Yahoo is a major force in the web business, even though they don’t have the same pull that Google does. Google—part of Alphabet—is now a part of the largest company in the world, but that doesn’t mean that other web based businesses are all going to follow suit. However, what Yahoo is currently experiencing is very different from Google’s success. Yahoo just released their earnings report, and although they beat predictions on revenue, the company’s stock slid by 2 percent in afterhours trading on Tuesday, February 2nd. Further drops are expected.
For a company that analysts didn’t have high hopes for to crush earnings predictions should send a flurry of buyers to their brokers, but the exact opposite is currently happening. In fact, the company is down almost 40 percent from its 52 week high, and more losses are seemingly on their way. In order to combat this issue, Yahoo’s management is taking some drastic measures, including attempting to separate themselves from the giant of Chinese ecommerce, Alibaba.
China has faced a world of economic trouble over the last six months, seeing their stock market crash, and effectively disrupting trading all over the world as a result. Alibaba is the biggest retail website in the world, and as China’s economy drags them down, the stakes that Yahoo have made within the company have had a large negative impact on them, too.
Much more than separating themselves from Alibaba will be needed to get Yahoo back to where they once were. Other measures are already in place. For example, a recent report indicates that Yahoo will be laying off 15 percent of its workforce. Other reports say that Yahoo is trying to separate itself from its web platform, perhaps in a similar way to what has happened with Google and Alphabet. For Google, this move has proven to be a very positive one. The big difference, of course, is that Google has billions of more dollars to work with than Yahoo does. This gives them extra wiggle room to take risks with, and Yahoo currently doesn’t have either the capital or the consumer support to pull this off safely.
This sends clear signals to short term traders on how they should handle Yahoo. Trading down, either through selling the company short, using put binary options, or offloading current positions are all viable choices. The issue is how long Yahoo’s decline will last. They’ve been slumping for months now, but there are no signs of a reversal yet. There are signs that the company is aware of a huge problem and is being proactive about fixing it, but there are no indications that anything effective has yet been done to alleviate the drop in price. For now, it seems that well timed, short term trades—all pointing downward—are the best way to handle Yahoo. If you have a binary options broker that carries Yahoo, this move is low risk and low cost, especially if you are using real time technical analysis tools as you formulate each trade.
Fundamentally, Yahoo is struggling even though they had a good revenue report. First, revenue was still right in line with earnings per share estimates at $0.13 per diluted share. This was right at what was expected, and the revenue beat wasn’t big enough to sway this. Also, the company has a very high price to earnings number, up over 100. This in itself isn’t a bad thing, but it does point to a high degree of instability. Ideally, you should be looking for companies that go no higher than 25 or 30, if you want more predictable results. These things just add to Yahoo’s problems.