Seeking Alpha

Yahoo higher; SunTrust upgrades, gives Alibaba $300B long-term valuation

  • Investors are "essentially getting the core Yahoo! (YHOO +2.2%) asset for free" at current levels after backing out the value of its Alibaba (ABABA) and Yahoo Japan stakes, says SunTrust's Robert Peck, upgrading shares to Buy and setting a $40 PT.
  • Peck assumes a $150B IPO and $200B post-IPO valuation for Alibaba, and expects the Chinese e-commerce giant to be worth $300B in a few years on the back of $10B in 2017 net income. A recent Chinese trip left him "astonished by the sheer size, scale, and long term potential" of the country's broader Internet market.
  • Yahoo was originally required to sell half of its remaining 24% Alibaba stake at IPO time. But a 2013 deal revision lowered the number of shares Yahoo has to sell back by 20%.
  • Yahoo's Q1 report, which should be accompanied by the release of Alibaba's numbers for seasonally huge Q4, is due tomorrow.
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Comments (10)
  • James Sands
    , contributor
    Comments (2431) | Send Message
     
    All of this sounds great for Alibaba. Yahoo's business is going nowhere. Yahoo better hold whatever shares they can.
    14 Apr 2014, 11:31 AM Reply Like
  • Pete P.
    , contributor
    Comments (819) | Send Message
     
    Actually I think Yahoo's business is turning around and moving in the right direction. Maybe 2 years ago it was going nowhere, but now it's actually getting better. Let's see what they say tomorrow during the call.
    14 Apr 2014, 11:41 AM Reply Like
  • James Sands
    , contributor
    Comments (2431) | Send Message
     
    Yea, I guess flat revenue growth is something to get excited about the next couple of years? 2015 revenue estimates are still down over 36% from 2008 numbers. Yahoo has lost considerable market share.

     

    For tech, a company like yahoo is lackluster. Great to see improving margins, but we are not talking about operating systems here, we are talking about advertising, which continues to grow robustly and is being dominated by Google and Facebook on both the Web and Mobile.

     

    If Yahoo were going to get top-line growth back to double digits, then it would merit some interest. Aside from that, there are much better investment options for tech, in the U.S. and abroad.
    14 Apr 2014, 12:46 PM Reply Like
  • buyandhold???
    , contributor
    Comments (907) | Send Message
     
    this would be 14% of a $300B company so $42B in ali baba shares wow!!!! That wouldn't count yahoo + yahoo japan($10B+) + cash which could be close to $10B

     

    yahoo is $70+ by then
    14 Apr 2014, 01:01 PM Reply Like
  • Manitobatex
    , contributor
    Comments (903) | Send Message
     
    Yea might as well look forward to 2020 and put the valuation at $500.B
    + Yahoo Japan that should be $20B plus . Yes Yahoo made a big turn around since they sold back $100B worth of Alibaba for a song and dance (ring around the rosey) since that brilliant move. This new upgrade to $40 is remarkable as the stock was in the low $40's awhile back and at that time the Alibaba value was supposedly built in. If people want the true value of Alibaba then buy the shares @ IPO time.....because SA shows forecasters have already boosted the value to $300B in 2017
    In short......eliminate the middleman or better yet the middlelady.
    14 Apr 2014, 02:59 PM Reply Like
  • Sanpeters
    , contributor
    Comment (1) | Send Message
     
    Yahoo should adopt the freemium model.

     

    Many of their free services are very good (e.g. yahoo finance, tumblr) but with a small monthly fee, these services could be excellent (e.g. unlimited superfast retrieval of favorites on tumblr, e.g. downloadable yahoo finance equity stock charts, bond yield curves, commodities charts and excel data series (for own stock chart configuration)

     

    When yahoo movies come along at a small monthly fee, they can even match Netflix
    14 Apr 2014, 11:20 PM Reply Like
  • Pete P.
    , contributor
    Comments (819) | Send Message
     
    I think they may be planning to adopt the freemium model with things like flickr, xobni, games, etc.
    15 Apr 2014, 10:48 AM Reply Like
  • Guy in Ithaca
    , contributor
    Comments (428) | Send Message
     
    Today Yahoo! Is where Apple was in early 2005. After years of languishing Apple was set to make an incredible climb upward. I strongly believe Yahoo! will do in the mobile space what Apple did in the hardware space. Lots of tech equities have been driven way up based on projected future earnings; some to a mind boggling degree. It seems that Yahoo! will have to do it the old fashioned way, earnings first. In the meantime Yahoo! seems destined to have its core business and rather obvious turnaround absurdly valued at zero. So be it. The turnaround and inevitable growth will still happen. Good luck to all.
    15 Apr 2014, 12:04 PM Reply Like
  • Pete P.
    , contributor
    Comments (819) | Send Message
     
    The one good thing is the Yahoo core is valued at zero. So when it starts to get valued at something, the stock price will move up in a big way.
    15 Apr 2014, 03:19 PM Reply Like
  • Pete P.
    , contributor
    Comments (819) | Send Message
     
    Looks like Core will have to be valued at something soon. :-)
    16 Apr 2014, 11:26 AM Reply Like
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