Trade-Ideas: Yahoo (YHOO) Is Today's

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer.

Trade-Ideas LLC identified Yahoo ( YHOO) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Yahoo as such a stock due to the following factors:

  • YHOO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $576.8 million.
  • YHOO has traded 33.3 million shares today.
  • YHOO traded in a range 411.4% of the normal price range with a price range of $3.86.
  • YHOO traded below its daily resistance level (quality: 209 days, meaning that the stock is crossing a resistance level set by the last 209 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on YHOO:

Yahoo! Inc. provides search and display advertising services on Yahoo properties and affiliate sites worldwide. YHOO has a PE ratio of 6. Currently there are 18 analysts that rate Yahoo a buy, no analysts rate it a sell, and 9 rate it a hold.

The average volume for Yahoo has been 13.3 million shares per day over the past 30 days. Yahoo has a market cap of $42.0 billion and is part of the technology sector and internet industry. The stock has a beta of 1.29 and a short float of 3.1% with 2.11 days to cover. Shares are down 12.2% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Yahoo as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, reasonable valuation levels and solid stock price performance. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • YHOO's revenue growth has slightly outpaced the industry average of 5.8%. Since the same quarter one year prior, revenues slightly increased by 8.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Although YHOO's debt-to-equity ratio of 0.04 is very low, it is currently higher than that of the industry average. Along with this, the company maintains a quick ratio of 4.44, which clearly demonstrates the ability to cover short-term cash needs.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Internet Software & Services industry and the overall market, YAHOO INC's return on equity exceeds that of both the industry average and the S&P 500.
  • Compared to its closing price of one year ago, YHOO's share price has jumped by 31.54%, exceeding the performance of the broader market during that same time frame. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.

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