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GOOG vs. YHOO – Which Is a Better Bet In Your Search for Profits?

Yahoo stock doubled in 2013, but Google stock was no slouch either, jumping 50%

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YHOO Stock – Alibaba and Optimism

YHOO-stock-yahoo-stockThe two biggest drivers behind YHOO stock this year have been its incredibly valuable stake in the Chinese e-commerce company Alibaba, and greatly improved sentiment stemming from CEO Marissa Mayer.

YHOO has a 24% stake in Alibaba, which is not only a cash cow, but will be worth a fortune when it goes public. An initial public offering in Alibaba would make the YHOO stake worth $36 billion, according to estimates.

Additionally, the market is bullish on Mayer’s leadership, and improved sentiment leads to multiple expansion.

Mayer’s product-focused turnaround does appear to be delivering results. Monthly users of Yahoo are up 20% since she took over in the summer of 2012. Even more important, the YHOO mobile user base jumped 15% in the most recent quarter.

Then there’s the acquisition spree YHOO is making under Mayer, the most notable of which was when Yahoo acquired Tumblr.

However, like GOOG stock, YHOO stock is no bargain. Indeed, it looks very expensive — and maybe overpriced. A new investor in YHOO stock is going to pay 24 times forward earnings for a long-term growth forecast of less than 14%. That’s a premium to the five-year average for YHOO stock. It also means the Yahoo stock price is rising twice as fast as the YHOO growth forecast.

Article printed from InvestorPlace Media,

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