Bullish Analyst Pounds The Table On Yahoo!: Sees SotP 'Materially' Undervalued

Yahoo!

analyst Eric Sheridan of UBS believes the Street is “materially undervaluing the sum of the parts in Yahoo shares (core Yahoo + stakes in Alibaba Group & Yahoo Japan)." In a note from Tuesday morning, Sheridan commented “we estimate the Alibaba stake is worth $26.32 on today's Yahoo! share count, while the [Yahoo Japan] stake is worth $5.33 per share using the current [Yahoo Japan] share price. This leaves the core trading at 0.4x EV/EBITDA on our '15 estimates --- a significant discount to peers despite early signs of turnaround success.” Sheridan believes 6x EV/EBITDA would represent “fair-value." Going further, the UBS analyst highlighted “In December, we noted that Yahoo had begun to see traction in its Display ad business on the back of Stream Ads and video ads." As for growth, mobile, social, video, and native areas, Yahoo has posted 98 percent growth year-on-year, up from 60 percent in 2013. Stream ads are now accounting for 20 percent of Yahoo's display ad volume, according to Sheridan. With 430 million mobile monthly unique visits, Yahoo can state its user growth and engagement across various key products is up 30 percent year over year. Sheridan maintains a Buy rating and price target of $47 on Yahoo! shares. With shares of Yahoo! trading up more than 4 percent to around $35.45 at last check, the UBS analyst's price target represents potential upside of nearly 33 percent.