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Investors Buying Yahoo Put Options Amid Low EPS And Asset Sale Plans -

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Jun, 14th 15:17

In April, Yahoo Inc. had posted its adjusted Q1 earnings per share of $0.08, compared with earnings of $0.15 in Q1 2015. Yet, this figure topped analysts’ expectation of $0.07. Gross revenue for the quarter also fell to $1.09 billion on a yearly basis, against the comparable year-ago number of $1.23 billion. The company’s second-quarter earnings report is scheduled to be published on July 19th, 2016. Wall Street predicts that the company’s Q2 earnings per share will come in at $0.10. Analyst forecasts for the Q2 EPS ranges between $0.05 and $0.16, while the consensus range for revenues is $1.05 billion-$1.1 billion, with an average of $1.08 billion.

Yahoo Inc is reportedly looking at several bids for its core internet assets. U.S telecommunications rivals Verizon Communications Inc and AT&T Inc have made it to the third and final round of bidders for Yahoo! Inc.’s core assets. Verizon Communications Inc offered $3.5 billion for Yahoo!’s core assets only, excluding Yahoo!’s patent intellectual property and real estate. Meanwhile, AT&T Inc reportedly bid about $5 billion for Yahoo!’s core business, patents and real estate.

However, no matter which telecommunication firm wins the bid, Yahoo Inc is expected to gain significantly from the sale. A telecommunication company could provide Yahoo Mail with broader distribution over mobile devices. This would pose a big threat to Gmail and Apple Mail, which lead the downloads and installations on Android and Apple devices. Additionally, Yahoo’s media unit could get a similar boost.

Moreover, recently, the company announced a three-year partnership with one of the largest application software providers, Oracle, with a view to improving its search business. Yahoo Inc’s attempt to ramp up its search engine market and search business should have a positive impact on second-quarter earnings report.

In a note published Wednesday, SunTrust analyst Robert Peck said that the valuation of three Yahoo-owned assets – Yahoo Japan royalties, patents, and real estate property – are not well understood by investors and could have “material upside” to the future bids for the company.

Yahoo’s currently seeking offers for parts of its business, including its core internet properties and ownership stake in Yahoo Japan. Peck last week ascribed a $6 billion to $8 billion price tag to it.


Fig. YAHOO H4 Technical Chart

On the chart H4, the stock is moving sideways and has been stuck between 38.11 and 35.51, around the 23.6% Fibonacci retracement. RSI (14) has slipped to 43.5665, signaling that a downtrend may be around the corner. The parabolic SAR band is still moving above the price, indicating that the stock is in a bearish market. A bounce-back may occur if the level 23.6% of Fibonacci retracement is tested.

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Buy Digital Put Option from 35.51 to 36.96 valid until 20:00 hours June 17th, 2016

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