Analysts from Mizuho and Piper Jaffray weighed in on web portal giant Yahoo! Inc. (NASDAQ:YHOO) and security firm Palo Alto Networks Inc (NYSE:PANW). The analysts reflect on Yahoo’s steps to find a buyer for its core business and Palo Alto’s upcoming earnings. While one analyst remains neutral on Yahoo, explaining why the company should sell its core business, the other is bullish on Palo Alto Networks, predicting strong Q2 earnings.
Analyst Neil Doshi of Mizuho Securities weighed in on Yahoo after the company announced the hiring of financial advisers and certain board members to explore options for selling its core business. The analyst believes Yahoo should close a sale as soon as possible, though questions whether or not Yahoo will follow through.
Earlier this month, the company released earnings that highlighted strategic initiatives to get the company back on track, such as focusing more on ad revenue, mobile optimization, and cost restructuring. Doshi believes this plan “will not be enough to fix Yahoo, and the core business will be less valuable a year from now.” He states that the longer Yahoo waits to sell, the more users and ad dollars it will lose to its competitors such as Facebook, Google, Snapchat, and Pinterest.
Doshi cites Comcast, Verizon and AT&T as the most viable buyers with “huge subscriber bases” in Internet, TV, and mobile in the U.S. He explains, “Each of these companies could easily absorb Yahoo and Yahoo could provide clear synergies to their businesses.” The analyst goes on to state positive factors Yahoo would bring its potential buyers, such as around 1 billion desktop and mobile users, mobile apps as significant revenue drivers, and its video ad platform, BrightRoll, which “could bridge traditional TV and online video advertising.”
While the analyst suggests a sale sooner than later, he cites some risks involved. First, he questions the willingness of CEO Marissa Mayer to sell the company after she was elected to turn the company around in 2012 and also states she could have “unrealized valuation expectations.” Second, the analyst cites uncertainty regarding who would pay for the company, though notes that after Verizon’s $4.5 billion acquisition of AOL, the price would be at least that if not higher.
The analyst reiterates his Neutral rating on the company with a $29 price target. Neil Doshi has a 49% success rate recommending stocks with an average return of 3.4% per rating.
According to TipRanks’ statistics, out of the 23 analysts who have rated the company in the past 3 months, 12 gave a Buy rating, 1 gave a Sell rating, while 10 remain neutral. The average 12-month price target for the stock is $36.95, marking a 21% upside from current levels.
Palo Alto Networks Inc
Analyst Andrew Nowisnki of Piper Jaffray weighed in today on Palo Alto prior to the company’s Q2 earnings release on Thursday. Although he cites some negative factors, such as a 26% quarterly decline in shares and a slowdown in large IT vendors for the month of January, the analyst remains bullish and expects a positive earnings report.
The analyst reiterated an Overweight rating on the company with a $208 price target. He explains, “While shares are down 26% since the last earnings call and a number of larger IT vendors have cited a slowdown in January, we believe Palo Alto will deliver another strong quarter and has a strong pipeline for the April quarter. We did not pick up any signs of pushing hard at the end of the quarter, nor did we pick up any incremental competitive pressure. As such, we are expecting upside to the high-end of guidance in the 3-4% range, which should exceed investor expectations.”
Andrew Nowinski has a 37% success rate recommending stocks with an average loss of (2.7%) per rating. According to TipRanks’ statistics, out of the 22 analysts who have rated the company in the last three months, 20 gave a Buy rating while 2 remain on the sidelines. The average 12-month price target for the stock is $201.59, marking a 55% upside from current levels.