Following Tuesday's earnings beat, Oppenheimer raised its price target for Yahoo! Inc. YHOO to $66 and maintained its Outperform rating. Oppenheimer notes that Yahoo’s intrinsic value is $57 based on the Alibaba Group Holding Ltd BABA closing price of $102.94 and a fully-taxed sale of Yahoo Japan.
The lower price, Oppenheimer noted, is the result of skepticism surrounding whether Yahoo can spin off its Alibaba stake without taking a tax hit. Though Liberty Media Corp has done so in the past, the size of this transaction would be significantly larger. Management, which has approved the spinoff, expects a private-letter ruling from the IRS in the future.
As for Yahoo’s core business, Oppenheimer said weak Q1 guidance is the result of programmatic platforms. Share price will move with sentiment around the Alibaba spinoff, as well as Yahoo Japan prospects.
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