Better Safe Than Sorry With Yahoo in 2007

Brian Bolan, research analyst at Jackson Securities, sent a note to clients with his take on Yahoo (YHOO) stock going forward. Excerpts follow:

Valuation and Recommendation
We are releasing our estimates for 2007 and lowering our price target for Yahoo!. While some may think the worst may be over, we would rather remain cautious in our stance at this time. We continue to recommend investors HOLD shares of Yahoo!.

Project Panama is meeting deadlines
A report came out that Yahoo! has begun to rollout the much anticipated new search backbone that has been called Project Panama. This “soft” launch is allowing customer to migrate to the new system over the next few months, so a financial impact will likely not be seen until next quarter. We view this as a moderate positive for the stock, and a development that we hoped would occur.

Peanut Butter
The peanut butter manifesto, penned by Brad Garlinghouse was a call to arms and was the catalyst that forced Terry Semel’s hand to split the company into three divisions. The fallout from the manifesto is that Dan Rosensweig [COO] is out and Sue Decker is better positioned for the CEO role should Semel continue to produce “status quo” results.

Earnings Estimates
We are releasing our 2007 earnings estimates for Yahoo!, with a bottom line number of $0.58 per share for the CY07. We were somewhat aggressive with out estimates but still below the consensus on Wall Street. We note that our estimates are heavily weighted to the back half of the year, possibly making the stock less attractive to investors during the first six months of 2007. We are also lowering our price target to $26 per share from $33 per share.

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YHOO 1-yr chart:

Comments

[carlivar:]

So you view Panama as a "moderate positive" yet you expect YHOO to go down ($26 target from its current price of around $27)? No mention at all of the stake in Yahoo Japan? So what's the reason for the low price target? I don't see any reasons noted in the article, specific or otherwise. Yes the re-org occurred and Decker may be primed for CEO but you have merely stated facts, not made any analysis.

2006 Dec 15 12:39 PM