Yahoo! shares enjoyed a small gain today on Alibaba’s “interest” in Yahoo . The stock has been on a steady decline, down nearly 20% year-to-date. Yahoo’s board is currently searching for a new CEO after firing Carol Bartz.
Youssef Squali, Managing Director & Senior Analyst at Jefferies & Company and Herman Leung, Senior Analyst with Susquehanna Financial Group brings us both sides of the equation in today’s Stock Brawl on Closing Bell at 3:20PM/ET.
Valuation
Squali has buy rating on the stock with price target of $18 per share. Squali believes Yahoo is a “diminishing asset.” However, Squali estimates that you can still get $18 - $20 per share using both DCF (discounted cash flow) and SOP (sum of the parts).
Leung on the other hand rates the stock a “neutral” with 12-month target price of $15 per share. Leung said “fundamentals of Yahoo's core business still remain challenged, while its Asian assets are getting a lot of outside interest.”
Yahoo For Sale?
There are several strategic options on the table for Yahoo Squali pointed out “an outright sale to a large media company like News Corp., or a more convoluted structure that would involve private equity, Microsoft , AOL and may be even Alibaba Group.” A Yahoo – Alibaba combo has been talked about forever. Squali’s in the camp that if Yahoo ends up doing any deals, it will be a partial sale or total sale with Alibaba in the mix. Bottomline, Squali believes “that it is more likely that the board reaches an agreement to sell the company or parts of the company before a new CEO is found.”
It’s widely known that Alibaba has been interested Yahoo, but the issue Leung points out is that the deal will be “complicated.” “Raising capital required by Alibaba Group might be challenging given the markets,” said Leung. Bottom line, Leung believes while LBO is complex and less likely he says, "we see corporations making a run at Yahoo more likely (Alibaba Group, Microsoft, traditional media).”
So we’ll have to wait and see if Alibaba makes a run for Yahoo!
Disclosures:
Squali’s firm owns Yahoo! shares.
Leung firm owns Yahoo! shares.
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