3 Reasons Comcast Should Buy Yahoo! (YHOO) - Mizuho

Mizuho analyst, Neil Doshi, thinks Comcast (NASDAQ: CMCSA) could and should buy Yahoo! (NASDAQ: YHOO) core for 3 reasons:

1) Comcast/NBC is the #8 largest site visited across desktop and mobile (Yahoo! is #3)

2) NBC recently made large investments in BuzzFeed and Vox Media

3) more video content is coming to Comcast/NBC sites and mobile devices.

Yahoo! has Key Assets that Could Accelerate Comcast's Ad Business. Yahoo's 1 billion users would give Comcast instant distribution across desktop and mobile. Yahoo!'s mobile apps + Flurry could give Comcast access to new apps and data around app usage in order to drive more advertising. Yahoo!'s video offering from BrightRoll could bridge traditional TV and digital TV.

Comcast should generate $74 billion in revenue this year, which will result in about $24.7 million in EBITDA. For 2015, we are expecting Yahoo! to generate Gross Rev. of $4.0 billion and EBITDA of $0.9 billion. And Comcast's Debt to EBITDA ratio is about 2x, so Comcast could conceivably lever up to buy Yahoo!.

The valuation could nearly double. Core Yahoo! is trading around 3x forward EBITDA, or $2.8b. With a strategic buyer, we believe core Yahoo! (excluding cash and Yahoo! Japan), could get around $4-$5b

No change to the Neutral rating or $37 price target.

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 $34.34 yesterday.

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 $34.34 yesterday.

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