A Change Of Heart Towards Yahoo!

In February I considered an investment  in Yahoo! but ultimately decided against it. I believed that too much Yahoo's value was tied up in their Asian assets. I did not trust Jack Ma, Chairman and CEO of Alibaba, to follow through on a deal due to his shady history. A deal has now closed and Yahoo! has successfully sold half its stake in Alibaba and will likely sell the other half in an IPO. Yahoo is in negotiations to sell their stake in Yahoo! Japan as well.

Now that Yahoo is well on its way to monetizing its Asian assets I am willing to give them credit for these assets. Excluding cash and Asian assets Yahoo sells for 0.6 times estimated 2013 EBITDA. As a comparison AOL sells for over 4 times EBITDA. Regardless of what one thinks of the business the price is  extremely low.

There is a catalyst in place for higher prices. Yahoo! will return $3 billion to shareholders in the near future. There should be an announcement shortly as to how they will do this. I suspect at the current price they will opt for a share repurchase or a tender offer although a dividend could be involved as well. I am long shares of Yahoo!

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An Update On Yahoo! said...

[...] recently wrote up Yahoo! and explained why I bought the stock. Last night the Yahoo CEO, Marissa Mayer, announced that she [...]