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TheStreet Open House

Yahoo!'s Marissa Mayer Receives a Wall Street No-Confidence Vote

NEW YORK (TheStreet) -- Wall Street is voting with its wallet as it always does, and the results are in: Internet giant Yahoo's (YHOO - Get Report) CEO Marissa Mayer is receiving a no-confidence vote.

When I profiled Internet giant Yahoo! during April in Yahoo!'s Next Hire Will Make or Break Marissa Mayer I focused on the market's increasing impatience with the company's CEO.

Mayer left Google (GOOGL) about two years ago to take command of Yahoo! and the news media immediately fell in love with her. As a number cruncher, I willingly and readily joined in and concluded the stock was one of the best values on Wall Street.

Logically, it's almost impossible to comprehend why shares in Yahoo! are trading so cheaply. Using my back-of-the-envelope current asset valuation method, I arrive at an appraisal greater than Yahoo!'s market cap.

YHOO Operating Income (Annual) Chart

Estimates on China's Alibaba valuation range from $120 billion to $250 billion, and the $200 billion figure is thrown around often lately. Since I'm conservative and risk-averse by nature, I'll use $150 billion as an appropriate Alibaba valuation.

Yahoo! owns 24% of Alibaba, and based on $150 billion total valuation it's worth (pretax) about $36 billion. Surprisingly to many investors is the fact that Yahoo! Japan is a separate company and Yahoo! only owns a minority stake.

Yahoo! owns about 35% of Yahoo! Japan. The Yahoo! Japan investment adds another $5.4 billion to Yahoo!'s balance sheet. Between the two Asian investments, Yahoo! has $41.4 billion mark-to-market value of assets. Add another billion dollars in cash over and above debt, and we arrive at $42.4 billion in two investments and cash.

However, as of this writing, Yahoo's market cap is only $33.5 billion. That means a share in Yahoo! is worth more than the trading price. That can happen during extreme pessimism, but it doesn't normally last long. The market is too efficient for such an obvious discrepancy to linger. Yahoo! shares recently traded around $33, down 18% for the year to date.

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