UPDATE: Bank Of America Upgrades Yahoo On Alibaba Optimism

Justin Post of Bank of America upgrade shares of Yahoo! Inc. (NASDAQ: YHOO) on Friday to Buy from Neutral with a price target raised to $62 from a previous $55.

“While Yahoo continues to lose U.S. online ad share (from seven percent in 2013 to 6.2 percent in 2014E and 5.6 percent in 2015E), we are upgraded Yahoo to Buy from Neutral based on Alibaba and potential Alibaba tax upside potential,” Post wrote in a note. The analyst adds that a bullish view is now justified on Yahoo shares following management's commitment to explore a tax savings strategy to sell its remaining stake in Alibaba Group Holding Ltd (NYSE: BABA).

Post notes that Eddie Leung, an analyst at Bank of America that covers Alibaba, placed a $132 price target on the Chinese e-commerce company which raises his valuation of Yahoo, as Yahoo's stock remains tied to Alibaba's stock price. The analyst calculates that a 10 percent appreciation in Alibaba stock would result in a 7 percent appreciation in Yahoo stock.

“Alibaba stock remains a better pure play on Alibaba stock price moves, but Yahoo stock clearly has exposure,” Post also wrote.

Finally, Post states that Yahoo's Core business could see improving advertising revenue trends in 2015 following its Mozilla search deal and acquisition of Bright Roll.