YHOO Stock Undervalued: Analyst
It may not be all doom and gloom for Yahoo! Inc. (NASDAQ:YHOO) stock. On the contrary, Citigroup analyst Mark May thinks it may actually be a good time for investors to pick up some Yahoo stock.
Yahoo shares surged on Thursday after May upgraded the stock from “Neutral” to “Buy” and raised its price target from $31.00 to $32.00. YHOO stock has now pared back its losses since Tuesday’s closing session when the company reported $4.36 billion in losses and that it plans to cut 15% of its workforce.
The future looks dire for Yahoo. The company turnaround Marissa Mayer promised when she took over as Yahoo’s CEO four years ago hasn’t come to light and doesn’t look it will anytime soon. So what value does May see in the stock?
May believes YHOO stock is actually undervalued. He said that the stock is down 21% since the company held off plans to sell off its stake in Alibaba Group Holding Ltd (NYSE:BABA) and trades 12% below the previous $31.00 target at Thursday’s open.
Also, Yahoo plans to cut costs, which will reduce the risk of the company not meeting earnings estimates in 2016. This can also push the stock valuation, said May, especially if there are earnings surprises.
He added that given Yahoo’s bleak guidance and financial outlook, management will be pressured to consider “strategic alternatives,” such as spinning off it core business, including Yahoo! Japan. May said that both cases would provide “enough upside to warrant buying the stock.” (Source: “Citi Upgrades Yahoo To Buy, Says Core Biz Currently Has Negative Valuation,” Benzinga, February 4, 2016.)
May also said that if Yahoo sells off non-core assets, YHOO stock could receive a valuation boost.