This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Yahoo! Shares Are Cheap, But Don't Wait or the Sale May End

Stocks in this article: YELP YHOO

Yahoo! also owns 35% of Yahoo! Japan. One would think Yahoo! Japan is entirely owned and operated by Yahoo!, but that's not the case. The excellent news is the 35% is worth about $9 billion.

There is considerable debate over the Yahoo! Japan valuation, especially between Yahoo! and Yahoo! Japan. If we discount the net valuation expected valuation to Yahoo! shareholders, we can add $6 billion more.

Adding Alibaba and Yahoo! Japan holdings brings us up to at least $31 billion. Add $2 billion in excess cash, and Yahoo!'s $39 billion market cap begins to appear closer to $6 billion -- or less.

When viewed from that angle, the forward estimated earnings multiple shifts from 21 toward 3.3, making Yahoo!'s stock remarkably cheap. Yahoo!'s board is also convinced the shares are trading at an extremely attractive price and continues to authorize massive share buybacks.

Normally, I'm not impressed when a company's board authorizes large share repurchases. Management teams seem to get it wrong and buy at the top more often than not, and the vast majority of companies, especially tech companies shouldn't try to play the asset manager role and stick to what they know best. In other words, unless your business card says 'fund manager," don't try to invest like one.

Another red flag with share repurchases is that despite sometimes gargantuan salaries, management can't find an alternative use for working capital. The exception is when shares are incredibly undervalued to the point that management rightfully fears looking incompetent for not buying. That is where I place Yahoo!'s stock. It's so cheap that few other investments can match the return.

Where else can you buy as much as you want for only three to four times forward earnings? Nowhere else, and that is why Yahoo! is quickly moving higher toward $40 once again. You have a chance to buy at a discount, albeit don't expect it to remain available for long.

At the time of publication, Weinstein had no positions in securities mentioned.

Follow @RobertWeinstein

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

2 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs