Needham & Company Downgrades Yahoo! (YHOO) to Hold; Loeb Exit Raises Risks

July 23, 2013 8:28 AM EDT
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Price: $42.05 -0.1%

Rating Summary:
    20 Buy, 26 Hold, 5 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 30 | Down: 30 | New: 23
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Needham & Company downgraded Yahoo! (NASDAQ: YHOO) from Buy to Hold, citing increased risks following news Dan Loeb is selling a bulk of his position and resigning from the board.

Analyst Laura Martin comments, "Third Point's exit raises important questions relating to "Why Now?" At least one set of answers is that they believe: 1) most of YHOO's near-term upside has been realized, or 2) Alibaba (YHOO now owns 24%) is over-valued in YHOO shares or the timing of an IPO will be later than expected (i.e., not 4Q13). Since Board members have better information than public shareholders, their exit raises questions and adds risk that forward-looking valuation drivers for YHOO may be more negative than public markets reflect today."

Martin notes YHOO has had a floor under its share price for the past 18 months while it purchased about $3.6B of its shares from selling the first 20% of Alibaba. "We believe today's events have shifted this to a ceiling instead because, by leaving the Board, Third Point has greater flexibility about when it can sell its remaining 20mm shares, thereby creating an overhang until these shares are disposed of."

For an analyst ratings summary and ratings history on Yahoo! click here. For more ratings news on Yahoo! click here.

Shares of Yahoo! closed at $29.11 yesterday.

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Daniel Loeb, Needham & Company, Third Point LLC

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