Yahoo: The importance of good management
Yahoo! Inc. (NASDAQ:YHOO) is the only company in this list that doesn’t trade at sidereal valuations. Instead, it exchanges at about ¼ of the industry average valuation, at 7 times its earnings. Despite this fact, the company’s future looks quite bright and analysts expect it to outperform its peers. Moreover, its margins and returns are far better than those of Facebook Inc (NASDAQ:FB), LinkedIn and most of its other competitors. With such a positive outlook, the stock looks like a buy and hold case.
The main reason behind this recommendation is Marissa Mayer. Ms. Mayer took the CEO position at Yahoo almost one year ago and it seems like she might pull off a turnaround for the company. During her tenure, she redesigned Yahoo! Inc. (NASDAQ:YHOO)’s homepage and mobile email interface, as well as Flickr´s page with substantial success.
Acquisitions have also played an important role and should prove profitable in the years to come. The $1.1 billion Tumblr acquisition made last month should prove of particular importance for traffic. Analysts estimate that this site´s traffic bulks up to roughly 130 million users each month.
The other important growth catalyst that I can find in Yahoo is its advertising expertise, which will help it better capitalize the migration of publicity from traditional media to online platforms. Furthermore, its webpages’ massive traffic will allure plenty of advertisers over the years to come, driving revenue and margin growth.
Bottom line
Although Facebook Inc (NASDAQ:FB) and LinkedIn Corp (NYSE:LNKD) might be undisputed market leaders in their segments, the fact is that all their success is already priced into their stocks. Opposite to these two firms, Yahoo! Inc. (NASDAQ:YHOO) is quite undervalued, mainly due to its competitive disadvantage in comparison to Google, Facebook or Twitter and some erratic results in the past. But a renewed management has injected new life to this firm that trades at a very attractive valuation and offers plenty of growth prospects. I’d say, buy Yahoo! stock while it is still cheap and hold on to it – upside should be plenty.
The article Is It Time To Avoid Some Internet Stocks originally appeared on Fool.com and is written by Damian Illia.
Damian Illia has no position in any stocks mentioned. The Motley Fool recommends Facebook and LinkedIn. The Motley Fool owns shares of Facebook Inc (NASDAQ:FB) and LinkedIn Corp (NYSE:LNKD). Damian is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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