Here’s Why I’m Sticking with Yahoo Stock
The chart for Yahoo! Inc. (NASDAQ:YHOO) reflects Yahoo stock’s shaky performance. It looks like the EKG of a patient suffering from a very odd heartbeat. There’s a sense that investors have all but given up on Yahoo stock, yet had you bought Yahoo shares last February at $26.00, you would have made a handsome 42% profit in April. At that time, YHOO stock had a share price of more than $37.00.
In other words, appearances can be deceiving and the appearance for Yahoo stock now is that it’s risky. In fact, it doesn’t take a fearless investor to consider Yahoo, given the fact that everybody on Wall Street expects a rich buyer to enter the stage and acquire Yahoo’s major assets. It’s an open secret that the likeliest buyer is Verizon Communications Inc. (NYSE:VZ).
The last time I checked, Verizon is doing rather well these days. The company had to deal with a long strike, but the stock climbed all the way through, touching a new all-time high a few days ago. Why is this relevant? It simply further substantiates the company’s willingness and, more importantly, its ability to acquire what Yahoo is selling.
However, others are also vying for Yahoo assets, including Quicken Loans Inc. and AT&T Inc. (NYSE:T). (Source: “Yahoo Has Received Multiple Bids at or Above $5 Billion for Core Business,” CNBC, June 9, 2016.)
What this means for investors is that they have not missed the chance to make money from Yahoo stock after all. The Yahoo auction is on but the outcome—that is, who ends up winning Yahoo’s core business and at what price—is still in the air. What we do know is that it’s going to happen this summer.
The main takeaway is that Yahoo stock has not lost any of its charm. Many want to get their hands on its one-billion-strong userbase, thanks to popular web sites covering topics from finance to sports. This draw in users can then become a potential source of monetization. Apparently “Yahoo Mail” is still highly popular, attracting 250 million users, as are the company’s sports and financial news services. (Source: “What Would You Do Without Your Yahoo? Avid Users Fret as Decision Looms,” USA Today, June 30, 2016.)
The kind of user numbers Yahoo can boast didn’t just arrive overnight. The company took years to generate them, securing a desirable and unexpected brand loyalty. This is the kind of loyalty you cannot fake; it’s also the kind of loyalty you cannot generate in a month, or even a year.
Yahoo is the last major survivor of the Internet pioneers and covers various generations of users. This provides a wide range of monetization opportunities, which is an important fact to consider if you have any doubts about why Yahoo has stayed so relevant for someone to bid $4.0–$5.0 billion or more for its assets.
Should you be a gloom-and-doom doubting Thomas or skeptical Jane type, note that Yahoo also comes with some millennial-drawing apps, such as “Flickr,” the photo sharing tool, or “Tumblr,” which have gathered more than 112 million and 555 million respective users. (Source: “Leading Social Networks Worldwide as of April 2016, Ranked by Number of Active Users,” Statista, last accessed July 1, 2016.) You don’t need to know what Flickr is to get that it’s a big draw for Yahoo and it increases the company’s value. (Source: “Thank You, Flickr Community,” Flickr Official Blog, June 10, 2015.)
I can’t even begin to explain what Tumblr does, but I know that it takes a long time to get half a billion users to visit a web site. Therefore, I can see that it makes Yahoo that much more valuable.
Forget about Yahoo launching new products now. It does not need to do that any longer, as it has enough to draw the biggest players (in telecoms) who are hungry to build their online presence. Yahoo gives them the chance to buy a turnkey userbase.
Yahoo stock, while teetering up and down, has not moved too far off its $34.00–$37.00 range. It has not fallen back to the lows of February 2016. The next massive upside for Yahoo stock will come with the winning bid.