Cantor Fitzgerald Cuts Price Target on Yahoo! (YHOO) Following IRS Decision Over Tax-Free Spin-Off

Cantor Fitzgerald reiterated a Buy rating on Yahoo! (NASDAQ: YHOO), and cut the price target to $45.00 (from $56.00) following IRS' decision that it would not grant the requested private letter ruling related to the proposed tax-free spin-off of Yahoo's remaining stake in BABA. Yahoo's Board will continue to consider all options, including proceeding with the spin-off transaction on the basis of an opinion from counsel.

Analyst Youssef Squali commented, "After market close yesterday, Yahoo disclosed in an 8-K that the IRS would not grant the requested private letter ruling related to the proposed tax-free spin-off of Yahoo's remaining stake in BABA. While the IRS also indicated that it wasn't ruling adversely on the request, we view this as a black eye for the Yahoo team considering that it is the architect of this much-anticipated transaction. It also biases the outcome of this decision more negatively in the mind of investors, in our view. Additionally, Alibaba's disclosure at an investor conference yesterday that China macro issues are having a negative effect on consumer spending adds more uncertainty around BABA's valuation (also see today's BABA note), and in our view creates more urgency for Yahoo to complete this transaction, which we believe until now has been the reason to buy YHOO stock in the first place. As a result of our updated BABA valuation and a new 50/50 assumption regarding the tax treatment on the spin-off, we are lowering our PT to $45 from $56, while maintaining BUY based on the value of the underlying assets. Full tax treatment and BABA at $60.93/ share yields ~$32/share for Yahoo."

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 $30.90 yesterday.

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