Top RBC Capital Analyst Weighs in on Yahoo! Inc. (YHOO) Acquisition by Verizon

RBC Capital analyst Mark Mahaney weighs in on this morning’s confirmation that Verizon is now set to acquire the operating business for Yahoo! Inc. (NASDAQ:YHOO) in a $4.83 billion cash deal. With expectations for the deal to close by the first quarter of 2017, Mahaney reiterates a Hold rating, with a price target of $39.00.

Mahaney notes, “We view the deal as a reasonable outcome for YHOO shareholders.” It is a deal that will separate the operating business from Yahoo’s substantial Alibaba stake. An important aspect to keep in mind is that knowing this context indicates the deal in addition to Alibaba shares will also not include Yahoo Japan shares, convertible notes, small investments, non-core patents, or cash. Once Yahoo converts its name following the Verizon deal’s official close, the rest of these parts of the company will transition to a publicly traded investment company.

Verizon’s acquisition closed higher than Mahaney even initially expected. Mahaney commended the deal, explaining, “The deal values YHOO at roughly 6x EBITDA on our 2017 EBITDA estimate of roughly $858MM, a reasonable valuation for the company we believe given its lower-growth profile.” Yahoo will join a list of successful acquisition deals, including Verizon’s $4.4 billion deal to take AOL close to a year ago. Mahaney views the deal as logical and strategic, rife with potential and revenue opportunities, as he predicts fruitful gains in efficiency. So for now, Mahaney bids adieu to the company that once was “‘the Facebook’ …or ‘the Google’ …of the Internet circa 1999,” and holds until the future to see how Verizon integrates Yahoo into its larger sphere.

As usual, we find it important to provide a track record for an analyst when reporting on new notes to give key perspective on the effect it has on stock performance. According to TipRanks, Mark Mahaney has earned a high ranking at #7 out of 4,081 analysts, sustaining a 65% success rate with an average of 19.9% in profitable returns per recommendation.

TipRanks analytics exhibit Yahoo! as a Moderate Buy. Out of 24 analysts polled in the last 3 months, 50% rate a Buy, 46% maintain a Hold, and the remaining 4% issue a Sell. The 12-month average price target is $41.78 with a close to 9% increase from where the stock is currently trading.


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