The recent pullback in Yahoo's stock should only serve as an entry point to enter or add to existing trades. Though the share price is up substantially since Marissa Mayer became CEO, when you back out the value for Alibaba and Yahoo Japan, the value of Yahoo's core assets have not risen that much.
However, Ms. Mayer has, in my opinion, done well to add value and even demonstrate movement in the difficult to measure mobile category. With that game up for grabs, it could serve as Yahoo's foray back from obscurity.
With Alibaba and Yahoo Japan's "put" on the stock, I believe that the price could move above $30 or $35 by the end of 2013. If Yahoo can continue to build on mobile growth in Flickr and its email property, then the outlook for the company becomes much more appealing - potentially leading the stock to double in the next couple years.
I am totally agree with your post. Without question, MM is doing a great job for YHOO. With that alone, YHOO shares movements should UP UP UP, the only way. What will be interesting here, however; is that how is Alibaba now and down the road. Likewise, YHOO Japan is having exploding growth and projected to continue. The latter YHOO's 35% stakes could be worth $9B to $12B now. If growing robustly, can YHOO stakes to grow to $15B next year or next two years. So I would conclude YHOO Asian assets alone could potentially put YHOO to $30 to $40 per share. Yes baby $30 to $35 this year!!
Melissa Mayer has made a lot of headlines the past year, and, I think, gone a long way to demonstrate Yahoo is on a path to sustainability. However, the rise in the stock over the past year is more a result of the performance of its Asian properties than more faith in the core business.
Despite Ms. Mayer's focus, Yahoo's real value continues to be in Alibaba and Yahoo! Japan (YAHOY.PK). A $60 billion valuation for the Chinese e-commerce and search company, Alibaba - which may be the low end of a late-2013 IPO - puts Yahoo's 24 percent stake at around $14.4 billion. That equates to nearly half of the company's current market cap.
When Alibaba IPOs, it will have the right to purchase back half of Yahoo's stake, in addition to $835 million in preferred shares the company owns. At a $60 billion valuation, that would give Yahoo over $8 billion in cash. At a $100 billion valuation - the top end of the range - Yahoo would reap nearly $13 billion.
Yahoo also owns 35 percent in Yahoo Japan - a company that is also seeing tremendous growth. Yahoo Japan is also doing quite well, experiencing a 13 percent year-over-year increase in profits at Yahoo's last filing. That puts Yahoo's stake in that company at around $6 billion.
While there has been discussion in the broader market about the "Bernanke Put," for Yahoo, there is the Asian Put. With those properties becoming increasingly valuable (anywhere from $22 to $30 billion), it will be difficult to see the stock price move below $20 per share.
The current share price does not leave much by way of value for Yahoo's core business, particularly when backing out the $2.78 per share in cash the company holds.