Analyst Takes on Yahoo! Inc. (YHOO): Yahoo Japan News Thumbs Up; Fundamentals Remain A Concern


Yahoo! Inc. (NASDAQ:YHOO) seems to have attracted the attention of different analysts’ following  comments on Yahoo Japan. The company indicated that it was ready to separate Yahoo Japan so that it could focus on its core business. Activist investor, Starboard Value, has also been pushing it in the last nine-month period. It was quite natural that analysts’ started to feel upbeat on the potential unlocking of its value, given the developments. Here are a few different opinions.

Most remain more cautious on Yahoo’s core business and more optimistic about unlocking value in assets.

Pivot Research

The investment advisor said that the guidance provided by Yahoo! Inc. (NASDAQ:YHOO) was in line with expectations though it was weak on an underlying basis. The brokerage was not encouraged by the outlook provided for the second quarter since it was not stronger.

However, Pivot Research said that the prospect of Yahoo Japan being separated from the core business would drive its stock. Therefore, the brokerage lifted its price objective on Yahoo to $49 from $48. However, it reiterated its rating of Hold on the company’s stock.

FBR Capital

The brokerage said that the first quarter results of Yahoo! Inc. (NASDAQ:YHOO) presented some metrics on the improved side though it was light. This excluded profitability, as well as, revenue, excluding traffic acquisition costs.

FBR Capital said that its social site MaVeNS has shown some notable progress though it was a small one. However, the stock was gaining with the support of Asian assets. The brokerage said that the separation of Yahoo Japan would be valued around $3.50 a share. However, the investment advisor reduced the price objective to $50 from $58 to reflect the weakening price of Alibaba Group Holding Ltd (NYSE:BABA).

Axiom Capital

The brokerage blamed higher than estimated TAC, as well as, cash OPEX for missing its estimates and consensus. It cited continued fall in core PC business and that it posed a big challenge for its management. As a result, valuation of Yahoo! Inc. (NASDAQ:YHOO) was limited.

Axiom Capital said that the company was witnessing strong growth continuously in the mobile, video, social and native space. The brokerage cited reasons as to why an investor should hold the shares of Yahoo! Inc. (NASDAQ:YHOO). This included potential separation of Yahoo Japan, steps to enhance the core units, tax-free spin-off of shares of Alibaba and a possible alliance with Google Inc (NASDAQ:GOOGL).

Oppenheimer

The brokerage believes that Yahoo! Inc. (NASDAQ:YHOO) provided a weak outlook for the second quarter. As a result, Oppenheimer has slashed its price objective to $58 from $59 on Yahoo shares.

The investment adviser said that its search investments were centered on Mobile and contextual searches. It noted that it would continue to depend on Microsoft Corporation (NASDAQ:MSFT) for deep reference searches.

Needham And RBC Capital

Needham Research said that the shareholders would hold the core business for free if the management intensions to free Yahoo Japan as tax-free come true following the stake of Alibaba shares. The brokerage said that it provided 14 – 22% upside potential. It retained the rating of Buy and price target of $55 on Yahoo! Inc. (NASDAQ:YHOO) shares.

Similarly, RBC Capital Markets has maintained the rating of Sector Perform and a price objective of $52 Yahoo shares.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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