Yelp, Inc. (YELP) connects people with local businesses by bringing word of mouth online and providing a platform for business and consumers to engage and transact providing local review sites. The stock is currently trading around $33.45 at the lower end of its 52 week range of $32.36-$86.88. The stock has been under performing the market this year falling 38.79% year to date. YELP is scheduled to report earnings after the closing bell today, and the stock is down $0.24 or 0.71% on the session ahead of the close.
Over the past 12 quarters YELP has rallied on earnings day 6 times with an average move of 13.66%. The stock appears bearish on a chart going into the release having traded below or in the Ichimoku Cloud since March on the daily bars. Over the past 12 quarters YELP has rallied on earnings day to expiration 6 times with an average move of 13.18%. Investors have seen a report from Pacific Crest about the company overcharging for ads, the returns of which have been lower than expected. With a bearish chart, mixed earnings history and no positive news it is hard to justify anything but a short position on YELP.
The options market is currently implying a move of around $4.95 or 14.7% in YELP by this Friday’s close giving us targets of $28.5 and $38.40.
Trade: Buy this week’s 30.5-28.5 Vertical put spread for $0.52
Risk: $52 per lot
Reward: $148 per lot
Break Even: $29.98