NEW YORK (TheStreet) -- Shares of Yahoo! (YHOO) are tumbling, down 7.47% to $42.99 in early market trading Thursday, after Alibaba Group Holding (BABA) - Get Alibaba Group Holding Ltd. Sponsored ADR Report posted third quarter revenue that fell short of analysts' expectations, revealing signs of a slowdown in the Chinese e-commerce company's growth during the holiday shopping season, CNBC reports.
In the December quarter, revenue rose 40% to $4.22 billion from a year ago, but missed analysts' estimates of $4.45 billion.
Alibaba posted better-than-expected third quarter earnings of 81 cents per share, compared to the 75 cents analysts were expecting.
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On Tuesday, Yahoo! announced its decision to spin-off of its remaining stake in Alibaba into an independent registered investment company, SpinCo.
The company's tax-free spin-off announcement of its remaining 384 million shares of Alibaba is valued at around $40 billion.
Yahoo! CEO Marissa Mayer recently reorganized management, partnered with web-browser company Mozilla and acquired video advertising service BrightRoll to boost growth in new fields, according to MarketWatch.
Separately, 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, notable return on equity, reasonable valuation levels, solid stock price performance and expanding profit margins. 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:
- 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. To add to this, YHOO has a quick ratio of 1.99, which demonstrates the ability of the company to cover short-term liquidity needs.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. 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.
- Compared to its closing price of one year ago, YHOO's share price has jumped by 30.94%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, YHOO should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- The gross profit margin for YAHOO INC is currently very high, coming in at 84.00%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 13.27% trails the industry average.
- You can view the full analysis from the report here: YHOO Ratings Report