NEW YORK (TheStreet) -- Yahoo (YHOO) shares are down 0.55% to $39.66 in pre-market trading on Thursday after being downgraded to "sector perform" from "outperform" by analysts at RBC Capital.
The firm also maintained the company's $44 price target despite the downgraded ratings outlook.
The company's price target represents a 10.9% upside from the stock's current price.STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.
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 largely solid financial position with reasonable debt levels by most measures, solid stock price performance, good cash flow from operations, expanding profit margins and reasonable valuation levels. 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:
- 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 2.99, which clearly demonstrates the ability to cover short-term cash needs.
- Compared to its closing price of one year ago, YHOO's share price has jumped by 38.31%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- Net operating cash flow has slightly increased to $357.41 million or 8.03% when compared to the same quarter last year. Despite an increase in cash flow, YAHOO INC's cash flow growth rate is still lower than the industry average growth rate of 41.67%.
- The gross profit margin for YAHOO INC is currently very high, coming in at 83.10%. Regardless of YHOO's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, YHOO's net profit margin of 24.87% compares favorably to the industry average.
- The revenue fell significantly faster than the industry average of 43.9%. Since the same quarter one year prior, revenues slightly dropped by 4.5%. 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