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Today’s Trading Edge: Yelp shares plummet after guidance disappoints

Posted by WorldWideMarkets . on Feb 9, 2017 8:36:25 PM

WWM YELP FEB 9 2017.jpg 

Yelp Inc, (YELP) shares tumbled over -9% in after-hours trade to yesterday to $37.51 after reporting fourth quarter earnings.  Adjusted earnings per share came in at $0.27, 23 cents better than analyst’s survey of $0.04.   Sales came in at $195 million, a slight beat with the analysts’ expectation of $194 million.  Traders particularly focused on the first quarter guidance, which targeted revenue between $195-199 million, much lower than the analyst estimate of $204 million. 

CEO Stoppelman noted, “We had an outstanding year, growing local revenue by 39%. I am extremely proud of how Yelp has become deeply integrated into consumers’ daily habits and increasingly essential to local business owners. In 2017, we look forward to increasing engagement on the app, expanding transactions and broadening our sales strategy.”

Price action on the YELP 240-minute chart shows that the initial drop started last week, after price formed a bearish ABCD pattern.  Point D was confirmed with the 141.4% Fibonacci expansion level of the B to C leg.  If bearish momentum continues, key support may come from the 200-day SMA level, which settled at $34.37.  If the reversal ends, key resistance may come from the psychological $40.00 level.

The Trade: Buy YELP at $34.50, with a stop loss at $33.50 and a take profit at $37.50.  The Risk/Reward Ratio is 1:3

Topics: Equities Market, Stocks, US equities


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