Why Yahoo is Still a Dangerous Stock
News broke on Monday that the Daily Mail’s parent company, the Daily Mail & General Trust, is mulling over a potential bid on Yahoo (NASDAQ:YHOO). The company is reportedly in the early stages of talks with potential partners to create a joint bid on the ailing Internet pioneer.
News of the potential bid comes after Yahoo allegedly pushed back its deadline for bids on its core business. Reportedly, the deadline has been pushed back from April 11 to April 18, allowing for more potential suitors to place their bids.
Yahoo’s decision to extend its deadline signals the possibility that the company expects more offers to pour in. While this can be seen as a good thing, investors may want to steer clear of Yahoo for the time being.
Caving into pressure from activist shareholders, Yahoo made the decision to put its core business up for sale in February, which includes its search, email and news features.
Marissa Mayer, CEO of Yahoo, has been trying unsuccessfully to turn the company around for three years by focusing on mobile apps and advertising revenue.
Revenue is expected to decline by 15% in 2016. Earnings are expected to plummet by at least 20%. Thousands of employees will lose their jobs between 2016 and 2017. Yahoo isn’t in great shape right now.
Thus far, we know that Verizon (VZ) and Alphabet (GOOGL) have shown interest in Yahoo. Verizon reportedly wants to bundle Yahoo’s core with its Japanese business. The company would remove Mayer and replace her with AOL CEO Tim Armstrong. There are also reports that Time (TIME) is interested in the company.
AT&T (T), Microsoft (MFSFT) and Comcast (CMCSA) all dropped out of the auction.
Yahoo’s stock still has some value, but most of that value comes from its stake in Alibaba (BABA), the China-based e-commerce giant. Yahoo purchased its shares in 2012 for $7.6 billion.
While the discounted price on the stock has some analysts feeling bullish, Yahoo’s fundamentals aren’t there to warrant an investment, even if a billion dollar sale is in the near future. The company’s numbers are weak and until its uncertain future becomes clear, investors may want to sit this one out.
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