2/23/2015
Yahoo! Inc (NASDAQ:YHOO)
How can I be negative on something that seems so cheap? A website the performs a range of great services and is an amazing portal, but also has a history of abysmally failing to monetize it's huge assets and eyeballs.
Price at write-up $43.53
Target 33 to 41
Valuation Ratios
Price/Earnings (TTM) . . . . .5.76
Price/Sales (TTM) . . . . . . . 9.05
Earnings per share . . . . . . .7.65
Price/Book (MRQ) . . . . . . .1.11
Price/Cash Flow (TTM) . . .5.9
Held by institutions . . . . . . .63.2
Short interest . . . . . . . . . . . . 3.2
Dividend . . . . . . . . . . . . . . . NA
MarketCap 41.2B
Other than one-time items, i.e sale of Alibaba, sales are trending down. Recent decline could foreshadow the possibility of an upturn or the call of the void. Personally I expect it to reach about $35 before it potentially rebounds. But from there, who knows? Yahoo stands merely as a web portal with lots of places to go and things to do that make no money for Yahoo. In effect, Yahoo is an interesting way to make other companies money, such as Microsoft via Bing which has provided search for Yahoo since 2009. To me the whole page just seems disingenuous, as if it's designed to waste your time - I'm sure that appeals to some but they don't seem to be paying much for the service. Yahoo Finance might be one of the best place to get non-subscription financial information and the portal itself is one of the most visited on the web.
David Einhorn might be able to influence the board to change its ways to more profitable positions, perhaps a bit easier after the "resignation" of Jerry Yang as CEO. Marissa Mayer does seem hell bent on turning Yahoo around and as we all know, you can polish a turd. And what a Turd, what sort of contagion does Yahoo! have that it's share price is falling with a PE less than 6, a book value that was recently negative (when share price was near $38). The upside potential is amazing, but it could be that the people entrenched at Yahoo! can make great social, mobile, and news applications that cannot be monetized. And what chance does Yahoo! have in search? After the sale of Alibaba what will be left but an expensive to run web portal? Well it'll be worth $32 less per share at least.
The CEO brought in to right the ship has been selling off all her options, which I don't really object to seeing as she's retained 98.5% of her holdings which as of October were 2.3M shares or 0.24% of the company. But insiders own relatively little of the company, and what they do own they seem to immediately sell off once it's obtained.
Is the underlying company worth $9 a share? Probably. In that case you can pay $41 a share, you might be able to catch 38.50. Is it worth $5 a share? Absolutely. 32+5=$37, and that'd be my price but only because I both see a large possible future with no road to that future.
And even if the equity is spun off into SpinCo, what the hell is that company going to do? No idea, so for me there's too much uncertainty here. But you'd probably do ok anywhere in the 33 to 41 target range, but not clearly enough for me.
Due Diligence and order of popularity as a web portal (via Comscore's "Digital media properties: December 2014"):
Goog, Yhoo, FB, AOL, AMZN, MSFT, Mode Media Corporation (privately held), CBS, CMCA (Comcast), APPL.
Yahoo! Inc (NASDAQ:YHOO)
How can I be negative on something that seems so cheap? A website the performs a range of great services and is an amazing portal, but also has a history of abysmally failing to monetize it's huge assets and eyeballs.
Price at write-up $43.53
Target 33 to 41
Valuation Ratios
Price/Earnings (TTM) . . . . .5.76
Price/Sales (TTM) . . . . . . . 9.05
Earnings per share . . . . . . .7.65
Price/Book (MRQ) . . . . . . .1.11
Price/Cash Flow (TTM) . . .5.9
Held by institutions . . . . . . .63.2
Short interest . . . . . . . . . . . . 3.2
Dividend . . . . . . . . . . . . . . . NA
MarketCap 41.2B
Other than one-time items, i.e sale of Alibaba, sales are trending down. Recent decline could foreshadow the possibility of an upturn or the call of the void. Personally I expect it to reach about $35 before it potentially rebounds. But from there, who knows? Yahoo stands merely as a web portal with lots of places to go and things to do that make no money for Yahoo. In effect, Yahoo is an interesting way to make other companies money, such as Microsoft via Bing which has provided search for Yahoo since 2009. To me the whole page just seems disingenuous, as if it's designed to waste your time - I'm sure that appeals to some but they don't seem to be paying much for the service. Yahoo Finance might be one of the best place to get non-subscription financial information and the portal itself is one of the most visited on the web.
David Einhorn might be able to influence the board to change its ways to more profitable positions, perhaps a bit easier after the "resignation" of Jerry Yang as CEO. Marissa Mayer does seem hell bent on turning Yahoo around and as we all know, you can polish a turd. And what a Turd, what sort of contagion does Yahoo! have that it's share price is falling with a PE less than 6, a book value that was recently negative (when share price was near $38). The upside potential is amazing, but it could be that the people entrenched at Yahoo! can make great social, mobile, and news applications that cannot be monetized. And what chance does Yahoo! have in search? After the sale of Alibaba what will be left but an expensive to run web portal? Well it'll be worth $32 less per share at least.
The CEO brought in to right the ship has been selling off all her options, which I don't really object to seeing as she's retained 98.5% of her holdings which as of October were 2.3M shares or 0.24% of the company. But insiders own relatively little of the company, and what they do own they seem to immediately sell off once it's obtained.
Is the underlying company worth $9 a share? Probably. In that case you can pay $41 a share, you might be able to catch 38.50. Is it worth $5 a share? Absolutely. 32+5=$37, and that'd be my price but only because I both see a large possible future with no road to that future.
And even if the equity is spun off into SpinCo, what the hell is that company going to do? No idea, so for me there's too much uncertainty here. But you'd probably do ok anywhere in the 33 to 41 target range, but not clearly enough for me.
Due Diligence and order of popularity as a web portal (via Comscore's "Digital media properties: December 2014"):
Goog, Yhoo, FB, AOL, AMZN, MSFT, Mode Media Corporation (privately held), CBS, CMCA (Comcast), APPL.