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B. Riley Warns Yahoo Resets Could Lead To Year Of Negative Growth

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B. Riley Warns Yahoo Resets Could Lead To Year Of Negative Growth
  • Shares of Yahoo! Inc. (NASDAQ: YHOO) were trading lower by nearly 2 percent during Wednesday's pre-market session following its third-quarter print.
  • Sameet Sinha of B. Riley downgraded Yahoo to Neutral from Buy with a price target slashed to $35 from a previous $50.
  • Sinha cited Yahoo's "mixed" third quarter while management's fourth-quarter guidance "signaled a massive reset."

Shares of Yahoo were trading around $32.20 Wednesday morning following the company's weaker-than-expected third-quarter results, which included a disappointing fourth quarter outlook.

Related Link: Bob Peck Reveals Yahoo's 'Unique' Opportunity

According to Sinha, Yahoo's already "depressed" valuation was responsible for the "muted" after-hours stock reaction. When combined with the possibility for another year of revenue and margin declines, a higher valuation for Yahoo-only assets is "impossible" and shares should remain rangebound.

Sinha added that Yahoo Search monetization could be "depressed" for the near term, MAVENS (mobile, video, native advertising, and social) are facing "tough" comps and the company's "Other" businesses resets could "provide additional headwinds."

Finally, Sinha noted that a $35 price target is based on a 6.0x 2016 AEBITDA (a "significant" discount to the comp group's 13.0x multiple) on Yahoo's core business, $23.38 (down from a previous $35) per share for both Alibaba Group Holding Ltd (NYSE: BABA) and Yahoo Japan, and $7 per share in cash.

Latest Ratings for YHOO

DateFirmActionFromTo
Oct 2016JefferiesDowngradesBuyHold
Oct 2016NeedhamDowngradesBuyHold
Oct 2016MKM PartnersMaintainsBuy

View More Analyst Ratings for YHOO
View the Latest Analyst Ratings

Posted-In: B. Riley Sameet Sinha Yahoo Yahoo EarningsAnalyst Color Downgrades Price Target Analyst Ratings Best of Benzinga

 

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