This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
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! Should Split Into Yahoo!, Yahoo! Japan and Yahoo! Alibaba

Stocks in this article: YHOO TWC DIS


This puts Yahoo's book value somewhere around $55 billion which presents a nice disconnect for Jack Ma to take advantage of considering the current market cap is $34.2 billion and Ma can probably purchase the company for somewhere between $40 billion and $45 billion. A $45 billion market cap translates into a $44.55 stock price which is a significant premium to the current price at $34.

Is Mayer desperate enough to unlock shareholder value? If I was Yahoo CEO for a week my first order of business would be to break up the company into shares of Yahoo, Yahoo Japan and Yahoo Alibaba.

My second order of business would be to sit down with Jack Ma and find out what parts of Yahoo he wants to buy.

My third order of business would be to go all-in on Yahoo Screen by acquiring live content to go with the live concerts from Live Nation. The cord cutting revolution is just underway but live content remains scarce.

Yahoo should acquire exclusive rights to as much live news and sports content as it can get. Let Netflix be the video library. Let Youtube be the site for user generated content. But establish Yahoo as the web portal for live video streaming. The NBA's television contract with ESPN (Disney (DIS)) and TNT (Time Warner (TWC)) expires in the 2015-2016 season.

Rumors suggest the NBA contract can be had for just under $1 billion per year. Yahoo should aggressively go after it. NFL television contracts with run through 2021-2022. In total the four networks contribute $5 billion to $6 billion annually to the NFL. Yahoo should be prepared to bid aggressively for the NFL in 2021. Yahoo recently acquired HD streaming company RayV which is a viable platform for these kinds of endeavors. The ad dollars for Yahoo's same old services aren't there anymore.

It's time for Marissa to be bold. It's time to throw the old playbook out the window. Yahoo needs to do something big if it wants big results. As investors, we view this period of desperation as a buying opportunity in front of the Alibaba IPO. Yahoo!'s trading range continues to hold at the $33 bottom, at the next sign of an uptick in price action we plan to initiate a position. We're about to see what Marissa Mayer is made of.

At the time of publication the author held no positions in any of the stocks mentioned.

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

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 multiple 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 31.51%, 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 ($1.62 versus $1.26).

Jason Schwarz
no positions in YHOO
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!

Markets

DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

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