Citi Raised Yahoo's PT After Reevaluating Model

Citi Research analyst Mark May raised the price target on Yahoo! Inc. YHOO from $39.00 to $46.00 after reevaluating the model. May made four adjustments to the model. Citi "1) increased our CY14 opex to better reflect mgmt's 3Q13 commentary; 2) raised our target P/E multiple for Alibaba Group (AG) to 29x from 22x (and thus our AG target valuation, see Figure 7) to reflect comp gains; 3) we're no longer assuming a tax efficient treatment for a portion of the AG stake in order to be more conservative; and, 4) we're adjusting our core Y! valuation to reflect removal of the cash TIPLA payment (~$100mm/year) at AG IPO." The price target increase is a reflection on the increase in the AG valuation. The analyst added that shares of Yahoo are expected to out-perform after the IPO of Alibaba Group. Yahoo will have approximately 14% of AG, or approximately one-third of Yahoo's value. Yahoo will also have a large excess cash balance and share buybacks, core improvement, and revenue growth inflection. Yahoo closed at $39.73 on Monday.