Yahoo! (YHOO) 40M Share Sale by Third Point Raises Concerns
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Price: $52.58 --0%
Rating Summary:
18 Buy, 21 Hold, 5 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 10 | Down: 19 | New: 6
Rating Summary:
18 Buy, 21 Hold, 5 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 10 | Down: 19 | New: 6
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On Monday it was learned that Yahoo! Inc. (Nasdaq: YHOO) entered into an agreement to repurchase 40 million shares of Yahoo! common stock owned by Third Point at a purchase price of $29.11 per share. Third Point will now own 20 million shares or a 2% stake in Yahoo. The three board members appointed in association with Third Point's investment have also announced their resignations from the Board. In the view of analyst Brian Wieser of Pivotal Research, the sale amplifies strategic concerns at Yahoo.
Yahoo stock is underpinned by upside from Alibaba, which will continue to support interest from investors, said Weiser, but once Alibaba IPOs, he thinks focus will return to challenges to Yahoo's core business.
"Unfortunately we see no favorable prospects for the legacy business as it presently exists given the permanent secular decline in premium display advertising that the industry is experiencing. A better product and better user experience will not lead to revenue growth when the core product is essentially free," said Wieser.
"With the prior Board members in control, investors could feel some degree of comfort that the company was committed to a long-term view, meaning that it would not necessarily change course if investments took time to pay off. However, with today's changes, it becomes less certain that the company will maintain this approach. Consequently, as we have previously written, it will become increasingly important for Yahoo's management team to distinguish its corporate strategy from its product strategy in order to provide investors with an enhanced degree of confidence that it can thrive in years ahead despite the conditions that are impacting its core business today," he added.
Pivotal Research has a Hold rating on Yahoo! with a price target of $27.00
For an analyst ratings summary and ratings history on Yahoo! (NASDAQ: YHOO) click here. For more ratings news on Yahoo! click here.
Shares of Yahoo! closed at $29.11 yesterday.
Yahoo stock is underpinned by upside from Alibaba, which will continue to support interest from investors, said Weiser, but once Alibaba IPOs, he thinks focus will return to challenges to Yahoo's core business.
"Unfortunately we see no favorable prospects for the legacy business as it presently exists given the permanent secular decline in premium display advertising that the industry is experiencing. A better product and better user experience will not lead to revenue growth when the core product is essentially free," said Wieser.
"With the prior Board members in control, investors could feel some degree of comfort that the company was committed to a long-term view, meaning that it would not necessarily change course if investments took time to pay off. However, with today's changes, it becomes less certain that the company will maintain this approach. Consequently, as we have previously written, it will become increasingly important for Yahoo's management team to distinguish its corporate strategy from its product strategy in order to provide investors with an enhanced degree of confidence that it can thrive in years ahead despite the conditions that are impacting its core business today," he added.
Pivotal Research has a Hold rating on Yahoo! with a price target of $27.00
For an analyst ratings summary and ratings history on Yahoo! (NASDAQ: YHOO) click here. For more ratings news on Yahoo! click here.
Shares of Yahoo! closed at $29.11 yesterday.
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