This week Yahoo came out firing with some new initiatives and challenges for the company’s future. In addition, they announced some major management changes which look to shore up some of the apparent holes in their business plan. New CEO Marissa Mayer has taken charge and appears to be pushing all the right buttons.
BUY RATING
On Thursday Goldman Sachs initiated coverage with a buy rating, nothing I have seen happen for many months if not years. The story of course is well known and repeated constantly. The worry is whether the big search company will be rendered irrelevant with the power of Google, Baidu and others crimping their space. Google has been the leader for years and all Yahoo has done is been a revolving door for executives. Perhaps this is where that ends.
CHART CLUES
I always look to the chart and the options market to get a good view on where price may be headed. Most recently some big call activity has been seen on the October 16 strikes, and it’s not only a one day affair. Thursday saw several Nov bullish spreads traded as the stock lifted past 16 and closed above there for the first time in about two months. Now, big options plays are nothing new to Yahoo, always the subject of takeover speculation, only to fizzle out in disappointment. This time however it seems a bit different.
JUST GETTING STARTED
Just above is some very heady resistance but clearing 17 puts Yahoo on the road to much higher prices. Take a look at the chart below. This stock presents a nice opportunity for upside as it catches up to Google and others.
Position: Long YHOO Oct 16 calls
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