SunTrust Cuts Yahoo's Price Target; The Core Should Be On Everyone's Mind

• Yahoo! Inc. YHOO shares have lost 11 percent since January 4, and are trading near their 52-week low of $27.30.
• SunTrust Robinson Humphrey’s Robert S. Peck maintained a Buy rating for the company, while reducing the price target from $45 to $40.
• Yahoo needs to provide a clearer path to growth and profitability and give details of its restructuring plans, Peck stated.

Analyst Robert Peck mentioned that although investors are expecting Yahoo to report weak 4Q results, they are likely to focus on the company’s receptiveness to offers for its core business and its near-term restructuring plans.

Management’s decision to abandon the potential Aabaco spin seems appropriate. “We think the board will continue to honor its legal fiduciary duty in maximizing shareholder value by being receptive to credible and accretive offers for the core,” Peck added.

The analyst expects the separation of Yahoo’s Asian assets from the core to be the fastest way to unlock and maximize the value of the company’s core business. The company is likely to announce some layoffs, some asset sales and a focus on fewer projects.

Peck believes that Yahoo needs to right-size its core business, run an active sale process on the core, entertain 100 percent acquisition offers and, if the offers are not adequate, opt for spinning off the core business.

Yahoo is likely to report 4Q revenues excluding TAC of $960 million and EBITDA of $183 million, respectively.