Yahoo! Inc. Price Target Trimmed For Lower Alibaba Group Holding Ltd Target
Yahoo Inc.’s valuation continues to depend on Alibaba’s and its Japan’s valuation, however the company is planning to spin off its ownership in both. Tax implications uncertainty of the spinoff remains swirling, due to which analysts are reducing their target prices for both Alibaba and Yahoo.
Eric Sheridan, an analyst at UBS AG and his team explained that they reduced their price target for Yahoo to $48 from $51 because they reduced their price target for the Chinese company to $93 from $101 per share, according to Yahoo stock news. This has been a similar theme amid several firms for couple of months. The main reason behind reducing Alibaba’s target price was revenue issues resulting in by Chinese macro environment. They reiterated their rating of Buy on Yahoo stock.
Stock price of Yahoo has been soaring in the $30s for the past several months, and the team at UBS said the current stock price accepts no to little tax efficiency in the Yahoo and Alibaba Japan spinoff, as reproted by Yahoo stock analysis. They also added that Yahoo’s present valuation seems nearly 41% tax rate on its holding in Alibaba & Yahoo Japan.
That depends on their conjecture that the essential of Yahoo is worth 5x EV/ EBITDA on their FY16 EBITDA projection. It also expects that Yahoo’s diluted share count and cash balance count continues to be same for second quarter.
UBS Team also highlighted, however, that the Internal revenue service has not said “no” to a tax free spinoff Aabcao’s proposal, so there is still a chance for this. The IRS is going to make a final decision on that when the firm continues with the transaction. Due to this, Sheridan believes that Wall Street is ignoring Yahoo way too much.
Robert Coolbrith, an analyst at Sterne Agee also cut his target price on Yahoo stock because he cut his target for Chinese e-commerce giant, Alibaba as well. His latest target price foe Yahoo stands at $59, while $93 for Alibaba down from $110.
He thinks that IRS decision of not ruling on the Aabaco spin is discussed and is fortified that Yahoo did not get a negative ruling yet. He is of the view that the precedent rulings and tax code will not help making the spinoff taxable and that Yahoo can continue with the spinoff public lending right, rejected by IRS.
Yahoo stock closed at $31.04 on September 15 and went during pre-market session today by 0.10% to reach $31.07.
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