Yahoo (YHOO), known for its web portal and search engine has recently been in the news related to its stake in Alibaba. Yahoo has a 24% stake in Alibaba that is currently $36.4 billion. After the IPO of Alibaba, Yahoo will sell around 50% of its stake from the company. Analysts believe that Yahoo’s real test would be after the IPO of Alibaba since it will have to focus more on the core competencies and rely on their main business.
Market has been somewhat pessimistic and optimistic about Yahoo. Their Revenues in 4QFY13 are 6% down year over year. However their Net income was up 28% with Earnings growth of 41% in the same period. Yahoo stock has given strong gains since the CEO; Marissa Mayer took over in 2012. YHOO shares have appreciated 132% in value since then to what has been called a turnaround for the company.
In the last one month, Yahoo stock has shed 8% of its value. However, the stock has given a return of more than 53% in the past one year. Yahoo has been busy in acquiring startup companies that compliment to their business model and some of which are diverse in nature. It recently acquired Wander which is known for its diary app Days. It gives users the option to share photos and animated graphic files on one single page which describes all their activities for the day.
It also acquired Distill, a technical recruitment company that will help the human resources of Yahoo in hiring talent by video interview and integrating it with programming challenges. Apart from that, YHOO has been continuously updating its ad formats on the site and adding more valuable content to it. Yahoo also acquired Tumblr that allows its users to post multimedia content in a blog.
So we can safely say that YHOO is doing efforts to expand its presence and improve their current business. If we see the qualitative side of it, the company is just in the right direction. And following the IPO of Alibaba, it will focus more on its products which will definitely reflect in its balance sheet and might drive up the stock price.
Yahoo stock Price as on 18th April is $36.38, down 0.08% from previous day’s closing price of $36.35. Yahoo stock is down 10% year to date but analysts are optimistic about the company moving forward and give the stock a buy rating.
Yahoo stocks in the recent times have benefited from the improved financial performance of Alibaba driving the stock price up. Alibaba recently posted increase in sales by 66% with income more than doubled for 4QFY13. These positive results had impacted the stock price of Yahoo positively. So after the IPO, Yahoo won’t be getting much assistance from the e-commerce giant leaving YHOO to focus solely on its online advertising business.
In the second quarter of 2014, YHOO projects revenues of $1.06 billion to $1.1 billion which is in line with the street estimates.