The firm cited the looming Alibaba IPO as a major factor in its position on Yahoo!, as the company owns a 24% stake in the Chinese business.
"We believe Alibaba should continue to deliver outsized revenue growth on the back of strong secular growth in China e-commerce," UBS wrote in a research note . The firm added Yahoo!'s core business outperformed in the first quarter and "warrants a multiple more in-line with peers."
The stock was up 3.53% to $35.19 at 11:36 a.m. on Tuesday.
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 solid stock price performance, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels 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:
- Compared to its closing price of one year ago, YHOO's share price has jumped by 42.38%, 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.
- 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.
- YHOO, with its decline in revenue, underperformed when compared the industry average of 11.7%. Since the same quarter one year prior, revenues slightly dropped by 0.7%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- You can view the full analysis from the report here: YHOO Ratings Report