Citi Notes Buying Opportunity on Yahoo!, Reiterates Buy

In a report published Thursday, Citi Research analyst Mark May reiterated a Buy rating on

noting the Buying opportunity on current share valuation. May noted that the 5% pullback in shares following Yahoo's fourth quarter earnings creates a buying opportunity as the current valuation implies “worse-case scenario” assumptions. The analyst commented that the current valuation implies “1) no growth for core Yahoo! and a 5.5x terminal EBITDA multiple; 2) meaningful deceleration in revenue growth and flat margins for Alibaba Group (AG) and a P/E multiple that is only in-line with comps (24x); 3) fully-taxed on AG and YJ proceeds; and 4) no accretion from future share repurchases.” Citi reported that downside for Yahoo! Is limited and sees a potential upside to the mid-$40s. This upside can be driven by improved confidence and transparency in growth, profitability and valuation. In addition, a Yahoo turnaround could materialize in 2H14 and the company may obtain accretion from expected significant repurchases. Yahoo! Closed at $36.24 on Thursday. Shares have traded as high as $37.06 on Friday, up 2.26%.