Yahoo! Inc.: Deadline Day for YHOO Bids Promises More Upside Ahead

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It’s deadline day for bids to acquire Yahoo! Inc.‘s (YHOO) core business, but regardless of who wins, it should represent a nice out for anyone holding YHOO stock.

Yahoo! Inc.: Deadline Day for YHOO Bids Promises More Upside AheadShares in Yahoo are having a market-beating year thanks to the web company putting itself up for sale. True, YHOO is up more than 9% for the year-to-date — and 36% from a 52-week low hit in mid-February — but there should be even more upside ahead.

After all, plenty of deals are well telegraphed before they’re struck, and yet shares still command a premium to the market price. That’s often just the price of doing business in mergers and acquisitions.

Sometimes acquisitions fall through, and that risk shows up in the share price pre-deal. On the other hand, sometimes the acquirer surprises you with the their willingness to pay up for what they want. Either way, the close of bids is good news for YHOO.

It’s also good news for the apparent frontrunner. Verizon Communications Inc. (VZ) is reportedly the most likely buyer of YHOO’s core business — adding the company makes a lot of sense.

Remember, Verizon bought AOL in a deal worth $4.4 billion last summer and YHOO offers similar capabilities and scale. The plan is to leverage VZ’s vast network to deliver mobile and video advertising.

Whatever their faults as web sites, both AOL and Yahoo have desirable ad platforms. Putting them together sounds like a no-brainer.

YHOO and VZ Are a Good Match

Besides, where else is Verizon going to find growth?

There are no existing competitors that make for an appealing acquisition target. Wireless subscriptions are more about stealing share from the other guys, and wireline is, well, wireline.

At the time of the AOL acquisition, VZ said it would help build out its LTE wireless video, streaming video and mobile strategy. AOL ‘s CEO said the deal was about the “40-40 opportunity, which is $40 billion going to mobile and $40 billion going to video.”

If Verizon does end up winning the auction, that should also be somewhat comforting to Yahoo’s media properties. For one thing, YHOO already shut down its less-attractive sites in order to pretty itself up for an acquisition. Further, Verizon hasn’t separated AOL’s Huffington Post, so far, so maybe sites such as Yahoo Finance and the like will be safe. Indeed, the company is actually investing money in Yahoo Finance these days.

But back to the stock. YHOO reports earnings after the Tuesday market close. Management’s conference call with analysts is sure to be the main attraction. It’s a good idea to keep tabs on any news emerging from the event.

Otherwise, unless something untoward happens, YHOO will sell itself eventually.

At this point, it’s just a matter of how much of a premium shareholders can get for their YHOO stock.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/04/yahoo-yhoo-stock-verizon-vz/.

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