Yahoo! Inc. (YHOO) Remains A Strong Buy Despite Of Not Meeting The Expectations

Yahoo! Inc. (NASDAQ:YHOO) remains a strong buy despite a disappointing showing on first -quarter earnings that saw it miss Wall Street estimates. Speaking on CNBC, Raymond James senior analyst, Arron Kessler, reaffirmed a $61 per share price target on the stock, despite valuing the core search business at ‘zero’.

A big chunk of Yahoo! Inc. (NASDAQ:YHOO) valuation has been down to its stakes in Alibaba having had a poor run on its core search business. After the poor showing on earning fronts, CEO, Marissa Mayer is set to be under immense pressure to spin-off stakes in Alibaba, which should help compensate the near nothing valuation of the core business, affirms Kessler.

“The core business in our view remains challenged, we still think they are an arbitrage opportunity with Alibaba and the core business is respectively being valued close to zero in the mid $40 here. […] At the current levels you are effectively valuing Yahoo! Inc. (NASDAQ:YHOO) at Zero before we are given roughly $5 a share to make Yahoo core business. Effectively you are getting Yahoo for free assuming current levels of Alibaba,” Kessler said.

Kessler believes Mayer is being bashed for no reason on allegations that she has failed to trigger growth in the company. Mayer deserves some credit according to the analyst having been able to steer the company in the right direction seen by some segments of the business showing signs of growth even as the search business continues to struggle.

“They are investing in the right areas of mobile, native video and social that they talked about; we are still early across some of these initiatives so I think it is still early. I think if they can start to execute better across these initiatives maybe make a couple of small acquisition, then they are headed back in the right direction,” Kessler said.

There has been talk that Yahoo! Inc. (NASDAQ:YHOO) may need more activists on the stock as one of the ways getting things done especially in rejuvenating growth and spearheading massive shakeups. However, the analyst believes it is highly unlikely to see the likes of Carl Icahn getting involved with the stock as the company has budged to investors pressure to spin Alibaba Group Holding Ltd (NYSE:BABA) stakes.

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