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Yahoo! Inc. (NASDAQ: YHOO) shares have been a disappointment for the bulls ever since peaking out in mid-November 2014. Since then, shares have traded lower by more than 15 percent while the NASDAQ has rallied about 7 percent.
The rest of Yahoo!has been shunned now that Alibaba Group Holding Ltd has been spun off. The question is whether Yahoo shareholders will have better times ahead or simply more of the same. Let's take a look.
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What The Bulls See
• A reasonable price-to-book ratio of 1.10.
• Strong positive levered free cash flow of $4.05 billion annually.
• A strong balance sheet: Cash of $8 billion versus debt of only $1.31 billion, debt-to-equity of 3.19 percent and a current ratio of 2.14.
What The Bears See
• Some very rich valuation metrics: A market capitalization of $42.63 billion that easily exceeds the estimated enterprise value of $35.94 billion, a price-to-sales ratio of 9.27 and a P/E ratio of over 45 versus estimated flat revenue and EPS growth.
The Technical Take
Technicians note that Yahoo has been a real underperformer versus the rest of the top NASDAQ names for the last three months. That being noted, they note that it looks like even more downside could still be in store for the stock. The downside target for this move should be down at around $40.30, which represents a technical measuring target in addition to the downside edge of the upside gap that occurred on October 22, 2014. Even when that support is tested, the bounce that will likely occur should be short-lived.
Overall
With the rich valuation metrics and poor technicals, Yahoo looks like a troublesome hold for existing longs and a weak candidate for prospective longs. A break and close above the $45.25 level would turn the tide technically, but that would not change the valuation metrics at this point.
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.