Downgrade Could Spark a Yelp Stock Slide

Yelp stock has virtually gone nowhere since August

Jun 13, 2018 at 10:33 AM
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Yelp Inc (NYSE:YELP) was just hit with another analyst downgrade, with Aegis Capital cutting its rating to "sell" from "hold." The firm also dropped its price target to $34 from $45, lowering its revenue and EBITDA estimates through 2019 in the process. On top of that, Aegis downplayed Yelp's Request-a-Quote feature, which it believes will fail to make a meaningful impact.

YELP stock is down 4% at $40.94 on the news, as it continues to chop sideways on the charts. More downside could be ahead, though, since today's move puts its below the $41 level. This price point is approximately a 61.8% Fibonacci retracement of the security's year-to-date low-to-high, which contained the last two pullbacks.

YELP stock today

It's certainly a good time to use options to speculate on YELP's short-term trajectory. Specifically, the security's Schaeffer's Volatility Index (SVI) of 30% is just 5 percentage points from a 12-month low, showing extremely low volatility expectations priced into near-term options.

Traders at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have been upping the bearish ante, too. Yelp's 10-day put/call volume ratio across these exchanges comes in at 1.51, and ranks in the 78th annual percentile. In short, there's been an unusual appetite for long puts. During this time, the July 41 put saw heavy buying activity, meaning many are speculating on an extended slide below the aforementioned $41 mark.


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