Stock Market Wakes Up to Yahoo’s Deep Value

Wall Street began to wake up to the “deep-value” Yahoo play that Breitbart News has been reporting, with a 10 percent jump in the stock price to over $36 on December 2.

The stock leaped after the Wall Street Journal stated that Yahoo Inc.’s (YHOO-NASDAQ) Board of Directors planned to hold a series of meetings to consider selling the two-thirds of Yahoo’s revenue associated with the company’s legacy business of Internet desktop advertising and display, along with “how to make the most of its valuable stake in Chinese e-commerce powerhouse Alibaba Group Holding Ltd.”

But as Breitbart News reported on November 28 in “The Long Knives Come Out for Yahoo’s CEO,” subtracting the $30 billion stock market value of Alibaba’s stock from Yahoo’s $34.5 billion market value meant that investors were only valuing all the other pieces of Yahoo at $4.5 billion.

Yahoo has two lines of profitable operating businesses that make up its $5 billion in annual revenue. About $3.6 billion is associated with its weak Internet legacy business. About $1.7 billion is associated with its high-growth “MaVeNS” business that includes mobile, video, native advertising, and social.

Revenue for the quarter was $1.226 billion, up about 7 percent from the June quarter. The MaVeNS revenue versus the prior year jumped by 60 percent in the June quarter and 43 percent in the September quarter, to $422 million. But the Internet two-thirds of Yahoo revenue declined in both quarters.

If Yahoo were a stand-alone “MaVeNS” company, it would have up to an $8 to $15 billion valuation on a screaming 50 percent growth rate. That would be similar to hot stocks like Tableau (NYSE:DATA) or FireEye (NASDAQ:FEYE), according to Brian Nichols at Premium Research.

Yahoo’s Internet business’ may be declining, but the company is still one of the most-visited websites in the world. It received 210 million unique visitors in October, according to comScore, making it the No. 3 site behind Google and Facebook. To a weaker competitor like Microsoft, the business would still be worth at least one times revenue, or about $3.6 billion.

Yahoo also has an ownership stake in Yahoo Japan that was valued recently by Reuters at $8.8 billion, and $5.8 billion in cash after subtracting out Yahoo’s debt.

Adding up the potential value of the pieces of Yahoo amounts to almost a $60 billion asset value, which means the Yahoo assets might be worth double the stock price.

Breitbart News reported on November 28 that an increasing number of analysts were following Yahoo’s stock, with about 60 percent rating the company’s shares a “buy” or “strong buy”: “The analysts seem to be looking at Yahoo’s “deep-value” gets priced into the stock price over the next couple of months.”

CEO Marissa Mayer has received lots of grief from impatient hedge funds about how long it was taking to turn around Yahoo. But the value recognition about Yahoo’s parts may now be happening.