AmTech Reiterates Buy on Yahoo! (YHOO)

July 23, 2008 11:49 AM EDT

American Technology Research reiterates its Buy rating and $33 price target on Yahoo! (Nasdaq: YHOO).

The firm calls Yahoo!'s results yesterday, "not as bad as feared" and believes that the announcement could be a good opportunity for Microsoft (Nasdaq: MSFT) or Google (Nasdaq: GOOG). As Microsoft reported last week that growth of its online services business is slowing, AmTech believes Microsoft could now have a great incentive to do a deal with Yahoo!. The firm said, "Whether this is the highest probability outcome or not, we find the risk/reward on 54% upside from yesterday’s close very compelling."

AmTech values several Yahoo! assets in order to arrive at a conclusion about the possibility for Microsoft to see a deal through: based on revenue and cost synergies in Yahoo!'s Search market, the firm feels this asset could be worth $17-$20 billion for Microsoft. Further, the firm sees Yahoo! Japan worth $7.2 billion, its investments in Alibaba.com TaoBao and AliPay worth $4-$5 billion and cash, investments and NOL carry-forward worth another $4 billion. With a $33 offer, AmTech's valuations would imply that "Microsoft would be buying the non-Search businesses and any strategic/financial upside from Asian assets for $11B-$15B."

Yahoo! Inc. provides Internet services to users, advertisers, publishers, and developers worldwide.

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