How should you trade Yahoo! and Verizon in the wake of their earnings reports?
Internet laggard Yahoo! reports earnings Tuesday after the bell.
Carol Bartz is now midway through her four-year contract as Yahoo's CEO and she still hasn't been able to erase investor doubt that she is the right person for the job.
Perhaps that's because Yahoo's revenue for the quarter is expected to be below where it stood for the same period two years ago. That marked the last quarter before Bartz arrived to engineer a turnaround.
The Great Recession caused Yahoo's revenue to fall early in Bartz's tenure, but the company didn't recover much as the economy gradually improved last year. That's primarily because advertisers are spending more money at other Internet services, especially those run by Google and Facebook, instead of Yahoo.
In last year's fourth quarter alone, Google's ad revenue rose by 26 percent to $8.2 billion — more money than Yahoo brought in for all of 2010.
Even one of Yahoo's strengths, visual marketing campaigns known as display advertising, is weakening.
Yahoo's share of U.S. display advertising online fell to 16.2 percent from 16.5 percent in 2009, according to the research firm eMarketer Inc.
WHAT'S EXPECTED: Analysts polled by Thomson Reuters expect earnings of 23 cents per share on revenue of $1.19 billion, after subtracting Yahoo's ad commissions.
What’s the trade?
I think the downside is probably $15, says Guy Adami, but if you get long it’s only good for a pop up to $17.
Verizon reports ahead of the bell, Tuesday.
As you likely know, the company announced two weeks ago that it's going to start selling the iPhone of Feb. 10, ending years of speculation and AT&T Inc.'s exclusive hold on the device.
Fourth-quarter results will, of course, not reflect the addition of the iPhone, but executives will hold an analyst meeting in New York in conjunction with the release of the results, so investors could get an update on the company's expectations.
Analysts vary widely in their estimates of sales of Verizon iPhones this year, from 5 million to 13 million. They note that selling the popular device will likely reduce Verizon's earnings this year, because the company will be subsidizing each phone by about $400 and it takes time to make the money back through monthly service fees.
WHAT'S EXPECTED: Consensus on the Street is for Verizon to earn 55 cents per share, on revenue of $26.47 billion.
What’s the trade?