Yahoo's Risk/Reward is Superb - ThinkEquity

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Yahoo (YHOO) shares are up 1.85%, bucking a broadly weak market, after its shares were upgraded to Buy from Accumulate at ThinkEquity based on valuation and improving near-term fundamentals. "With Yahoo!'s stock down 22% since we initiated coverage on October 22, 2007, we believe the current share price offers an attractive entry point," analyst William Morrison said.

ThinkEquity said it believes most Street estimates overstate Yahoo's exposure to potential losses in earnings and cash flow from a restructured or terminated broadband partnership with AT&T (NYSE:T). "While we remain concerned about slowing user growth, display monetization challenges, and the restructuring of Yahoo!'s relationship with AT&T, our research suggests that near-term fundamentals have improved, and we believe key risks are more than priced in at current levels," Morrison said. He believes Yahoo is "more likely than not" to beat Q4 earnings estimates later when it reports on Jan. 29, and says at $23, shares offer "one of the most attractive risk/reward profiles we have seen in two years."