Category Archives: oud

Yelp Stock Jumps As Q1 Earnings, Revenue Beat On Local Ads

Yelp ( YELP ) Q1 earnings fell from the year-earlier period but beat expectations, while the Internet firm also raised current-quarter and full-year revenue guidance ahead of analyst views, sending shares up. San Francisco-based Yelp late Thursday said it earned 8 cents per share minus items in the March quarter, down from 10 cents in Q1 2015. But analysts had modeled a 16-cent per-share loss ex items. Revenue rose 34% to $158.6 million, ahead of analyst consensus of $156 million. Yelp stock, which in February hit a nearly four-year low of 14.53, was up 11% in premarket trading Friday, near 24. Yelp stock had been down 26% in 2016 as of Thursday’s close and down 56% from 12 months earlier. Yelp has a weak IBD Composite Rating of 24 out of a possible 99. Yelp connects consumers with a directory of local businesses, such as restaurants, boutiques, and household services, and users can post feedback on the services. “Yelp reported a solid quarter driven by local (ads) where revenue growth accelerated on better-than-expected ad budget fulfillment and above-average salesperson productivity,” said Brian Fitzgerald, an analyst at Jefferies, in a research note. Q2 revenue guidance of $167 million to $171 million edged Wall Street estimates of $168 million at the midpoint, which would be up 26% from Q2 2016. And the midpoint for Q2 EBITDA (earnings before interest, taxes, depreciation and amortization) guidance of $21 million to $25 million also beat the Street’s estimate of $21 million. For 2016, Yelp hiked its revenue guidance to $690 million to $702 million from $685 million-$700 million against the Street’s $691 million expectation. Yelp had sales of $550 million in 2015. “Although Yelp’s Q1 results demonstrated an impressive pivot from brand ads to direct-sold national campaigns, the company will likely need to show a few more quarters of local advertising strength to fully win back the confidence of the Street,” John Egbert, an analyst at Stifel, said in a report. “We are encouraged by the first-quarter results, as it appears Yelp has largely completed the migration of its core business from a CPM (cost per impression) product to a performance-based cost-per-click (CPC) without a material impact on its financial results,” Ralph Schackart, an analyst at William Blair, wrote in a research report.

Declining Housing Starts Equals Big Profits

Since peaking at 2,111 on April 20, 2016, the S&P 500 has rolled over. The broad market index now sits at 2,050 – nearly 3% lower in just a couple of weeks. The S&P 500 chart below has a distinctly negative look to it. Click to enlarge As the S&P 500 peaked, the moving average convergence divergence (MACD) momentum indicator showed significant negative divergence. This is a strong warning sign that the current rally is exhibiting exhaustion and could be vulnerable to a reversal. The S&P is well-below its 9-day exponential moving average (EMA) of 2,068, which means the market could test its 50-day moving average at 2,035. But given recent negative readings on a host of economic reports here and around the globe, there’s a real possibility that a much deeper move is in the cards. And should the market pass through the 2,035 level, there is no real support until roughly 1,980. That’s another 3.4% from current levels. For this reason, traders should use any strength in the market to unload long positions, while also adding short positions. One possible short position is the S&P Homebuilders Fund (NYSE: XHB ) You see, the homebuilding sector is vulnerable here to a sharp pullback. Below is a chart of XHB… Click to enlarge This chart looks eerily similar to the S&P 500 chart. It shows that XHB has also fallen below its 9-day EMA, while also sitting at its 50-day moving average. This means the $34 level effectively becomes XHB’s new level of resistance. This provides an excellent opportunity to short XHB. With the close proximity to the new resistance level at $34, we can quickly exit the position if resistance with a small loss if resistance breaks. On the other hand, if the nine-day resistance holds, XHB should fall to one of the lower support lines at about $31.20 or as low as $30.20. Now, we hold that the $30.20 price target best aligns with our expectation of a moderate pullback (~3.4%) in the S&P 500. This make $30.20 a reasonable target over the next few weeks. XHB closed at $33.29 today. Now, by taking a short position at this level, we’re risking $0.54 per share if the stock moves higher. Conversely, we stand to pocket $3.00 per share if we’re right and XHB moves lower. That gives us a good risk/reward setup. But we can mitigate our risk even further by purchasing put options on XHB instead of shorting the stock. Here’s how… Let’s assume you’d typically short 500 shares of a recommended stock. At today’s price of $33.29, you’d pony up about $16,650 to short the shares. Now, most investors are willing to absorb a 10% drawdown on shorted stocks should the stock run the wrong direction. This would limit your loss to $1,665 before you exited the position. But, because $1,665 is the most you’re willing to risk, you could instead use the $1,650 to buy the puts. But let’s reduce our risk even further by cutting our maximum loss in half… The XHB June $34 puts closed Thursday at $1.15. With $825, you can purchase seven put options on XHB. Since each option contract covers 100 shares, that gives you control of 700 shares of XHB – versus the 500 shares you would have shorted with the $16,665. You’ve reduced the risk on this trade, while also increasing the potential reward by controlling more shares. This is the right way to speculate with puts. Of course, if we’re wrong on this trade, you could lose 100% of the money you used to buy the puts. But it’s far better to lose 100% of $825 than to lose 10% of $16,665. And if we’re right on this trade, you can make more money by owning seven puts than by shorting 500 shares. So, by purchasing puts instead of shorting the shares, we reduce our risk and increase our potential reward. It makes for a more intelligent trade for managing risk/reward. Here’s the trade in a nutshell… Buy the XHB June $34 put options (XHB160610P0003400) up to $1.25. This option closed yesterday at $1.15 when XHB closed around $33.29 per share. You should be able to get into this trade as long as XHB is trading above $33.30 per share by the time you enter your order. If the stock falls and the option moves out of range, or if the option spikes higher as a result of this recommendation, give the trade a day or two to come back into range. Going forward, if XHB falls to our downside target at $30.20 per share, the June $34 puts will be worth at least $3. That’s a 161% gain on the trade. Once the options have double in price, sell half the position. This will eliminate any chance of a losing trade. Then focus on maximizing profits if XHB moves lower. One caveat…. It’s important to remember this is a speculative trade. We’re buying short-term options in anticipation of a stock market pullback. There’s no guarantee the market will fall or that XHB will decline even if the broader market falls. You can lose everything you put into this trade. So, please, limit your risk to less than half of what you would normally be willing to lose on the stock. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Obama Fostering Uncertainty Over Smartphone Encryption Issue

The contentious issue over whether the U.S. government should be able to force tech companies to weaken security on their smartphones and software apps so that law enforcement agencies can access private data isn’t likely to be resolved soon. But it could be. All it would take is for President Barack Obama to make a statement supporting strong encryption on tech devices and Internet services. Obama holds himself up as a tech-savvy president, but his lack of leadership on the encryption issue has prolonged the dispute between the federal government and tech firms, tech groups and privacy advocates say. “The White House should be leading on this issue,” said Cindy Cohn, executive director of the Electronic Frontier Foundation (EFF). “President Obama is trying to be the best tech president ever. He’s got really good technical consultants, and the idea that he wouldn’t listen to them is shocking.” The tech industry is united in its call to keep encryption strong, saying that weakening software security or creating back doors for authorities to bypass privacy protections opens the door for hackers and criminals. “The math doesn’t change,” Cohn said. “The math is the problem that the FBI has, which is: They cannot build a back door that only they can use. It doesn’t matter which technical expert you bring to bear on it. … This isn’t controversial in the tech community.” The FBI has sought court orders in two criminal cases to try to compel Apple ( AAPL ) to unlock password-protected iPhones. In both cases, the FBI ultimately backed down when it found other ways to access data on the devices. One involved paying a third party to hack the phone, and the other was resolved when the phone’s owner provided the password. Encryption Petition Quickly Surpasses 100,000 Signatures Last September, EFF, Access Now, and a coalition of nonprofit and industry groups launched a public petition calling on President Obama to defend strong encryption and oppose back doors. They used the We The People API, Obama’s preferred petition tool, and quickly surpassed 100,000 signatures. Despite the White House’s pledge to respond to petitions with 100,000 signatures within 60 days, it has remained quiet and is now four months overdue in its response. But if Obama doesn’t support strong encryption for businesses and consumers, perhaps the next president will. On Wednesday, 13 U.S. tech industry groups representing companies such as Apple, Amazon.com ( AMZN ), Facebook ( FB ) and Uber Technologies urged the two presumptive major party presidential nominees to support strong commercial encryption. The encryption stance is among a list of tech industry requests made in an open letter to Democrat Hillary Clinton and Republican Donald Trump. The trade groups asked the candidates to strengthen cybersecurity and encourage other governments to do the same. The letter urged the candidates to recognize the importance of encryption as a critical security tool and to advance policies that enhance data privacy. Groups signing the letter included the Consumer Technology Association, the Business Software Alliance, the Internet Association and the Semiconductor Industry Association. The encryption issue made headlines earlier this year when the FBI secured a federal court order to force Apple to unlock a smartphone belonging to deceased San Bernardino, Calif., shooter Syed Farook. Apple fought the order, saying it would set a dangerous precedent. To help educate the public, Apple CEO Tim Cook stepped up to become the face of consumer data security. He gave high-profile media interviews and made public statements about the importance of strong encryption. Apple’s fight to protect its encryption is about securing the data on all iPhones in use from bad guys, Cook said. That means securing customers’ data, including financial and health information, confidential business documents, private communications and photos. The FBI might have retreated in the cases of the San Bernardino terrorist and a Brooklyn drug dealer, but it is likely to pursue similar cases against tech companies in the future. Unless the White House tells it not to. Meanwhile, law enforcement supporters on Capitol Hill are crafting legislation that could force tech companies to comply with all law enforcement demands for customer data. Sens. Richard Burr, R-N.C., and Dianne Feinstein, D-Calif., have proposed the “Compliance With Court Orders Act of 2016.” As drafted, the legislation would require any individual or company to comply with any U.S. court order and hand over data to authorities, including data that is encrypted. The bill has been roundly criticized by civil liberties and digital privacy groups. No Encryption Bill Expected Until After Elections “I don’t think anything will happen in this session of Congress,” said Gary Shapiro, president of the the Consumer Technology Association. Political gridlock, especially during an election year, will ensure that no encryption bill is passed in Congress, he said. It is more likely that a court case will work its way up to the Supreme Court over the next couple of years, he said. Even if the FBI gets what it wants from the courts or Congress, the law would only be enforceable in the U.S. Foreign companies and their encrypted products would be unaffected, putting U.S. tech firms at a competitive disadvantage, Shapiro said. Public support for encryption is growing, especially in light of major data breaches at companies like Anthem ( ANTM ), eBay ( EBAY ), Home Depot ( HD ), JPMorgan Chase ( JPM ) and Target ( TGT ), as well as at government agencies, Cohn said. “We don’t live in a world where computer security is abstract and the damages and problems it causes for people are something that’s theoretical anymore,” Cohn said. “I think it strikes a lot of people as absurd that the government is engaging in trying to attack our security and undermine it and convince companies to give less of it when it should be their job to promote it.” Weakening security on mobile devices and software, says Shapiro, would destroy the confidence people have in businesses to keep their private data secure.