NEW YORK (TheStreet) -- Yahoo! (YHOO) was gaining 3.7% to $40.38 Friday after Starboard Value announced it acquired a stake in the company in a letter sent to CEO Marissa Mayer and the Internet company's board of directors.
In its letter the investment management firm highlighted opportunities for Yahoo! to "unlock tremendous value" for its shareholders. Those opportunities include "unlocking the substantial value" of Yahoo's equity stake in Alibaba (BABA) , reducing expenses, halting its aggressive acquisition strategy, and exploring a merger with AOL (AOL) .
The activist investor said a merger with AOL "could improve Yahoo's competitive position, deliver cost synergies of up to $1 billion, and potentially facilitate the realization of value from Yahoo's non-core equity stakes with minimal tax leakage."
Shares of AOL are gaining 4.3% to $44.80 following the letter.
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."