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  • Yahoo Jumps Higher; It's All About Alibaba 0 comments
    Jul 2, 2014 10:21 AM | about stocks: YHOO, AMZN, EBAY, BIDU, QIHU

    Shares of Yahoo Inc. (NASDAQ:YHOO) climbed nearly 3%, touching a high of $35.26, before closing a notch lower at $35.13, following an upgrade from neutral to overweight by the investment and asset management firm Piper Jaffray. In addition, Piper Jaffray analyst Gene Munster increased the price target on the stock to $43.00.

    Many analyst believe that Yahoo's equity stake in Chinese e-commerce giant, Alibaba Group Holding is underestimated at the current price. Munster believes that as the time for Alibaba's initial public offering comes closer, it will send Yahoo!'s shares 20% percent higher than the current levels.

    Gene Munster compared Alibaba to other e-commerce companies such as (NASDAQ:AMZN), eBay (NASDAQ:EBAY), and China-based Internet businesses such as Baidu (NASDAQ:BIDU) and Qihoo 360 (NYSE:QIHU) and estimated that Alibaba is worth $221 billion including cash.

    In May, the Chinese e-commerce giant filed for an IPO with the U.S. Securities and Exchange Commission, which is expected to be the next major Internet IPO in the U.S. market. Alibaba's IPO filing showed that Yahoo holds a 22.6% stake in Alibaba and that it is expected to offload 40% of its holdings in the upcoming IPO.

    (click to enlarge)

    YHOO is approaching resistance near the 200-day moving average at 36.01. A break of this level would push the stock to test the April, May and June highs at 37. A breach of this level would lead to a test of $40.

    Momentum on the stock is price is gaining traction as the MACD (moving average convergence divergence) index generated a buy signal. This occurs when the spread (the 12-day moving average minus the 26-day moving average) crosses above the 9-day moving average of the spread. The index moved from negative to positive territory confirming the buy signal. The relative strength index (RSI) moved higher with price action reflecting accelerating positive momentum while printing near 54, which is in the middle of the neutral range.

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