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Jefferies Lays Out The Bull/Bear Scenarios In Yahoo; Downgrades To Hold

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Jefferies Lays Out The Bull/Bear Scenarios In Yahoo; Downgrades To Hold

Jefferies’ Brian Fitzgerald estimated the value of five key assets held by Yahoo! Inc. (NASDAQ: YHOO), Yahoo Core, Cash & Market Securities, Alibaba Group Holding Ltd (NYSE: BABA) stake, Yahoo! Japan and the Excalibur Patent Portfolio.

Fitzgerald downgraded the rating on Yahoo from Buy to Neutral, while raising the price target from $43 to $48.

Assets Valued

The analyst continues to remain focused on Verizon Communications Inc. (NYSE: VZ) closing the acquisition of Yahoo Core, along with the monetization and tax efficiency of the Alibaba and Yahoo! Japan (YJ) stake.

Related Link: Yahoo Discloses Traffic Stats To Smooth Over Investors' Data Breach Concerns

According to the Jefferies report, using SOTP analysis, Yahoo Core was valued at $3.8-$4.8 billion, Cash & Marketable Securities at $7.7 billion, Alibaba at $13 billion–$43 billion, YJ at $4.1 billion–$6.6 billion and the Excalibur Patent Portfolio at $0.6 billion–$1.2 billion.

The Bull & Bear Case

Fitzgerald mentioned that in an upside scenario, where Alibaba and YJ are spun off in a tax efficient manner, the price target could reach $66, while a downside scenario would take the price target to $30.

However, the analyst stated, “Given the limited ability for YHOO management to come to a solution over the past 4+ yrs we have little insight into the ability to reach a tax efficient spin.”

In the downside scenario, Fitzgerald assumes a $1 billion write down of Yahoo core for the Verizon acquisition. Therefore, the closing of the acquisition at the announced price of $4.8 billion is awaited.

“Yahoo shared engagement trends which highlighted the lack of a fallout from usage following the Sept email hack announcement. There could be downside if VZ determines there was a material withholding during due diligence,” the analyst cautioned.

At last check, Yahoo was down 1.42 percent at $41.78.

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Latest Ratings for YHOO

DateFirmActionFromTo
Oct 2016DowngradesBuyHold
Oct 2016DowngradesBuyHold
Oct 2016MaintainsBuy

View More Analyst Ratings for YHOO
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Posted-In: Brian Fitzgerald JefferiesAnalyst Color Downgrades Price Target Analyst Ratings Movers Tech

 

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