In a research report issued today, Cantor analyst Youssef Squali maintained a Buy rating on Yahoo! (NASDAQ:YHOO) and raised the price target to $60 (from $43), as the company announced a plan to spin-off its 15% stake in Alibaba into a separate company, avoiding any taxes on the transaction.
Squali wrote, “We’re maintaining a BUY rating and raising our PT, mainly on the back of the tax-free spin-off announcement of the BABA stake and adjustment of BABA’s valuation to reflect its current stock price. Operationally, core Yahoo! remains challenged with, as expected, muted 4Q results, and 1Q:15 guidance that’s below expectations. That said, new initiatives of Mobile, Video, Native and Social are seeing good traction, offset by legacy PC revenue, a phenomenon management believes will reverse in 2015, paving the way for Y/Y growth. In our view, Yahoo! remains a compelling SOP story supported by a low valuation, a massive buyback and a free option on the resumption of growth in Core.”
The analyst shed some light on his new price target, “Both our SOP and DCF yield ~$60 PT, reflecting ~$41/share for Yahoo!’s BABA stake, ~$4/share for Yahoo! Japan, ~$8/share in cash/securities and $7/share for core Yahoo! Current YHOO valuation implies virtually no value to Core.”
Yahoo! Inc. operates as a technology company worldwide. The company offers Yahoo Search that serves as a starting point to navigate the Internet and discover information; and Yahoo Answers, which enables users to seek, discover, and share knowledge and opinions across mobile phones, tablets, and desktop.