Bob Peck On Yahoo: Separation Is Bulk Of Value

• Yahoo! Inc. YHOO shares have declined 38.4 percent over the past one year, falling almost to their 52 week low on September 28 to trade at $27.60.
• Robert S. Peck of SunTrust Robinson Humphrey has maintained a Buy rating and price target of $45 on the company.
• Peck mentioned that there have been investor concerns over the past week regarding the company’s future plan, amidst conflicting reports about Yahoo considering a sale of its core business.

Analyst Robert Peck mentioned that there have been reports that “received many investor questions on what Yahoo plans to do next, amidst conflicting reports that Yahoo may consider selling the core or may seek to invest up to $3B in more content.”

Peck believes that Yahoo should pursue “parallel processes,” including continuing with the spin, listening to credible suitors and cutting costs to enhance core health.

“However, we think that, given the reported interest in the core and confusion around the next strategic steps, the company should be more engaged in its approach and run an active core sale process, rather than merely a passive one,” Peck stated.

Peck expects this move to maximize shareholder value, given that a solid bidding process would help the company access the best price.

According to the SunTrust report, the core could be worth $6-8 billion for a strategic buyer, although it might be worth slightly less for a financial buyer.

“Further, we think the cost basis for taxes could be well over $3B, which means the after tax difference in value to Yahoo would be negligible,” the report explained.

In fact, Peck stated that investors are likely to want an active sales of the core announced soon, given that interest in the business has been expressed publicly.