This Underdog Could Deliver Double-Digit Gains for Traders Who Buy Now

StreetAuthority Network

When you think about Internet search engines, I suspect that the first company that comes to mind is Google (GOOG). I know that's my first thought, as the Google website is even set as my personal homepage. Yet when it comes to recent traffic metrics, as well as share price performance over the past 12 months, Yahoo (YHOO) is beating up on its biggest rival.

On the traffic front, we got news from industry tracking group comScore showing that in terms of the number of unique monthly visitors in July, Yahoo actually bested Google for the first time since May 2011.

According to the comScore traffic data, Yahoo received 196.6 million monthly unique visitors. That number beat Google's 192.3 million in July. Moreover, Yahoo's number didn't include unique visitors from the recently acquired Tumblr blogging site, which had 38.4 million unique visitors in July.

The traffic data was a surprise to many social media watchers, including Ed Barton, director of digital media at technology consulting firm Strategy Analytics. Commenting in an interview with CNBC, Barton said the Yahoo numbers were "incredible" and a "pretty strong endorsement" for Yahoo CEO Marissa Mayer.

"No online media outlet would have come close to predicting this, and if they had, you would have said they were insane," remarked Barton. As for Yahoo's stock, he said, "This will probably have a positive impact on the share price and if Yahoo keeps this up, it has a chance of becoming relevant again."

Indeed, there's nothing irrelevant about the performance of Yahoo shares over the past year. In fact, we see it trouncing Google, with YHOO up about 77% during the past 52 weeks versus GOOG's 23% gain.

While some of this relative outperformance has to do with Google shares being somewhat tired after a stellar five-year run, there is no doubt that the optimism about Yahoo's turnaround under the leadership of Mayer has caused the smart money to bet on YHOO.

Mayer has made a lot of headlines with some of her high-profile changes, including the aforementioned Tumblr acquisition, the ban on Yahoo employees working remotely from home, and the company's policy of extended maternity leave benefits.

More importantly, however, is Mayer's bottom-line business acumen. She talked about that in a recent Vogue interview. Mayer stated that Yahoo has plans to prevail as the transition from traditional desktop PCs to mobile devices such as tablets and smartphones continues its inevitable march.

In the Vogue interview, Mayer said that mobile customers want, "Email, maps, weather, news, stock quotes, share photos, group communication, sports scores, games… it sounds like a list of what Yahoo does."

Now, from a technical perspective, YHOO shares saw a 3% bounce in early Thursday trade following the comScore news. The stock now sits comfortably above its 50-day moving average, while trading just below its 52-week high.

View photo

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YHOO Chart

I suspect that if Yahoo's traffic metrics continue to improve, and if it can show that it was able to monetize that traffic in the coming quarter when it reports earnings in October, then traders are looking at a potential big winner at current price levels.

Recommended Trade Setup:

-- Buy YHOO at the market price
-- Set stop-loss at $25.66, approximately 8% below the current price
-- Set initial price target at $32.08 for a potential 15% gain in two months

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