Why The Yahoo Revival Is The Real Deal

Yahoo (YHOO) is finding its groove again. Since Marissa Mayer took over as CEO, shares rallied from below $16 to $19.63 (on December 14, 2012). Yahoo is clearly on a revival, and its path is being led by It projects that leverages its existing Internet properties.

Yahoo took the right step by building a Flickr iPhone app. As an avid user of Flickr (the desktop version) for many years, reading Yahoo earn high marks for its Flickr app is a relief. Flickr has a focused community of photographers who rate each other’s photos (“favorites”), post comments on photos, and participate in discussions.

The new Flickr app for iPhone competes with Instagram. It has 16 filters, and gives users many ways to share photos. This sharing was, until the app was launched, available only on the Flickr website.

Flickr, welcome to 2012.

Investment Analysis

Investors cannot be bullish on Yahoo based on a revival for Flickr, but the company is moving in the right direction. Investors should add Yahoo to their watch list. Shares could pull-back, as investors take profit. After that, the focus will be on renewed growth and on valuation.

Valuation

According to Kapitall’s Number Cruncher, Yahoo has a book value of $13.19. It is trading at a price to book of 1.5 times, and has a P/E of just 5.8 times. POP, or Price of Profit, is slightly high, at 18.

Comparisons

Using the Compar-o-matic tool, Yahoo’s valuation is lower than most Internet firms. Only Baidu (BIDU) has a lower POP, at 16.

Investment Ideas

Investors considering Yahoo as an investment should also look at AOL (AOL) and Google, Inc. (GOOG). Google’s dominance in search continues to hurt Yahoo. AOL’s management is shareholder-friendly. The company made the right moves in returning money to shareholders. AOL sold its patent, and paid out a portion of funds to investors.

Click on the company icons for more info, or go to a snapshot of the firms discussed.

Written by Kapitall’s Chris Lau.

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