RBC Capital Lowers Yahoo! (YHOO) PT to $33

RBC Capital analyst, Mark Mahaney thinks that shares of Yahoo (NASDAQ: YHOO) have bottomed out here but he recognizes that the stock price won't bottom until fundamentals do. Reducing PT to $33 from $42 and maintaining the Sector Perform rating.

YHOO reported Q4 Net Revenue of $1.00B, about 5% above RBC & Street estimates & the guidance high-end. Still, Net Revenue declined 15% Y/Y, which implies deteriorating asset risk. EBITDA of $215MM came in around 13% ahead of RBC & Street & the guidance high-end, though EBITDA Margin was down materially Y/Y and EBITDA declined a concerning 47% Y/Y. Both the Q1 and the 2016 guide were below the Street, with management laying out a detailed strategic plan to return YHOO to growth in 2017.

Keys to the quarter:

1) Display Remains Solid – Grew 2% Y/Y ex-TAC, consistent with Q2 and Q3, driven by also consistent 8% growth in Ads Sold and 6% growth in Price Per Ad.

2) Search Still Really Struggling – Declined 18% ex-TAC, dragged down by a 10% Y/Y decline in Paid Clicks, though Price Per Click was up 3% Y/Y

3) Mavens Revenue Increasing…tho Slowing – $472MM in Q4 (up 25% Y/Y), though the ’16 guide implies this may slow to high single digits…

4) New Strategy Implies YHOO Keeping ALL Options Open – a) Operational Restructuring: includes $4.5B impairment charge, along with 15% workforce reduction and slimmed product focus; b) Reverse Spin: continuing to look to spin off Yahoo! Core from BABA stake in ‘16; & c) Strategic Options for the core business

2016E EBITDA is now at $782MM, the lowest level in over a decade bringing the PT down to $33. The PT is based on a SOTP analysis: 4x EV/EBITDA multiple to ’17E EBITDA of $900MM, adjusting for $6.1B in YE 2016E Net Cash and BABA and YJ stakes (both fully taxed at 35%).

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 $29.06 yesterday.

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