NEW YORK (TheStreet) -- Shares of Yahoo! (YHOO) are up 3.67% to $49.75 as analysts boost their price targets after the company announced a tax-free spinoff of Alibaba (BABA) - Get Alibaba Group Holding Ltd. Sponsored ADR Report in its fourth-quarter earnings report yesterday after the market close.
"We're maintaining a 'buy' rating and raising our price target to $60 from $43, mainly on the back of the tax-free spin-off announcement of the BABA stake and adjustment of BABA's valuation to reflect its current stock price," Cantor Fitzgerald said. A tax-free spin-off for last BABA stake should unlock about $14 per share, by their estimate, analysts added.
Credit Suisse maintained its "neutral" rating on the stock, while raising its price target today to $69 from $54. "As we have been previously contemplating a tax bill of 40% on the sale, we
have increased our price target to $69 as we give YHOO shares full credit," Credit Suisse said.
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Oppenheimer raised its price target today to $66 from $61 and maintained its "outperform" rating on the stock. "Based on BABA's closing price of $102.94, this implies $57 for YHOO, assuming a 7% discount, and a fully-taxed sale of YJ. As YHOO shares were trading $51 after-hours, this suggests investors are discounting a negative IRS ruling. We believe the Spin, and future tax-savings around YJ, remain the main drivers of the stock," Oppenheimer said.
JPMorgan raised its price target today to $58 from $55 and maintained its "overweight" rating.
Separately, TheStreet Ratings team rates YAHOO INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate YAHOO INC (YHOO) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity and reasonable valuation levels. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Internet Software & Services industry. The net income increased by 2183.5% when compared to the same quarter one year prior, rising from $296.66 million to $6,774.10 million.
- YHOO's revenue growth trails the industry average of 28.5%. Since the same quarter one year prior, revenues slightly increased by 0.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- YHOO's debt-to-equity ratio is very low at 0.03 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 2.75, which clearly demonstrates the ability to cover short-term cash needs.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Internet Software & Services industry and the overall market, YAHOO INC's return on equity exceeds that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: YHOO Ratings Report