Yelp (YELP) reports second-quarter results after the closing Tuesday. Given the stock's track record of selling off after earnings, including a 10% selloff in the first quarter, it would be a smart move to take profits now and wait for Yelp management to issue guidance.
In the past four quarters, the online consumer review site has averaged a negative earnings surprise of over 300%, according to investment firm Zack's. This measures the difference between what analysts were expecting and what Yelp actually delivered. So, given the company's track record for disappointment, why risk three-month gains of 23%?
What's more, Yelp's stock chart, courtesy of TradingView, suggests a correction could be around the corner, even if the company beats estimates.
Yelp shares, which are up 10% year to date, currently trade at around $31, outperforming the 6.8% rise in the S&P 500 (SPX) . But as you can see from the chart, YELP has skyrocketed almost 80% since the end of March, including a 20% jump from support at around $22 (green line) to $26 per share.
Why is that significant? Since that one-day spike on May 6, YELP has left all three key moving averages (20-day, 50-day and 100-day) in the dust. The stock now trades more than 21% above the 100-day (yellow line) average at $25.59. That's a key level to watch after Tuesday's results. Analysts expect a 7-cent loss on $170 million in revenue. It missed by 4 cents in the first quarter. Another miss Tuesday and/or a deceleration in revenue growth could take a 10% to 15% cut in the stock price.