Goldman See Little Near-Term Impact For Yahoo, Remains Neutral On Stock

Goldman Sachs’ Heath P. Terry expects little impact on Yahoo! Inc. YHOO's stock valuation in the near- to mid-term from the company’s fundamental performance.

Terry maintained a Neutral rating on Yahoo, while raising the price target of $37 to $38.

The analyst mentioned fundamentals were unlikely to impact valuation, “as balance sheet assets continue to make up the vast majority of the company’s market cap.”

Q1 Results

Yahoo reported its revenue, ex-TAC, and adjusted EBITDA for the quarter ahead of the estimates. Revenue declined 18 percent year-on-year, as compared to the 15 percent decline in 4Q15.

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Mavens revenue, on the other hand, grew 7 percent year-on-year, as compared to the 26 percent grown seen in 4Q15. Search revenue declined 21 percent year-on-year.

“Management guided to 2Q16 revenue ex-TAC of $810-$850 vs. our prior estimate of $860mn,” Terry stated.

Strategic Alternatives

According to the Goldman Sachs report, “Management stated that it has been (and continues to be) supportive of the board in its exploration of strategic alternatives, but declined to provide additional details on process.”

Management also indicated that the earlier proposal of a reverse spin was still being considered as an option, although it has received less attention through the sale process.

The revenue estimates for 2016-18 have been reduced by an average of 2 percent, to reflect the continuing declines in Search.