Verizon Wins! Volatility Ahead for Yahoo!
Monday morning, Yahoo! Inc (YHOO) confirmed the sale of its web-based business to Verizon (VZ) for $4.8 billion in cash. Most of the company’s assets will be sold, the remaining Yahoo! will consist of holdings in Alibaba and Yahoo Japan.
With Yahoo! flush with Verizon cash and still holding on to Alibaba stock, there could be pressure from stockholders to sell off the remaining assets, wind up the company, and pay out.
On the other hand, given CEO Marissa Mayer’s indication that she wishes to continue as the CEO of Yahoo! perhaps she has other plans in mind. Of course the board could always fire her, but that could prove expensive and the disruption to the company may not be worth it at this time.
We think with approximately $10.8 billion to spend, ex-Google executive Mayer could be pushing at her one chance to reshape Yahoo! in her own image. What that will mean is anybody’s guess, but look for price volatility in the short term.
If you follow our ratings, you probably have not bought Yahoo stock since last November when at $34.20 a share we rated the stock a “Hold,” and you sold it sometime after we downgraded it again in March, when it hit $33.81.
No matter the stock was trading at $39.38 last Friday, this was not a safe stock to hold with zero dividends and a known takeover target. And after the Verizon announcement, it opened down slightly on Monday. Day traders might want to seek out the volatility, but an 18-month horizon is what we look for in our investment ratings.
$30Take a look at our data on Verizon, compare it to Yahoo! and see how their performance is vastly different. You might be shocked at just how volatile Yahoo! appears to be.