Yahoo Still Compelling, But Now Trades Closer To Fair Value

| About: Yahoo! Inc. (AABA)

The Marley Group initiated coverage on Yahoo! (YHOO) nearly 6 months ago with a ‘Strong Buy’ rating and set a price target of $32.00. Shares of the company have since appreciated to our estimate, making this an appropriate time to offer an updated outlook on the company.

With vastly improved levels of investor sentiment driving a 36% appreciation in shares of Yahoo! since recommending purchasing them in October, the stock is trading at a valuation much closer to fair value. Contributing largely to the aforementioned improvement in investor sentiment surrounding Yahoo!, are reports that the roll out of the long awaited upgrade to their search marketing platform, Panama, has been going smoothly and has been receiving positive feedback from customers.

Given the positive response to Panama, we are sticking by our view of Yahoo! earning $0.72 per share for the year. With initial reactions being positive thus far, a good deal of investor concern has been lifted, reflected in Yahoo!’s strong advance these past few months.

Taking this improved sentiment and lessened risk associated with the company after initial reports of a successful Panama launch into consideration, shares are positioned to further return to normalized valuation levels, causing us to raise our target price to $35.00 per share. While a realization of this estimate would represent a 9% gain from current levels, Yahoo! is no longer irrationally undervalued relative to their peers. Therefore, we are updating our view accordingly, reducing our rating on Yahoo! to a hold on valuation grounds.

Disclosure: Joseph Urgo does not have a position in Yahoo!.

YHOO 1-yr. chart:

Yahoo Investment

Related Articles: Yahoo: Expectations Too High For Panama?; I Wouldn't Touch Yahoo for Half Its Current Price; Yahoo Velocity Shows that Criticism May Be Overstated

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