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  • Yahoo Valuation. Price Target $46 0 comments
    Aug 31, 2014 3:34 PM | about stocks: YHOO

    Yahoo's position in Yahoo Japan is valued at 9B[1].

    Yahoo has 2.7B[2] in cash/short-term investments as of 6/30/14.

    Yahoo owns 22.6% of Alibaba which I will use a conservative valuation on Alibaba of 150B.

    Which means Yahoo's Alibaba investment is valued at 33.9B.

    Now Yahoo will have to pay tax when it sells its position in Alibaba. Yahoo will be selling 6.1% of Alibaba for the IPO.

    6.1% * 150B = 9.15B * 65% (after tax) = 5.94B into cash from the IPO.

    Update for after the IPO:

    Yahoo Japan - 9B
    Yahoo's cash/short-term investments (includes cash from IPO) - 8.6B
    Yahoo's position in Alibaba (16.5%) - 24.75B

    Cash & Positions = 42.35B

    The core business has a value since it is still earning over a billion dollars a year. Yahoo is projected to make $1.40 per share in 2015[3]. I will give a very conservative PE of 10.

    PE of 10 x $1.40 = $14.00 x 994million shares outstanding =
    13.92B I have the core business valued at.

    Core business = 13.92B

    Total = $56.27B ($56.57 per share)

    When Yahoo sells the rest of the Alibaba stake it will have to pay 35% corporate tax on the sale. 24.75B x 65% (after tax) = 16.08B (8.63B going to taxes). That would drop my target price to $47.89, which still makes yahoo a nice buy at the current share price at $38.51.

    When Yahoo sells their stake in Yahoo Japan and has to pay the same 35% corporate tax on the sale. 9.0B x 65% = 5.85 B (3.15 going to taxes). That would also drop my target price to $42.06 (After selling the rest of Alibaba and Yahoo Japan)

    I still think Yahoo can still go higher than $42.06. Alibaba would have to stay valued at 150billion. Alibaba has been projected to be valued over 200B. The price target of $42.06 does not take that into consideration. If Yahoo sold the remaining shares when Alibaba was valued at 200B that would give Yahoo an additional 4.03B after tax. That changes the target price to $46.11. That would be if Yahoo sells and pays taxes on Yahoo Japan and sells Alibaba when valued at 200B and pays taxes on that sale as well.


    Lowest Price Target for Yahoo = $42.06
    Highest Price Target for Yahoo = $56.57

    My Price Target for Yahoo = $46.11




    Disclosure: The author is long YHOO.

    Stocks: YHOO
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