Yahoo!

04/25/2003 12:00 am EST

Focus:

Mark Skousen

Editor, Forecasts & Strategies, High-Income Alert

Yahoo is an interesting situation in that it ironically represents the very extreme of unwarranted optimism during the Internet bubble, yet at the same time, remains one of the few "new media" firms to survive the bubble intact. Indeed, the search engine concept has proven sound despite the company's earlier inability to live up to unrealistic expectations. Here's a new look at the company:

“Internet media company Yahoo (YHOO NASDAQ) recently unveiled its new premium subscription service, Yahoo Platinum, a premium online video and audio service featuring mainline programming in sports, entertainment, and news from the top television syndicates (ABC, NBC, CBS, FOX, etc.) through its broadband outlets,” says Dr. Mark Skousen, editor of Forecasts & Strategies. “Yahoo seeks to become the Internet’s No. 1 entertainment destination. A recent Arbitron study estimates that over 100 million Americans (44% over the age of 12) have experienced Internet broadcasts of either audio or video in the past year.. Yahoo is richly priced (selling at more than 90 times earnings), but is likely to move higher with its aggressive marketing strategy.”

Adds Bernie Schaeffer, leading expert at Schaeffer Investment Research and editor of The Option Advisor, “Yahoo makes our bullish list; from a fundamental perspective, equity continues to impress. In its April 8th first- quarter earnings report, YHOO posted results that exceeded Wall Street estimates by two cents per share. The firm also revised revenues higher for fiscal 2003. Technically, the shares continue to move higher along its supportive ten-day and 20-day trendlines. Despite technical and fundamental strength, sentiment remains near bearish extremes. Barron's recently posted a negative article on several Internet stocks, including YHOO. Options players continue to add to the put side and our Schaeffer's put/call open interest ratio shows that that there are 1.18 open put contracts for each open call contract in the front three months. Putting this into perspective, current put/call readings on the stock are higher than all but 2% of the past year's worth of data. Wall Street also maintains a wary eye on the stock. According to Zacks, only six of the 17 analysts following the firm rate it a ‘buy’ or better. Any future upgrades from this pessimistic bunch could provide additional fuel to drive the shares higher. Aas the shares continue to inch higher along their 10-day and 20-day moving averages amid a skeptical options crowd. Traders should continue to target a move up to 27.29 with a stop-loss set for a close below 24.81. Ovreall, These types of low expectations on a consistent outperformer often prove to be outstanding bullish contrarian plays.  Meanwhile, for options players, we hold the October 22.50 call (YHQJX)."


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