Yahoo!'s Next Takeover Target: A Payment Processor?

NEW YORK ( TheStreet) -- Investors can almost feel the renewed energy and excitement coming from Yahoo!'s ( YHOO) corporate headquarters in Sunnyvale, Calif., since Marissa Mayer took the helm as CEO about a year ago.

YHOO Chart YHOO data by YCharts

Shareholders more than believe it -- they are experiencing more than a 40% surge in share price from this time last year. On Monday, I wrote "Yahoo!: The Best Is Yet to Come" that touches on expected disruptions to eBay ( EBAY) and Amazon ( AMZN) if/when Alibaba enters the North America market.

eBay and Amazon have more to worry about than Alibaba -- they have Yahoo! on its own merits. If Amazon's CEO Jeff Bezos and eBay's CEO John Donahoe aren't staying up at night worrying, they should be. When you think of online shopping, the two biggest names today are Amazon and eBay, but that wasn't always the case.

Yahoo! once dominated the online commerce world with Yahoo! Shopping. Yahoo! even had an auction site that was a serious alternative to eBay until management screwed it up like so many other Yahoo! properties. But that was then, and this is the new now with Mayers guiding Yahoo! back to prosperity.

I don't mean Mayer is simply turning around the company and extracting greater shareholder value; I'm talking about grabbing the encompassing debilitating discombobulation known as Yahoo! by the neck and choking it into submission. The potential for Yahoo! to return to its glory is right there for the taking and Mayer knows it.

Mayer's leadership is why the market continues allocating greater amounts of capital into the stock. Usually when a company buys other companies the shares take a hit as a result of the greater uncertainty. In Yahoo!'s case, the shares continue to rise as Mayer removes the uncertainty of how aggressive Yahoo! is under the new command.

You can travel back to the dot-com boom days and not find a year that Yahoo! bought more companies than Mayer's Yahoo took over in 2013 and we're only half-way through the year. Despite the buying binge and Yahoo!'s shopping portal, there remains one key element missing from the Sunnyvale's business tool chest.

Yahoo! doesn't have an internal payment processing system. eBay owns Paypal and Amazon offers Amazon Payments, albeit the closest Yahoo! is to payment processing is through their relationship with Bank of America ( BAC).

The Street's Rocco Pandola recently highlighted the importance of mobile payments. Online payment processing leaps into the retail world through smartphones. Investors who missed The Street's Richard Saintvilus pounding on the table don't have to look further than Verifone Systems' ( PAY) chart to appreciate PayPal, Amazon, Google ( GOOG) and Apple's iPhone ( AAPL) impact in the payment processing space.

The one noticeable missing company from the list is Yahoo! and I think Mayer will fix that soon. Possible (including wildcat) candidates include PaySimple, WEPAY, Square and others with various degree of footprints.

Regardless of entry choice, an entry into payment processing is a logical and symmetrical fit into Mayer's growth strategy. Yahoo! is coming back and shareholders have a lot of reason to remain eager and hold on for the ride.

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.
Robert Weinstein currently blogs, mentors traders, and writes several weekly columns in Rocco Pendola's Option Investing newsletter from his home in northern Wisconsin. Robert tends to focus on the psychological importance of goals, risk mitigation, emotion, and relatively short term market exposure. With nearly 30 years of studying and investing experience, Robert has experienced the many ups and downs in the financial markets and uses the knowledge gained to maintain balance. Robert believes the best way to make money investing is to avoid losing it. The best way to avoid losing is to know what emotional traps lay in the path of investors and learning how to avoid them. Robert is a voracious reader of financial related books often completing more than one book a week while not trading or writing. Robert contributes to his blog at paid2trade.com on a regular basis with an emphasis on studying behavior finance.


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