Investors Getting Yahoo's Core Assets 'For Free,' SunTrust Says
Shares of Yahoo (NASDAQ: YHOO) are trading up by 1.7 percent in Monday's premarket trading after SunTrust upgraded the stock from Neutral to Buy and announced a $40 price target.
Analyst Robert Peck sees the recent pullback from $40 as a “favorable risk/reward for investors.”
Investors are “essentially getting the core Yahoo! asset for free,” said Peck.
“Taking the taxed current market value for Yahoo! Japan (which is down ~18% in the last month) and assuming a $150b IPO for Alibaba with a $200b ultimate value for Yahoo!'s stub remaining position accounts for $29 per share for Yahoo,” then subtracting ~$4b of net cash, investors are paying -0.2x EBTIDA for Yahoo core, according to Peck.
The analyst believes Alibaba will be worth $300 billion “in a few years based on $10b of net income by 2017.”
Peck is “astonished by the sheer size, scale, and long term potential” of the Chinese internet market after visiting the country recently. Yahoo is well-positioned to capitalize, owning 24 percent of Alibaba, one of the “market leaders.”
Peck's $40 price target represents 20 percent upside from current levels.
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|Nov 2014||Bernstein||Maintains||Market Perform|
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