Why Yahoo! (YHOO) Stock Is Down Today

NEW YORK (TheStreet) -- Yahoo!  (YHOO) fell Wednesday in the wake of the long-awaited Alibaba IPO, which the Chinese company finally filed on Tuesday.

Yahoo! has an approximately $26 billion stake in the company, according to The Wall Street Journal. Alibaba said in April it valued its shares at $50, and Yahoo owns 523.6 million shares.

Yahoo! owns 22.6% of Alibaba and must sell 208 million shares in the IPO at a value of $10.4 billion based on the most recent fair value, according to the Journal.

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The stock was down 4.77% to $34.75 at 9:51 a.m.

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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 a few notable 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 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 50.24%, 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 20.6%. 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.
  • YAHOO INC's earnings per share declined by 17.1% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, YAHOO INC reported lower earnings of $1.26 versus $3.28 in the prior year. This year, the market expects an improvement in earnings ($1.64 versus $1.26).
  • You can view the full analysis from the report here: YHOO Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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