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YHOO: Too Rich for Investors, Too Weak for Traders

Yahoo's earnings multiple is high and a negative technical event just occurred


Yahoo (YHOO) — This company is one of the worlds largest providers of content and services. I recommended in my Top Stocks to Buy for May under $24 with a six-month target of $30, mentioning that its investment in Asian companies could add to future earnings.

On July 18, at close to $30, I suggested that traders who bought the stock at $24 consider taking profits, but that investors should continue to hold. The stock fell to under $28, but then rallied to a new high at $35.

I again recommended traders sell on Sept. 25, and I advised long-term investors to take defensive measures like selling options.

On Wednesday, YHOO fell on high volume on a strong day for the market, which is a poor technical event. Analysts look for earnings per share of $1.47 this year and $1.67 in 2014. At 22.5 times this year’s earnings and 19.8 times next year’s earnings, the current price is rich.

I’m adjusting my buy under price to $30, where it is a worthwhile long-term investment. Traders should sell current positions at $33.50 or above.

YHOO Chart
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