This Could Spark a Rally in Yahoo Stock
Yahoo! Inc. (NASDAQ:YHOO) stock lost a lot of investor appeal in recent years. But that doesn’t mean the company’s over. In fact, if you got into Yahoo stock earlier this year, you would have made quite a bit of money. Since it bottomed in February, Yahoo stock has soared 42%.
Obviously, the biggest catalyst for the stock right now is the acquisition prospect. Since the company put out the “for sale” sign for its core assets, quite a few potential buyers have reportedly signed up for the auction, and they all have deep pockets.
It was reported last month that Yahoo has received multiple bids, with some of them at or above $5.0 billion. Among the bidders are Verizon Communications Inc. (NYSE:VZ), AT&T Inc. (NYSE:T), Quicken Loans Inc., and some private equity firms. (Source: “Yahoo Has Received Multiple Bids at or Above $5 Billion for Core Business,” CNBC, June 9, 2016.)
Note that the opportunity in YHOO stock might not be over just yet. The company is expected to reveal the outcome of this auction sometime this summer, so there could still be some serious action in Yahoo stock.
By now, many investors have realized that while Yahoo stock is not as appealing as before, the company’s core assets are more than attractive in the Internet business.
In today’s Internet industry, growing one’s userbase is a priority for almost every company. The idea is that once you get users in the door, there will be plenty of opportunities for monetization. And guess what? Yahoo just happens to have a userbase that totals one billion—and it’s all for sale.
One billion? Yes, there are more than one billion people globally who use Yahoo’s e-mail, finance, sports, and video sites each month. Yahoo’s e-mail service has 250 million monthly active users (MAUs) alone, while Yahoo! Finance has 81 million. (Source: “What Would You Do Without Your Yahoo? Avid Users Fret as Decision Looms,” USA Today, June 30, 2016.)
The major fact is that Yahoo did not amass its users in an instant. It took more than two decades for the company to build its giant userbase. What this means is that some of Yahoo’s users are very loyal.
The much older relationship Yahoo has with its users is an attractive feature. For instance, Alphabet Inc’s (NASDAQ:GOOG) “Gmail” service was launched in April 2004, whereas people started using “Yahoo! Mail” as early as October 1997. The data Yahoo has about its loyal users could offer many interesting opportunities to the potential buyer.
However, it’s not like all of Yahoo’s assets are old stuff. Yahoo also owns Flickr, a photo sharing service that has more than 112 million users. (Source: “Thank You, Flickr Community,” Flickr Official Blog, June 10, 2015.) Then there’s Tumblr, which was bought by Yahoo in 2013 and has 555 million active blog users. (Source: “Leading Social Networks Worldwide as of April 2016, Ranked by Number of Active Users,” Statista, last accessed July 1, 2016.)
Note that even without the prospects of being acquired, Yahoo has made some serious progress on its own. Last year, the company launched more than 30 major new products and more than 400 features. This helped the company attract new users as well as deepen the engagement level on Yahoo’s products. (Source: “Yahoo! CEO Marissa Mayer Hosts 2016 Annual Meeting of Shareholders Transcript,” Seeking Alpha, June 30, 2016.)
These initiatives also improved the company’s top line. In 2015, Yahoo generated nearly $5.0 billion in revenue, an eight percent increase year-over-year. The company also reached more than 600 million mobile MAUs, which is up roughly three times since the company shifted to its mobile strategy in 2012.
The Bottom Line on Yahoo Stock
Of course, those improvements are probably a bit too late to bring the company back to center stage in the Internet industry. However, its solid prospects could help Yahoo get a better price from potential buyers. Right now, few things are more exciting for Yahoo stock investors than a great offer.