Attention! The downward trend in Yahoo! Inc (NASDAQ:YHOO) stock was just reversed. After a sizable downfall in 2015, Yahoo shares started to climb back upward. In less than three weeks, Yahoo’s stock price has surged 23%. The question now is this: will the trend continue?
Could This Save YHOO Stock’s Demise?
First, let’s admit that Yahoo is not what it used to be. More importantly, the company is not even in the same league as its competitors. The latest report from comScore suggests that Yahoo sites only had 12.4% of the U.S. core search market in January 2016, absolutely dwarfed by Google sites’ 63.8% market share. Even Microsoft sites received 21.1%, significantly more than Yahoo. (Source: “comScore Releases January 2016 U.S. Desktop Search Engine Rankings,” comScore, February 15, 2016.)
It also doesn’t help that the company’s earnings are deteriorating. In 2015, Yahoo’s earnings per share (EPS) missed analysts’ estimates in three out of the four quarters. (Source: “Analyst Estimates,” Yahoo! Finance, last accessed March 2, 2016.)
So, how on earth did YHOO stock manage to climb up? Well, as it turns out, Yahoo is still a very attractive acquisition target.
Even though it cannot be comparable to other Internet giants, Yahoo still has quite a few users on its web portal. In fact, there are more than one billion people using Yahoo’s e-mail, finance, sports, and video sites. Companies that want to enter the Internet industry are eyeing YHOO stock for the company’s sizable web traffic and content.
According to Robert Peck, analyst at SunTrust Robinson Humphrey, there are more than 20 potential bidders for Yahoo. (Source: “Yahoo!: ‘Melting Ice Cube’ Must Engage Prospective Buyers, Says SunTrust,” Barron’s, February 18, 2016.)
A bidding war? Now that’s exciting.
Among the potential buyers are media companies like Comcast Corporation (NASDAQ:CMCSA), telecom giants like AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ), as well as private equity firms.
The Bottom Line on YHOO stock
More bidders will likely drive up the price of the asset. But the company has to be willing to sell first.
Fortunately, Yahoo is indeed looking at this option. Last month, Yahoo announced that its board has formed a strategic review committee to explore strategic alternatives alongside the company’s consideration of a reverse spin. (Source: “Yahoo Board of Directors Forms Independent Committee to Explore Strategic Alternatives,” Yahoo! Inc., February 19, 2016.)
Moreover, Yahoo has also hired Goldman Sachs Group Inc (NYSE:GS), JPMorgan Chase & Co. (NYSE:JPM), and PJT Partners Inc (NYSE:PJT) as financial advisors.
All of this suggests that Yahoo is taking a proactive approach in the potential sell.
Last but not least, remember that the goal of a sale of Yahoo’s core assets is to maximize value for shareholders. So when more information about the process is revealed, don’t be surprised if YHOO stock takes another surge.