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- Yahoo Search may become Safari's default search engine.
- This puts Google in a tough position as it continues to battle anti-trust issues in Europe.
- Microsoft will also benefit as it shares 12% of Yahoo's search revenue.
- Following the Firefox deal, and assuming Yahoo can also get Safari, Yahoo may become the best play on Search going forward.
- Yahoo's assets and cash are a good hedge against downside risk.
- Yahoo's position in Alibaba has given it a lot of breathing room. It should carefully let its strategy unfold in 2015.
- Yahoo may still appreciate further if it continues to land big deals such as the new partnership with Mozilla Firefox.
Can Mayer Successfully Transition Yahoo: An Analysis Of Her Mobile-Centric Strategy And An Algorithmic Forecast
- Yahoo stock has more than tripled due to the company’s investment in Chinese e-commerce giant Alibaba.
- Yahoo has acquired new startups to enter new growth markets in online advertising.
- Yahoo is trying to find a tax-free way to return remaining investment in Alibaba to shareholders.
- I Know First algorithm correctly predicted stock price increase in June 30th article and forecasts a future bullish signal for Yahoo stock.
- Firefox will make Yahoo its default search engine.
- Yahoo's search business may undergo a significant period of growth, assuming factors such as pricing and the total number of ads sold increase significantly.
- When conservatively estimating the impact of Firefox, paired with growth in pricing, the search business may grow from $1.8 billion to more than $4 billion in revenue over the next three years.
Yahoo-Mozilla Deal Likely Worth Billions For Yahoo
- Yahoo's search engine will soon be the default search for Firefox, which currently controls 14-19% of the browser market share.
- I estimate that this deal will add $2-2.7 billion of revenue to Yahoo per year, and $2.3-3.1 billion if Yahoo terminates its search engine deal with Microsoft next year.
- Yahoo may be able to capitalize further on this tremendous opportunity by increasing Firefox usage through promotion on its web page.
- YHOO is suitable for Enterprising Investors following the ModernGraham approach.
- According to the ModernGraham valuation model, the company is fairly valued at the present time.
- The market is implying an 11.28% earnings growth over the next 7-10 years, within a margin of safety relative to the rate the company has seen in recent years.
Yahoo's Acquisition Of BrightRoll Highly Accretive Over The Next 5 Years
- Yahoo acquired BrightRoll, a programmatic ad buying platform, which is distinct from a real-time bidding exchange.
- Programmatic ad buying is expected to grow at a fairly high rate as advertisers re-appropriate marketing budgets for targeted ad-buying across publishers.
- The $640 million acquisition offers meaningful upside prospects, as video advertising is expected to take off along with programmatic ad-buying.
Update: Yahoo's Acquisition Of BrightRoll Is A Significant Step In The Right Direction
- Yahoo has been looking to double down on video advertising, and has confirmed it is buying BrightRoll.
- This acquisition supports my original thesis that Yahoo would need to acquire video ad technology to succeed.
- This acquisition means that Yahoo will likely not acquire AOL.
Yahoo Eyes Video Ad Dollars With BrightRoll Acquisition
- This acquisition can catapult Yahoo to a No. 1 position in terms of the number of ads served in the US.
- BrightRoll leads the video ad tech industry, and continues to dominate over some of the top ad tech platforms such as LiveRail and Adapt.tv.
- Video online ad spending is expected to exceed $12.71 billion by 2018.
- Yahoo has moved considerably higher as a result of Alibaba.
- However, core business developments and the prospects of future capital returns make the investment opportunity extremely promising.
- On purely a tangible basis, Yahoo is worth $42.28 billion.
- However, after running an updated sum-of-the-parts analysis, the business should be worth $56 billion (conservatively).
- Various newer divisions of Yahoo are becoming profitable, presenting opportunities for future growth.
- The Display segment continues to struggle.
- Many of the new revenue drivers will demand attention in upcoming quarters.
- Recent events surrounding Yahoo have led it to be a very compelling investment for a variety of reasons.
- Sum of the parts analysis shows YHOO could be undervalued by as much as 40% with plenty of downside protection.
- Starboard reveals an interesting strategy that seems to coincide with Mayer's view from Q3 Earnings.
- Yahoo reported a phenomenal quarter and disclosed qualitative information that helps to quantify Yahoo's recovering search, display and native ad business.
- Earnings growth will come from mobile (native ads), share buybacks and strategic acquisitions.
- I believe that a combination of these three factors along with further upside in its Alibaba stake will drive the valuation premium significantly higher by the end of the year.
- Yahoo reported their quarterly earnings which was embraced by Wall Street.
- The shares have failed to trade above the BABA IPO high of $44 per share.
- I suspect the company's efforts to negate the tax effect will be futile.
Yahoo Earnings: Mobile, Windfall Profits From Alibaba Sale Boost Results
- The sale of Yahoo's 140 million shares in Alibaba boosted its cash position by $7 billion to $12 billion.
- While Yahoo's core search ad revenues (excluding TAC) improved by 6% year-over-year, its display ad revenues declined by 6%.
- The primary reason for growth in search ads revenue was the growth in the price per click.
Yahoo: Ignore The Headlines, The Q3 '14 Results Were Bad
- Yahoo reported Q314 numbers that generally beat estimates based on non-repeating items.
- Operations continue to show negative trends.
- A big jump in earnings from equity interests provided all of the upside that will drop going forward with the reduced investment in Alibaba.
Update: Yahoo Talks Taxes And Acquisitions On Q3 Earnings Call
- Yahoo reported higher than expected earnings on 3Q earnings call.
- CEO Marissa Mayer says company brought in tax experts to help minimize tag burden from sale of Alibaba shares.
- Mayer defended her acquisition strategy and said Tumblr would generate $100 million next year.
- This earnings call confirmed my arguments that Yahoo needed to minimize its tax burden and would need to get Tumblr generating revenue.
Mon, Sep. 22, 7:32 AM
- The Alibaba catalyst in the rearview mirror, Bank of America and Bernstein both pull Buy ratings on Yahoo (NASDAQ:YHOO).
- Softbank (OTCPK:SFTBF) tumbled 6.1% in Tokyo action overnight. "Part of the market used Softbank as an investment vehicle for Alibaba," says Jefferies' Atul Goyal. "And now that segment of the market doesn’t need to invest in it." Softbank owns 34% of Alibaba and its CEO said last week it has no intention of being a seller. Goyal reminds those selling Softbank today that Alibaba is just one of its investments, and Masayoshi Son has a number of other potential gems in the portfolio.
- Yahoo -2% premarket
Fri, Sep. 19, 6:15 PM
- With a market cap of $233.9B as of today's close, Alibaba (NYSE:BABA) is the 4th-most valuable tech company on the planet, behind only Apple, Google, and Microsoft. Nonetheless, many on the Street have argued shares are fairly valued or undervalued.
- Cantor, which started coverage with a Buy and $90 target earlier this week: "We believe that a differentiated pricing model, strong brand, and unmatched scale give Alibaba an unfair competitive advantage relative to peers ... While the stock's not cheap, we believe the company's outsized growth and margin profiles, if sustained, should support higher valuation over time."
- Wedbush, whose $80 target has already been surpassed, thinks "Chinese e-commerce appears to have room to grow at 30%+ for several years." CRT Capital's $95 target implies a multiple of 26x 2016E EPS, something it considers justified given a 35%+ revenue CAGR is forecast for 2014-2017.
- On SA, Triton Research observes Alibaba's 2013 marketplace revenue as a % of GMV (3.1%) was a tiny fraction of eBay's (19.3%), leaving plenty of room for growth even if eBay-like monetization isn't feasible in China.
- Value Record is more cautious, viewing Alibaba's VIE legal structure as a risk and questioning how successful its international expansion plans will be - Baidu and many other Chinese Web names have had a rough time trying to replicate their domestic success.
- Yahoo (YHOO -2.7%) closed lower, albeit off the day's lows. With shorts having trouble borrowing Alibaba shares, some may have settled for shorting Yahoo instead.
- Josh Brown thinks Yahoo's pending IPO windfall and large remaining Alibaba stake once more make it a prime target for an activist. "There is absolutely no way, in my opinion, they're going to allow this management team, this board of directors to take $6 billion, do a buyback and then have another free $6 billion in cash to experiment."
Fri, Sep. 19, 12:10 PM
- After peaking at $99.70, Alibaba (NYSE:BABA) has reversed course and is now at $92.14, slightly below an opening trade of $92.70. Shares are still 35.5% above their $68 IPO price.
- Yahoo (YHOO -3.5%) has reversed course as well. 121M Alibaba shares have already changed hands. Yahoo's volume for the day has reached 90M, more than 3x the company's daily average.
- Prior Alibaba coverage
Fri, Sep. 19, 12:01 PM
- Alibaba (NYSE:BABA) opened at $92.70 and has quickly jumped to at $99, up 45.6% from a $68 IPO price. Its market cap stands at a whopping $246.6B (66x FY14 EPS), as investors bet the company's strong top-line growth (46% Y/Y in Q2) won't let up.
- Yahoo (YHOO +1.2%) remains higher. With underwriters expected to exercise a 15% overallotment option, the company will be selling 140M shares through the IPO, good for pre-tax proceeds of $9.5B.
- SoftBank's (OTCPK:SFTBF) 797.7M-share stake has a current pre-tax value of $79B.
- Prior Alibaba coverage
- Prospectus, IPO preview
Fri, Sep. 19, 10:14 AM
- All signs suggest Alibaba (NYSE:BABA) will open well above its $68 IPO price. At $80/share, the company would be worth $197B.
- Yahoo (YHOO +1.4%) is trading higher. Shares have already priced in some positive Alibaba-related news since mid-July.
- Update (10:21 AM): Alibaba is now indicated to open in an $82-$85 range.
- Update 2 (10:30 AM): The range is now up to $84-$87.
- Update 3 (10:44 AM): It's now up to $86-$88.
Thu, Sep. 18, 5:30 PM
- Alibaba's (Pending:BABA) IPO price is at the high end of a $66-$68 range. The Chinese e-commerce giant is valued at $167.6B - 20x FY14 (ended March '14) sales and 45x FY14 earnings.
- Yahoo (NASDAQ:YHOO) +0.5% AH. Alibaba begins trading tomorrow.
- Related tickers: OTCPK:SFTBF, OTCPK:SFTBY
- Prior Alibaba coverage, prospectus
Thu, Sep. 18, 3:12 PM
Thu, Sep. 18, 11:19 AM
- CNBC reports Alibaba (Pending:BABA) plans to price its IPO within its elevated $66-$68 range, and that advisors have recommended a $68 price.
- At $68, Alibaba would be worth $167.6B. IPO proceeds would total $21.8B, of which $8.4B would go to Alibaba itself (minus underwriter fees). Official pricing is expected later today.
- Yahoo (YHOO -1.4%) has slipped on the report. The company is selling 121.7M shares through the IPO (worth $8.3B pre-tax at $68), and will be left with 401.8M afterwards (worth $27.3B pre-tax, and good for a 16.3% stake).
Fri, Sep. 12, 5:12 PM
- Yahoo (NASDAQ:YHOO) climbed 3.9% today to close at its highest level since Jan. 2006 and has now gained 8.3% since Sept. 5, when reports of the timing and pricing of the Alibaba IPO surfaced.
- YHOO, which owns a ~23% stake in Alibaba, is expected to sell 140M of the shares in the IPO next week, which should net ~$8.8B in proceeds to the company, according to Cantor Fitzgerald.
- But there's also potential danger for YHOO: Alibaba is widely known to have been the main reason why many YHOO investors have held on to their shares, and some analysts say much of YHOO’s value is based on Alibaba.
Fri, Sep. 12, 8:10 AM
- Two Mexican companies, Worldwide Directories and Ideas Interactivas, have sued Yahoo (NASDAQ:YHOO) and law firm Baker & McKenzie, alleging that they enlisted the help of a senior Mexican judge and other court personnel to avoid a $2.7B judgment issued by a Mexican court in 2012.
- The two companies originally sued Yahoo over an online search project in 2011, saying the tech company breached its duties by terminating agreements prematurely. The lawsuit resulted in a $2.7B preliminary judgment.
- Worldwide Directories and Ideas Interactivas now claim that Yahoo and Baker & McKenzie engineered a conspiracy to reduced that award to $172,500. A Yahoo spokeswoman calls the lawsuit "meritless."
Thu, Sep. 11, 7:15 PM
- The U.S. government threatened to slap fines of $250K/day against Yahoo (NASDAQ:YHOO) in 2008 if the company didn't comply with a demand to hand over user data, according to the Washington Post.
- The report provides details from documents unsealed today showing an ultimately unsuccessful legal battle by YHOO to resist the government's demands.
- The documents show how federal officials forced U.S. tech companies to participate in the National Security Agency's PRISM surveillance program.
Wed, Sep. 10, 10:40 PM
- The guessing game has started over which U.S. companies Alibaba (Pending:BABA) might pursue after it becomes flush with IPO cash.
- If Alibaba's borrowing power is factored in, estimates for its total spending capacity range as high as $50B.
- Lion's Gate (NYSE:LGF), Red Hat (NYSE:RHT), and Akamai Technologies (NASDAQ:AKAM) have all been bantered around as potential targets.
- Though a long shot, the case for Yahoo (NASDAQ:YHOO) being in the mix is also intriguing. There's $12B in tax savings generated from Alibaba buying Yahoo - instead of Yahoo selling off its post-IPO stake in the Chinese company and paying the tax bill.
- Alibaba debuts on the NYSE on September 19.
Mon, Sep. 8, 3:54 PM
- In what may be the first coverage of Alibaba (Pending:BABA), Atlantic Equities' James Cordwell - expecting the company to continue to gobble up share - rates the stock Overweight with $100 price target (current IPO price range is $60-$66).
- The biggest risk to the outlook, he says, is Alibaba not owning fulfillment centers. It's an approach that has worked well so far, says Cordwell, "but that could become a weakness as competitors extend their in-house capabilities.”
- As for Yahoo (YHOO +5.4%), Cantor's Youssef Squali says the company should end up with about $8.8B in gross proceeds and $5.7B net (though tax treatment could increase this amount) after selling 140M shares of its 523.6M share stake in Alibaba. He's got a Buy rating and $39 price target on Yahoo, but thinks the Alibaba IPO could boost the stock to $49.
Fri, Sep. 5, 7:04 PM
- Yahoo (NASDAQ:YHOO) is adding to its Friday gains in response to Alibaba's setting of an $60-$66 IPO price range that spells a $147.9B-$162.7B valuation range, which in turn gives Yahoo's 523.6M-share stake a $33B pre-tax valuation at the midpoint.
- Of interest: While Yahoo can be required to sell 140M shares at IPO time (down from a prior 208M, thanks to a recent deal amendment), Alibaba's prospectus only states Yahoo is selling 121.7M through the offering, thereby leaving it with a 16.3% post-IPO stake.
- If 140M shares are sold, Yahoo stands to reap pre-tax proceeds of $8.8B at the midpoint; if 121.7M are sold, proceeds total $7.7B. Yahoo has already promised to return at least half the post-tax proceeds to shareholders.
- Given huge investor interest, there's a healthy chance Alibaba will hike its price range before the IPO, which will reportedly arrive on Sep. 19.
Fri, Sep. 5, 4:05 PM
- Alibaba (Pending:BABA) has set a $60-$66 IPO price range. That spells a valuation range of $147.9B-$162.7B. The company is looking to offer 320.1M shares - 123.1M new shares, and 197M on behalf of existing holders. At the midpoint of the range, proceeds from the new shares would total $7.7B. (prospectus)
- Yahoo (YHOO +1%) is obligated to sell up to 140M Alibaba shares at IPO time. At the midpoint, that would spell proceeds of $8.8B. Its total stake would be valued at $33B pre-tax, and SoftBank's (OTCPK:SFTBF, OTCPK:SFTBY) at $50.2B. Yahoo has moved higher on the news.
- Earlier: Alibaba to reportedly start trading on Sep. 19
Fri, Sep. 5, 11:57 AM
- CNBC reports Alibaba (Pending:BABA) will price its IPO on Thursday, Sep. 18, and begin trading the next day. That fits with recent reports from the WSJ and NYT.
- The NYT reports today Alibaba's roadshow will start in NYC on Monday. No word yet on the price/valuation range sought by the Chinese e-commerce giant - plenty of analysts have assigned valuations above $150B.
- Yahoo (YHOO +1%) has ticked higher following the report.
- Related tickers: OTCPK:SFTBF, OTCPK:SFTBY
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