YHOO's Valuation
Full Story: online.wsj.com
WSJ reports: Citing Yahoo's 42% Ebitda margins, strong free cash flow and other measures of business health, Robert Peck of Bear Stearns, which counts Yahoo as a client, said in a note that Yahoo's share valuation doesn't "appropriately reflect this financial profile."
At a valuation of 10.6 times Peck's reduced Ebitda estimates, Yahoo "is trading not too far off from many traditional media stocks such as TV, radio and newspapers which are showing no growth industrywide and in many cases negative growth with no near-term prospects of an improvement."
Factoring in lower financial estimates, remaining risk to the fourth quarter and the good news that Yahoo's search-advertising system upgrade is on track, Merrill Lynch analyst Justin Post said in a note that strong e-commerce trends during the upcoming holiday season and valuation considerations should ensure strong support for the stock at around $22 a share. Merrill beneficially owns 1% or more of Yahoo's common stock.
Yahoo's stock traded at $23.22 recently, down 93 cents, or 3.9%, on volume of 97.9 million shares, compared to average volume of 25.7 million shares.
Goldman Sachs analyst Anthony Noto also argued the stock has "limited downside," but said it is unlikely to recover until Wall Street reduces its estimates, the financial benefits from the new search-ad system become clearer and growth rates for Yahoo's graphical-ad sales stabilize. Yahoo is a client of Goldman's.
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