What's a Reasonable Valuation for Yahoo?

In light of recent developments, Microsoft Corp.'s (MSFT) acquisition of Yahoo! Inc. (YHOO) is all but inevitabie, Citigroup Capital Markets analyst Mark Mahaney wrote in a research note.

Mr. Mahaney said that Microsoft's evident frustration in its most recent public letter to Yahoo's board of directors could be interpreted as the best way to force the company's hand and bring closure to negotiations.

Still, the prior asking price of $31 per share in a half-cash, half-stock offer for Yahoo could be sweetened to $34 per share, which Mr. Mahaney would consider "a reasonable, valuation-supported base case for Yahoo."

He said:

In a recessionary environment, this MSFT bid accords YHOO with one of the most defensive and attractive risk-reward outlooks in the Internet sector.

Mr. Mahaney rates Yahoo as a "buy" with a $34 target price.

Comments

[Robert DiAlberto]

Dream on Mr. Mahaney rates Yahoo as a "buy" with a $34 target. Don't see it. If Microsoft hangs on they can close the deal. YHOO is not going to have a great quarter in my opinion. I sold my shares after the tender offer and I am happy so far. Microsoft should get what they can of Yahoo right now and hold out. Be tough.

2008 Apr 08 11:28 AM

[John Capozzi]

Everyone seems to be forgetting Softbanks major position in Yahoo Japan and Allibba's which Yahoo USA owns about 40%. These two companies had great year end and qtrs earnings with great forward looking outlooks. These 2 companies need to be bought to the table also. Analyst have been stating all along that the major search and ADD revenues will be coming from Asia and India and South America in the coming years though 2010 amouting to hunderds of billions of dollars and this is why the bid undervalues Yahoo's companies value in total. This deal will not close without their approval. You already have Allibba looking for a company or private equity to buy out Yahoo's USA position which will hurt future profits. Microsoft has to also deal with a different culture arrangement making this deal different then recent USA mergers. These companies will not be bullied. You can very well see a team up of Allibba and Softbank with funding from the Chinese Government just like in the case of IBM'S computer sector to Lenovo. This might also be the holding out peroid Mr. Yang is waiting for and could be in the process now. Microsoft should sit down with all 3 companies and give a final offer of 38 to 40 a share based on the Asian and India ties that Yahoo USA has or walk away and let Allibba and Softbank put in their bids for the rest of Yahoo USA which would most likely be over 40 because of their extensive growth posted. There is also a big chance that Yahoo will surprise to the upside and beat numbers in this Qtr. I make these thoughts because the way this merger is going it doesnt make sense for the delay in normal business channels. Another thing Google knows something because their share price has lost half its value since the merger was anounced. On another note just recently in OCT Yahoo hit a high of 34.95 and their was no merger on the table.

2008 Apr 08 11:59 AM