Yahoo’s a Buy Despite It’s Recent Problems

by Louis Navellier | December 23, 2013 2:09 pm

Yahoo’s a Buy Despite It’s Recent Problems

Another week, another string of headline-making news from Yahoo (YHOO[1]).

yahoo logo Yahoo's a Buy Despite It's Recent Problems [2]Let’s first address the elephant in the room: The company’s free email service, Yahoo Mail, was having intermittent outages over a period of time. While most accounts are back up and running, the service problems have frustrated some Yahoo users in the meantime.

Despite the headaches caused by this, YHOO shares have held steady. That’s because in other parts of the web, Yahoo is plowing ahead. Yahoo’s 24% stake in China’s e-commerce giant Alibaba will pay off this holiday season. On Single’s Day, China’s version of Cyber Monday, Alibaba generated $5.7 billion in merchandise revenue that day.

This is very good news for Yahoo because it drums up further interest in Alibaba Group’s IPO, which is slated for Q1 2014 (but Alibaba is working to delay it until as late as December 2014[3]).  Yahoo will be required to sell 40% of its current stake when Alibaba goes public, so a higher price means a better deal for Yahoo. Analysts estimate that Yahoo’s stake in Alibaba[4] is currently worth $36 billion.

Meanwhile, the M&A frenzy continues. The latest rumor is that CEO Marissa Mayer is seriously considering a buyout of photo-sharing site Imgur. Run by just ten people the site has more than 100 million users. Imgur has been more successful in monetizing its service than many other social media and sharing websites, so analysts estimate that Yahoo would need to offer $100 million to $500 million for the company.

In other news, Yahoo also expanded its mobile presence by recently acquiring QuikIO, a video streaming app for Apple (AAPL[5]) iOS devices. With this latest acquisition, Yahoo has made 29 acquisitions, the biggest deal being the buyout of Tumblr in June.

To sum it up, Yahoo remains a great buy overall despite some of the issues it’s having with its email service. This quarter, the analyst community projects 19% annual earnings growth and the double-digit bottom-line growth continues through the end of next year. The stock is still trading at a more attractive valuation than the industry average and several analysts have recently increased their price targets for YHOO shares.

 

Endnotes:
  1. YHOO: http://navelliergrowth.investorplace.com/bluechip/stock-report/?sym=YHOO
  2. [Image]: http://investorplace.com/wp-admin/Yahoo,stocks-to-buy-now-
  3. as late as December 2014: http://investorplace.com/ipo-playbook/alibaba-ipo-delayed-yhoo-stock/#.UriHpPv-L08
  4. Yahoo’s stake in Alibaba: http://investorplace.com/2013/09/hey-marissa-lets-see-some-of-that-alibaba-windfall/#.UriHbfv-L08
  5. AAPL: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAPL

Source URL: http://investorplace.com/2013/12/yahoo-alibaba-yhoo-aapl/
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