Following Monday’s earnings report from Yahoo! Inc. (NASDAQ: YHOO), attention focused on which companies might still be bidding for Yahoo’s core business at the Monday deadline for bids. At this stage the list is probably not very long, but a couple of heavyweight names, Verizon Communications Inc. (NYSE: VZ) and AT&T Inc. (NYSE: T), are among the bidders at what most analysts believe will be a sales price of around $3 billion.
As important as what’s included in the sale is what is not. Neither of Yahoo’s stakes in Alibaba or Yahoo Japan is expected to be included in the sale.
With that in mind, Merrill Lynch analyst Justin Post maintained a $48 price objective on Yahoo stock along with a Buy rating. Post offered his firm’s take:
While estimates may go up slightly, our focus remains centered on core business divestiture, cash allocation, and lower implied tax/liquidity discount on the Alibaba stake.
The $48 price objective is a sum of the parts analysis for Yahoo. Using the current BABA share price yields a valuation of $43 per share. This assumes $3.90/share from the core business, $26.55 per share from Alibaba (using share price of $82.65), $5.60/share from Yahoo Japan, and $6.70/share cash.
Our upside case and [price objective] of $48 is based on BofAML analyst Eddie Leung’s 12-month Alibaba [price objective] of $99 and a 20% discount rate on Alibaba.  As such, we maintain Buy and believe the next key catalyst will likely be the sale of core business or patents, monetization of Yahoo Japan, cash return strategy to shareholders, and/or appreciation of [Alibaba] stock.
Other analysts have weighed in as well:
- Bernstein raised its price target from $42 to $44.
- BMO lifted its price target from $38 to $39.
- Citigroup raised its price target from $43 to $44 and has a Buy rating on the shares.
- CLSA increased its price target from $40 to $41.
- Pivotal Research cut its rating on the stock from Buy to Hold.
- Raymond James raised its price target from $45 to $46.
- RBC lifted its price target from $38 to $39.
- UBS raised its target price from $42 to $43.
Yahoo’s shares traded up about 1.3% Wednesday morning, at $38.66 in a 52-week range of $26.15 to $39.78. The consensus price target on the stock is $41.55, but all these recent changes may not yet be included in the calculation.
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