Tim Biggam, TradingBlock (December 2, 2011, 3:55pm CDT)
|Symbol||Analyst Target Price||Target Date|
|YHOO||22.00||June 1, 2012|
Yahoo! Inc. (ticker: YHOO) is a global internet media company offering communications, content, and a community platform that delivers consumer experiences and advertising solutions. The Company's site includes a hierarchical, subject-based directory of Web sites, which enables users to locate and access information.
Between Blackstone, Bain, Silver Lake, Alibaba, Softbank, Microsoft and others, there seems to be a pretty good likelihood for a suitor to emerge for Yahoo. While share prices have rallied lately due to the chatter, they are still trading well below the 22 level that may anticipate the bidding to begin.
Technically, YHOO did hold the 14.80 level and seems poised for an upside breakout above the recent highs at 16.70. Valuations remain reasonable, so I like the risk reward tradeoff of 2 points of downside to the 14.80 level versus 5 points of upside if a takeover play emerges. Remember, trading is all about probabilities, not certainties (unless, of course, your name is Raj Rajaratnam).
I think a deal may get done by June 2012, with a target (takeout) price of 22.
Play of the Day
Based on Yahoo! Inc's (ticker: YHOO) current market price of $16.05 and using a target price of $22.00, a target date of June 1, 2012 and $1,000 of investment capital, below are three options strategies (ranked by potential profit) and a comparative stock trade to consider should the price target be achieved at the target date.
Click on the strategy name below to access trade details using TradeBuilder on TradingBlock.com. Powered by TradingBlock's TradeBuilder.
|Strategy (click for details)||% Return at Target||Probability of breaking
even or better
|Buy July Call Spread||+145%||49%|
|Buy July Strangle||+118%||42%|
|Sell July Put Spread||+76%||60%|
* Click link to access TradeBuilder details on TradingBlock.com. Must have Instant or Actual account. Subject to change due to changing market conditions. Click here to view risks regarding selling stock short.
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