Yahoo +2.5% as analysts largely see Verizon deal going through

|By:, SA News Editor

Yahoo (NASDAQ:YHOO) is up 2.5% today, just 4.8% below last month's 52-week high, after it posted profits that beat expectations in Q3 and analysts mostly looked past them to a pending buyout by Verizon (NYSE:VZ).

Considering the lack of comment from Yahoo management, the results are likely to be overshadowed by Verizon's commentary when it delivers earnings tomorrow, analysts agree.

Nomura raised its price target to $45, from $39, to reflect appreciation of the company's stake in Alibaba. Analyst Anthony Di Clemente believes Verizon would be hard pressed to show material adversity for the deal, based on similar past events, and the Yahoo results aren't likely to add any pressure there.

An implied discount on Yahoo's Alibaba stake has increased since Verizon commented on Yahoo's breach, says SunTrust Robinson Humphrey's Bob Peck, who has a Hold rating and $42 price target. But the key question tied to the Verizon deal is whether Yahoo could even open up the process again to new bidders, he says.

Morgan Stanley (Equal-Weight, $42 price target) and Oppenheimer (Outperform, $53) agree that any risk to the deal is overshadowed by the fact that Yahoo's basically a trading vehicle for the Alibaba stake, so BABA bullishness can outweigh any M&A concerns.

Yahoo yesterday guided to Q4 revenue (ex-TAC) of $880M-$920M, below estimates for $938M, and to adjusted EBITDA of $260M-$300M (above a consensus for $245M).