December 9, 2015

VALUATION WATCH: Overvalued stocks now make up 44.55% of our stocks assigned a valuation and 17.18% of those equities are calculated to be overvalued by 20% or more. Six sectors are calculated to be overvalued.

BooHoo

Yahoo Reverses Course On Alibaba Stake

Yahoo! Inc. (YHOO) is a global Internet communications, commerce and media company that offers a comprehensive branded network of services. As one of the first online navigational guides to the World Wide Web, Yahoo! is one of the leading guides in terms of traffic, advertising, and household and business user reach. The company also provides online business and enterprise services designed to enhance the productivity and Web presence of Yahoo!'s clients.

Yes, Yahoo is still a thing. Which is often strange to think about given the overall dominance in search--and so much more--by Google. But Yahoo! is certainly more than other internet tech dinosaurs--such as AOL. The company retains critical assets like artsy-and "porn-y"--social media platform Tumblr, a big revenue stream from ads, a large user base, and more. In fact, the company's core business in search, email and news trails only Google and Facebook in terms of monthly visitors.

There has been an ongoing battle between the board, activist shareholders, users, etc. for the future of the company. Quite simply, the sum of the parts is calculated to be more valuable than the depressed share price would indicate. And that is the sort of situation where stakeholders often demand that the company be broken up into separate parts while others want to see the company "saved."

Today we find that the company has finally made a decision on its near-term future, and it was different than many analysts expected. Simply put, the company has changed its plans to spin-off one of its valuable assets, its stake in Chinese eBay-slayer Alibaba and instead it will plan to spin off its internet business and Yahoo Japan (which is very popular in that country) into a separate entity.

This news indicates that the effort of Yahoo! CEO Marissa Mayer to restore the internet giant to its former glory and compete on a more equal basis with rival Google has foundered. She had hoped to do this by raising revenues via digital advertising. Key to her turnaround plans was the spin off of Alibaba but that ran into difficulties due to the failure of the IRS to approve some accounting "shenanigans" designed to shield the company and shareholders from taxes.

Where the company goes from here is still up in the air. But it is hard to fathom how the firm returns to internet glory if it spins off its core business in an effort to make the remaining assets more attractive to suitors and investors. Still, this company has a lot of valuable assets, and it might be worth a look as some kind of takeover deal becomes more likely.

As you can see from the long-term rating chart below, we have not been into this stock on a sustained basis since 2012. ValuEngine continues its SELL recommendation on YAHOO! INC for 2015-12-08. Based on the information we have gathered and our resulting research, we feel that YAHOO! INC has the probability to UNDERPERFORM average market performance for the next year. The company exhibits UNATTRACTIVE Earnings Growth Rate and Price Sales Ratio.

You can download a free copy of detailed report on YHOO from the link below.

ValuEngine Forecast
	Target Price*	Expected Return
1-Month	34.59	-0.74%
3-Month	34.66	-0.54%
6-Month	35.71	2.46%
1-Year	31.76	-8.86%
2-Year	43.14	23.78%
3-Year	53.12	52.41%

Valuation & Rankings
Valuation	87.27% overvalued	Valuation Rank(?)	2
1-M Forecast Return	-0.74%	1-M Forecast Return Rank	11
12-M Return	-29.77%	Momentum Rank(?)	27
Sharpe Ratio	0.55	Sharpe Ratio Rank(?)	84
5-Y Avg Annual Return	15.20%	5-Y Avg Annual Rtn Rank	86
Volatility	27.59%	Volatility Rank(?)	61
Expected EPS Growth	-37.36%	EPS Growth Rank(?)	8
Market Cap (billions)	33.02	Size Rank	97
Trailing P/E Ratio	114.89	Trailing P/E Rank(?)	33
Forward P/E Ratio	183.42	Forward P/E Ratio Rank	2
PEG Ratio	n/a	PEG Ratio Rank	n/a
Price/Sales	6.67	Price/Sales Rank(?)	14
Market/Book	1.46	Market/Book Rank(?)	61
Beta	1.33	Beta Rank	26
Alpha	-0.43	Alpha Rank	15

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