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Making a Bullish Case for Yelp Inc (YELP)

Yelp Inc (NYSE:YELP) has been running up the charts, but there are still plenty of skeptics to be found

Sep 16, 2016 at 11:45 AM
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Yelp Inc (NYSE:YELP) has been flying up the charts since bottoming at a three-year low of $14.53 in mid-February, up 161% at $37.98. More recently, YELP stock pulled back to its 30-day moving average after notching an annual high of $39.96 earlier this month, and bounced. This shouldn't be too surprising, though, considering this rising trendline has served as a staunch level of support for YELP since mid-April. And while sentiment both in and out of the options pits is skewed toward the skeptical side, this outperforming stock could benefit as some of the weaker bearish hands start jumping ship.

Put buyers, for instance, have been blasting YELP stock in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), for instance, the equity's 10-day put/call volume has jumped to 3.85 from 0.57 since the start of the month. Plus, this current ratio outstrips all other comparable readings taken in the past 12 months, meaning puts have been bought to open over calls at an annual-high clip.

Likewise, YELP's Schaeffer's put/call open interest ratio (SOIR) of 0.93 is docked in the 100th percentile of its annual range. In other words, speculators are more put-skewed now toward options expiring in three months or less than they've been at any other point over the past year. This hefty accumulation of put open interest could help support YELP stock in the near term, as the hedges related to these bets are unwound.

Elsewhere on Wall Street, short sellers have been quick to call it a day amid YELP's uptrend, and in the most recent reporting period, short interest plunged 26.4%. However these bearish bets still account for a healthy 7.3% of the equity's available float, meaning there's still some sideline cash available to help fuel YELP's fire.

Plus, the soaring stock seems ripe for some more bullish brokerage attention. Of the 26 analysts covering the shares, 15 maintain a "hold" or "strong sell" suggestion. Plus, the average 12-month price target of $37.93 stands at a slight discount to current trading levels. Should YELP take a bigger bounce from its historically supportive 30-day moving average, additional upgrades and/or price-target hikes could translate into a fresh burst of buying power for Yelp Inc (NYSE:YELP).

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