Yahoo Downgraded At B. Riley; Warns 'Resets' Could Lead To Year Of Negative Growth

Shares of Yahoo were lower by nearly two percent at $32.20 early Wednesday morning following the company's

which included a disappointing fourth quarter outlook. Following Yahoo's results, Sameet Sinha of B. Riley downgrade the stock to Neutral from Buy with a price target slashed to $35 from a previous $50. The analyst cited the company's "mixed" third quarter results while management's guidance for the fourth quarter "signaled a massive reset." 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 range bound. Sinha also 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

and Yahoo Japan, and $7 per share in cash.