Yahoo! (YHOO): Core Sale Seems Like A Sell the News Event; 2 Downgrades Today

SunTrust Robinson Humphrey analyst, Bob Peck downgraded Yahoo! (NASDAQ: YHOO) from Buy to Neutral despite expecting a favorable outcome on the core business sale. The sale is expected to conclude around July 18th at a price of $6 billion but the analyst thinks it could be a negative catalyst for 4 reasons: 1) its widely anticipated and may have higher contingencies; 2) the process of liquidating investments (Y!J & BABA) is convoluted & complex; 3) the “hook" nature of BABA shares may lower takeout premium; and 4) it will likely take time (18 months?) to materialize, if it does at all.

Coincidentally, Pivotal research analyst, Brian Wieser, also downgraded the company and has a more dire prediction for the outcome of the core sale. The analyst notes that Yahoo global digital advertising market share peaked at 20% between 2004 and 2006 and is now falling from its current 3% level. With this information in hand, he believes the core sale will result in a price closer to $3.5 billion. excluding any cash.

If both the the bullish and bearish sale outcomes of $6 billion and $4 billion result in downgrades, is there any reason to own the stock headed into this event?

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 $37.74 yesterday.

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