Yahoo!'s Asian Assets Draws $44 Price Target From RBC Capital Markets
On December 9, Mark Mahaney, analyst at RBC Capital Markets issued a bullish analyst report on Yahoo! Inc (NASDAQ: YHOO) with an emphasis on the company's assets in China, specifically Alibaba Group.
Alibaba is a Chinese based e-commerce cite that generates more sales than eBay (NASDAQ: EBAY) and Amazon.com (NASDAQ: AMZN) combined. Yahoo! owns between 23 percent to 24 percent of Alibaba which Bloomberg recently projected could be valued at $200 billion by 2014 should the company proceed with a much anticipated IPO.
Alibaba recently disclosed that it has generated sales of $5.7 billion in total merchandise volume on November 11, aka Singles Day in China. The $5.7 billion figure represents an increase of 83 percent from the previous year. Put in to a proper context, Alibaba's one day sales was twice as much as the entire volume of U.S. online sales on Cyber Monday.
“With a new management team and a renewed focus on products, we think Yahoo! has the potential to become a class ‘Net turnaround story,” Mahaney wrote in his report. “The company has shown an increased pace of product improvement and innovation with a focus on consumer experience,” he added.
In addition to the company's strong Asian assets and management, the company has become increasingly shareholder friendly with its use of cash. Yahoo! continues to return cash to shareholders through share repurchases while keeping true to its strategy of investing in the business and executing acquisitions.
The $44 valuation is based on the analysts sum-of-the-parts analysis that values core Yahoo! at 6 times EV/EBITDA, in line with historical averages.
Allibaba Group accounts for $22.46 a share, the company's most valuable asset. Yahoo! Core accounts for $10.50 a share, Yahoo! Japan accounts for $6.08 a share while cash and equivalents represents $4.53 a share.
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