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YHOO tonight !

Published on January 23, 2007

YHOO tonight !

January 23, 2007

I am looking for Yahoo earnings tonight. Again I am playing backspread on this and my breakevens are $25.36 and $29.59. I expect roughly 8-10% volatility crush after the earnings are announced AMC. If Yahoo reports negative and the stock falls below $25.36, I will still make about $40. However, if it announces positive and the stock rises, then beyond $29.5, the returns will rise in accordance. The Margin requirement is $215 (I received $0.35 credit) per spread.

Yahoo Jan 07

Cheers and profitable trading,OptionPundit

Cheers and profitable trading,OptionPundit

6 Comments

  • Avatar optionpundit says:

    I did one more trade on Yahoo and this time i got $0.42 credit, for the same trade.

  • Avatar optionpundit says:

    Yahoo’s 4Q Profit Tops Analyst Views
    Tuesday January 23, 7:39 pm ET
    By Michael Liedtke, AP Business Writer
    Yahoo’s 4Q Profit Tops Analyst Forecasts by 3 Cents Per Share, Ending Streak of Letdowns

    SAN FRANCISCO (AP) — Yahoo Inc.’s fourth-quarter profit topped analysts’ expectations to end a recent pattern of financial letdowns, a breakthrough that the Internet bellwether hopes to build upon by accelerating the introduction of long-awaited improvements to the advertising system that fuels its growth.
    The pleasant surprise lifted Yahoo’s stock price by more than 5 percent late Tuesday after management shared the news.

    The Sunnyvale-based company said it earned $268.7 million, or 19 cents per share, during the final three months of 2006, traditionally the peak season for Web sites like Yahoo that depend on advertising for most of their revenue.

    The profit declined 61 percent from net income of $683.2 million, or 46 cents per share, at the same time in 2005, but the two quarters didn’t provide an apples-to-apples comparison. That’s because a one-time gain of $310 million boosted the 2005 results while the 2006 figures included stock option expenses that weren’t recorded on Yahoo’s books in the previous year.

    If not for certain tax benefits, Yahoo said it would have earned 16 cents per share, exceeding the average analysts’ estimate by 3 cents per share, according to Thomson Financial.

    More importantly for investors, Yahoo Chairman Terry Semel announced in a Tuesday conference call that the company will move up the United States debut of a new formula that will determine which ads are most likely to get clicked upon and generate sales commissions.

    Yahoo now plans to roll out the upgrade, code-named Project Panama, on Feb. 5 — nearly two months ahead of a revised timetable that management outlined October.

    That development helped boost Yahoo’s stock price by $1.53, or 5.7 percent, in Tuesday’s extended trading. The shares had previously shed 46 cents to close at $26.96 on the Nasdaq Stock Market.

    The company originally hoped to introduce Panama late last year, but decided to delay the high-stakes project to give its engineers more time to work out the kinks.

    “I made the decision to get it right rather than be fast,” Semel said during a Tuesday interview. “We have taken all the time we need and the (test) results have been very impressive.”

    Although Panama is coming out earlier than expected, Yahoo management predicted its first quarter revenue will fall below analysts’ expectations. Some analysts believe the conservative outlook is designed to give management wiggle room in case Panama’s improvements don’t boost revenue right away.

    Yahoo can’t afford for Panama to misfire after spending so much time touting the upgrade’s benefits. “This is make or break for Yahoo,” said Peter Hershberg, managing director of Reprise Media, which helps manage online advertising campaigns.

    Semel reiterated his confidence in Panama in Tuesday’s interview, predicting it will enable Yahoo to become one of the world’s two or three biggest advertising channels. “We had a much broader vision for Panama than people were seeing” last year, Semel said.

    Yahoo ended 2006 on the upswing, with fourth-quarter revenue of $1.7 billion, a 13 percent increase from $1.5 billion in the prior year.

    In a measure far more important to investors, Yahoo’s fourth-quarter revenue totaled $1.23 billion after subtracting advertising commission that the company paid to its partners. That figure represented a 15 percent increase from the prior year and a 10 percent improvement from 2006’s third quarter.

    Wall Street gives more weight to the sequential growth rate — an area where Yahoo has been falling further behind its biggest rival, online search leader Google Inc.

    The decelerating growth in Yahoo’s sequential revenue helps explain why the company’s stock price plunged by 35 percent last year as Google’s shares continued to climb.

    Analysts believe Google will show sequential revenue growth of 17 percent when it releases its fourth-quarter results next week.

    Investors already had been betting Panama will help Yahoo narrow the financial gap in 2007, contributing to an 8 percent increase in the company’s stock price during the first three weeks of the new year.

    Yahoo doesn’t expect its sequential revenue to increase in the first quarter, with management predicting revenue minus ad commissions to range between $1.12 billion and $1.23 billion. The average analysts’ estimate had been $1.26 billion, according to Thomson Financial.

    In its initial full-year forecast, Yahoo said its 2007 revenue minus ad commissions will range from $4.95 billion to $5.45 billion, below the average analysts’ estimate of $5.47 billion.

    Besides falling further behind Google in the lucrative field of online search, Yahoo also has had trouble capitalizing on the Web’s social networking craze, despite its massive audience of 423 million registered users through December.

    The problems facing Yahoo prompted the company to shake up its management team last month, with Chief Financial Officer Susan Decker being promoted to oversee the ad operations and Chief Operating Officer Dan Rosensweig deciding to leave the company in March.

    Coupled with the Panama upgrade, the changes seemed to have rejuvenated Yahoo, said Bill Wise, chief executive officer of Did-It Search Marketing, an Internet ad agency.

    “Any time you shake up the executive team, it scares people and gives them something to prove,” Wise said. “It’s almost like they got a breath of fresh air and are trying to get their act together in the next six months.”

  • Avatar optionpundit says:

    So far in the pre-open, Yahoo is up by $1.40.

  • Avatar optionpundit says:

    I have not yet found a good exit point and it has not triggered any of my exit plans as well. I am almost flat, neither loss nor profit so far.

  • Avatar optionpundit says:

    I had opened a backspread in 2:1 ratio. Yahoo is facing tough time to cross $29 marck that is acting as a strong resistance.

    I sold my bear call leg of the backratio and I am now  left with 1 straight call/per spread. There are still 22 more days to expiration.

  • […] YHOO stock didn’t move much. It faced tough resistance at $29 which was in between the “loss” range. As I posted here, my break even points were $25.36 and $29.59. Yahoo didn’t touch any of those. Since we are playing options, and I was long delta, long gamma but short theta, the conditions were not favorable for going long unless I wanted to adjust the position into a Bear call spread but the premium was very low. Separately, it had hit my exit rule for the trade, so “take the hit and look for other opportunities”. […]

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