Pivotal Research Skeptical of Rumors About Yahoo! (YHOO)/ AOL (AOL) Combo

Pivotal Research maintained a Hold rating on Yahoo! (NASDAQ: YHOO) with a modified price target of $41.00 (from $37.00). Analyst Brian Wieser updated his model post Alibaba IPO. He also discusses speculation it would acquire AOL, Inc. (NYSE: AOL), saying he was "skeptical."

"Advertising-related acquisitions seem all but inevitable (or at least appear to us as necessary) given the pace at which the company’s traction within the advertising community has diminished. However, the direction the company will move in remains unclear," said Wieser. "One approach to thinking about acquisitions might include outright purchases or non-controlling investments in content and content development, publishing or ad tech."

"In our view the best option for Yahoo would be to focus on ad tech companies with strong – and retainable – management teams, as Yahoo seems unlikely to turn a corner on display-related advertising with its current efforts. A skew towards video-related platforms (or companies with legacies in display but with real traction in video), and strong capabilities in working with mobile inventory will be critical as well. We note that while AOL would fit well with Yahoo on paper given our criteria, we are skeptical that any such arrangement would ever materialize," continued the analyst. "It seems difficult to contemplate the circumstances under which either management team would agree to sell itself to the other."

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 $40.93 yesterday.

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