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

Reducing the investment valuations by 26% to account for tax liability gets us much closer at $30.6 billion. It's anyone's guess what effective tax rate Yahoo! will have to pay, and Yahoo! isn't selling all of its Alibaba shares.

What the numbers clearly suggest is that despite the news media's love affair for Mayer, Wall Street is effectively giving her and Yahoo! a no-confidence vote. It's a mistake that will cost shareholders that are selling and investors that miss-out on buying the number two Internet company for virtually free.

Don't be that investor, don't let news about one missed meeting dissuade you from owning a stock right before the market figures out if Mayer's efforts during the past two years will pay off or not.

In fact, adding to an already long position or buying a dip precipitated by a one-off event is probably the best way to obtain long-term value. Remember, the reason a stock becomes a value is from shareholder emotions pushing it lower than its true value.

After discounting for cash and investments, the person selling the shares is only receiving about $2 a share. Would you buy Yahoo! for $2 right now if it didn't own stakes in Alibaba or Yahoo! Japan? Of course, you would because the core business is profitable, it's the number two internet site and the price-to-earning's multiple would be well under 10.

Adding Alibaba and Yahoo! Japan back in raises the share price valuation from $2 to $33. There's no sure thing on Wall Street, but if Yahoo! can grow its operational profit, the shares have tremendous upside. If Yahoo! can't, the shares are already discounted and are unlikely to continue much lower (and stay lower). That's as good as it gets for an investor using logic and not emotion to make decisions.

Good enough that I bought Yahoo! call options today.

At the time of publication, Weinstein is long Yahoo!.

Follow @RobertWeinstein

Google+

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

>>4 Stocks Under $10 Making Big Moves

TheStreet Ratings team rates YAHOO INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate YAHOO INC (YHOO) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Although YHOO's debt-to-equity ratio of 0.09 is very low, it is currently higher than that of the industry average. Along with this, the company maintains a quick ratio of 3.20, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for YAHOO INC is currently very high, coming in at 83.44%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 27.50% is above that of the industry average.
  • Compared to its closing price of one year ago, YHOO's share price has jumped by 32.16%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • YAHOO INC's earnings per share declined by 17.1% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, YAHOO INC reported lower earnings of $1.26 versus $3.28 in the prior year. This year, the market expects an improvement in earnings ($1.64 versus $1.26).

2 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
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 16,541.82 -21.48 -0.13%
S&P 500 1,929.07 -1.60 -0.08%
NASDAQ 4,369.0590 -0.7140 -0.02%

Brokerage Partners

Rates from Bankrate.com

  • 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