SunTrust's Peck Weighs in on Yahoo's (YHOO) Upcoming Quarter

SunTrust Robinson Humphrey analyst, Bob Peck, cut his target on Yahoo! (NASDAQ: YHOO) to $40 from $45 ahead of earnings but believes that investors will be more focused on strategic options than results. Peck expects weak results of rev. ex-TAC of $960M and EBITDA of $183M. However, he maintained his Buy rating based on the asset value of the company and the promise of restructuring.

Three things for investors to focus on:

1) Receptiveness of the company listening to offers for the core business

2) the near term plans around restructuring that are likely to be announced

3) likely weak results for 4Q.

The analyst thinks the core could be worth $6-8B, but what is even more value accretive is the separation of the Asian assets from the core. An active process for a quick and accretive core sale is likely the fastest way to unlock & maximize this value.

As part of the 4Q report, the company is likely to address its plans for a “Refocused Yahoo”, which likely includes a degree of layoffs (10-20%), some asset sales (land, IP), and a focus on fewer projects. This would be in synch with 4 parallel processes that the company should be running to maximize value:

1) rightsizing Yahoo core

2) running an active sale process on the core

3) entertaining 100% acquisition offers

4) alternatively spinning the core if the solicited offers aren’t sufficient

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 $29.75 yesterday.

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