahoo (YHOO[1]) — This large-cap technology company is one of the world’s largest providers of content and search services. I recommended it as one of the Top Stocks to Buy for May[2] with a six-month target of $30, mentioning that its investment in Asian companies could add to future earnings.

On July 18[3], with the stock near my target, I suggested traders consider taking profits but that investors should continue to hold. The stock fell to under $27.

On Tuesday, it popped to a high of $31.66 following a post on Minyanville[4] that mentioned Yahoo was being “noticed again” thanks to CEO Marissa Mayer. But getting noticed and achieving outstanding profits are quite different. Analysts look for earnings of $1.47 per share this year and $1.67 in 2014.

At 19 times next year’s earnings, the current price is rich, and so a pop due to the publicity gained from an Internet article seems like an ideal time to again lock in profits. Long-term investors should take defensive measures like selling options against current positions.

YHOO Chart
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Chart Key[5]

  1. YHOO:
  2. Top Stocks to Buy for May:
  3. On July 18:
  4. post on Minyanville:
  5. [Image]:

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