How Scott Thompson Can Monetize Yahoo! (Update 1)

Updated from 1:01 p.m. EST to provide additional analyst comments regarding potential M&A.

SUNNYVALE, Calif. ( TheStreet) - Yahoo! ( YHOO) may have finally appointed a new CEO, PayPal president Scott Thompson, but a question mark still hangs over the Internet giant's ability to to monetize its vast audience.

Yahoo! has gone through two previous CEOs (Terry Semel, and, most recently, Carol Bartz), neither of whom was able to boost the company's share price. Shares of the Sunnyvale, Calif.-based firm are off 44% over the past five years, whereas Google's ( GOOG) stock has gained nearly 44% over the same period.
New CEO Scott Thompson will try to monetize Yahoo!'s vast audience where others have failed.

Yahoo!, of course, is already looking closely at its Asian assets in an attempt to grow revenue.

Evercore Partners analyst Ken Sena believes the appointment of Thompson actually helps Yahoo!'s bargaining position in monetizing its Asian assets, specifically its 40% stake in Alibaba Group, which owns payment services provider AliPay. The Asian partners are aware of Thompsons' prior experience in payments, he explained, and the new CEO could get involved in the operation of AliPay. This may make a transaction such as the divestiture of the Asian assets happen sooner rather than later.

Sena added that Yahoo! is increasingly becoming data-driven, something Thompson excels at. "They need to move to data driven and mobile services, which is where Scott has excelled. He'll have to look at different ad-hoc products, and ensure pricing for the ads they are selling, and make sure they are competitive," Sena said.

He has an $18 price target and a equal-weight rating on shares.

One area where Thompson may have an immediate impact is Yahoo!'s Right Media online advertising division, Dan Salmon of BMO Capital Markets wrote in a report. He believes that Right Media could help Yahoo! "stem the tide of momentum" the company has lost to Google ( GOOG) in exchange-based, real-time display advertising by bringing in top engineers.

Salmon also believes that Thompson's experience in e-commerce could bring a new element to the conversation surrounding the Asian assets. The analyst notes that Taobao, Asia's version of eBay ( EBAY), and Alipay are core parts of Yahoo's Asian interests. He rates Yahoo! shares market perform with a $17 price target.

The potential for Yahoo! to get into into the micro-payment business was also brought up yesterday by analyst Trip Chowdhry of Global Equities Research, who believes it could be a boon for the company.

Jefferies & Co. analyst Youssef Squali, however, downgraded the stock from buy to hold and wrote that the proceeds from the sale of the Asian assets could be used for investments and mergers, as opposed to being returned to shareholders.

Stifel Nicolaus speculated on the potential acquisitions in a research note, citing WebMD ( WBMD), OpenTable ( OPEN) and The Weather Channel as possible targets.

Third Point's Dan Loeb may have something to say about the use of the cash Yahoo! receives from any Asian sale. Loeb, who owns 5.2% of the stock, has previously been very critical of the company, having called out the board of directors, and asked for the resignation of co-founder Jerry Yang and Chairman Roy Bostock.

" Scott Thompson's appointment is somewhat puzzling to us given Yahoo!'s effort in the last few years to become more of 'media and content' than a 'pure technology' company," noted Jefferies & Company analyst Youssef Squali, in a research note. "Scott's appointment is indicative perhaps of a change of direction for Yahoo! as it tries to 'return to the forefront of technology innovation', as Scott explained on Wednesday's conference. call."

Squali has an $18 price target on Yahoo!'s shares.

Yahoo! shares were lower Thursday, off 1.39% to $15.56.

For more on Yahoo! shares, see Daniel Loeb's Third Point portfolio.

Interested in more on Yahoo!? See TheStreet Ratings' report card for this stock.

-- Written by Chris Ciaccia in New York

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