Yahoo! (YHOO) will probably whip around ahead of earnings scheduled today after the close. Street estimates are $0.13 EPS & $1.2 Billion in revenues, and the company gave revenue guidance of $1.15 to $1.27 Billion. StarMine (registration required) is also only looking for $0.13 on EPS, and it is hard to find many looking for any huge surprises. Keep in mind that this is revenue on an ex-TAC basis (traffic acquisition costs). You can expect some guidance for the coming quarter and the March quarter estimates are $0.13 EPS on revenues of $1.26 Billion.
Don’t forget that the headline number on wires will be much larger than the real number, because the street backs out TAC on search companies. Last quarter total revenues were $1.58 Billion and ex-TAC real revenues counted by the street were $1.21 Billion.
A FEB07 straddle in options right now costs $2.75 (where investors just want to profit from a big move in either direction), which means that a buyer of the $27.50 Calls and $27.50 Puts (both February) has to see the stock rise more than 10% or fall more than 10% in either direction for their trade to be profitable. Conversely, options traders appear prepared to absorb roughly a $2.10 move in either direction. The problem with options today is that there is three and a half weeks until expiration date (Feb. 16).
Just last week everyone was discussing the stock as having traded like a buyout candidate because of a more than 25% gain while its metrics have not been improving. It is down more than $2.00 in the last 5 trading sessions. Its longer-term chart is not indicative of anything great, but it is oversold on a short-term basis. Its 200-day moving average is also back under the 200 day moving average of $28.54, and since it traded over that level and failed there could be more resistance the second time around.
Today is going to be all about Panama, its new ad-based search program that has been online for a month. The scary thing is that there has not been that much talk about it and it is too soon to know if many advertisers are skewing ad money back toward the platform. Sure it would be great to see a corporate alignment or a Semel departure. In fact, Semel is one of my 10 CEO’s that need to go (so far Nardelli & Pressler got their memos to leave). If this stock is truly rangebound as my partner hypothecized this morning, then we should just expect more of the same. What is very likely though is that if in their conference call they do not show how they are winning back ad customers or at least getting great indications from customers over Panama, then the shares are probably going to have to give back some more than the $2.00 in the last 5-days of their recent gains since last quarter’s earnings SNAFU.
Jon C. Ogg
January 23, 2007
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