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Yahoo! (YHOO) received an analyst upgrade from JMP Securities Monday. The thesis is that online advertising is improving, so now may be the time to get in on the possible capital appreciation of the business. The stock closed yesterday at $16.52 per share -- a gain of 2.8%. Volume was active.
The upgrade also comes with a price target of $21. Yahoo!, like many stocks, has bounced off its 52-week low quite strongly. Over the 12-month period, the company has risen by better than 20%. From one angle, I like the idea of this trade. Technically, the shares might be ready to move.
From a fundamental perspective, however, I don't like the concept of the trade. Relatively speaking, I believe there are other candidates in the space that should receive attention from investors. Yahoo! may be improving, but what about Microsoft (MSFT) or Google (GOOG)? Would you be more comfortable owning either of those two instead of the web portal?
It's debatable, certainly, but I know I would be more likely to look at, say, Microsoft. It's all a matter of which stock provides the maximum amount of confidence and safety (nothing is guaranteed, however).
What would make me want to add Yahoo! to my portfolio at this point? Going back to the technical argument, I'd say I would prefer to see a breakout beyond the 52-week high of $18.02. If the stock goes beyond that level, and the volume conviction is unambiguous, then Yahoo! would definitely turn into an attractive trade idea.
I feel no rush with Yahoo! and its shares. The one-year chart isn't wholly convincing in my eyes. I would want to see a higher quality of strength in this particular equity before sending in a buy order.
Disclosure: I don't own any company mentioned; positions can change without notice.
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